Part 215 - CONTRACTING BY NEGOTIATION

Subpart 215.1 - SOURCE SELECTION PROCESSES AND TECHNIQUES

215.101 Best value continuum.

215.101-2 Lowest price technically acceptable source selection process.

215.101-2-70 Limitations and prohibitions.

215.101-70 Best value when acquiring tents or other temporary structures.

Subpart 215.2 - SOLICITATION AND RECEIPT OF PROPOSALS AND INFORMATION

215.203 RESERVED

215.203-70 Requests for proposals - tiered evaluation of offers.

215.209 Solicitation provisions and contract clauses.

215.270 Peer Reviews.

Subpart 215.3 - SOURCE SELECTION

215.300 Scope of subpart.

215.303 Responsibilities.

215.304 Evaluation factors and significant subfactors.

215.305 Proposal evaluation.

215.306 Exchanges with offerors after receipt of proposals.

215.370 Evaluation factor for employing or subcontracting with members of the Selected Reserve.

215.370-1 Definition.

215.370-2 Evaluation factor.

215.370-3 Solicitation provision and contract clause.

215.371 Only one offer.

215.371-1 Policy.

215.371-2 Promote competition.

215.371-3 Fair and reasonable price and the requirement for additional cost or pricing data.

215.371-4 Exceptions.

215.371-5 Waiver.
215.371-6 Solicitation provision.

Subpart 215.4 - CONTRACT PRICING

215.401 Definitions.

215.402 Pricing policy.

215.403 Obtaining certified cost or pricing data.

215.403-1 Prohibition on obtaining certified cost or pricing data (10 U.S.C. chapter 271 and 41

U.S.C. chapter 35).

215.403-3 Requiring data other than certified cost or pricing data.

215.403-5 Instructions for submission of certified cost or pricing data and data other than certified

cost or pricing data.

215.404 Proposal analysis.

215.404-1 Proposal analysis techniques.

215.404-2 Data to support proposal analysis.

215.404-3 Subcontract pricing considerations.

215.404-4 Profit.

215.404-70 DD Form 1547, Record of Weighted Guidelines Method Application.

215.404-71 Weighted guidelines method.

215.404-71-1 General

215.404-71-2 Performance risk.

215.404-71-3 Contract type risk and working capital adjustment.

215.404-71-4 Facilities capital employed.

215.404-71-5 Cost efficiency factor.

215.404-72 Modified weighted guidelines method for nonprofit organizations other than FFRDCs.

215.404-73 Alternate structured approaches.

215.404-74 Fee requirements for cost-plus-award-fee contracts.

215.404-75 Fee requirements for FFRDCs.

215.406 Documentation.

215.406-1 Prenegotiation objectives.

215.406-2 Certificate of current cost or pricing data.
215.406-3 Documenting the negotiation.

215.407 Special cost or pricing areas.

215.407-1 Defective certified cost or pricing data.

215.407-2 Make-or-buy programs.

215.407-3 Forward pricing rate agreements.

215.407-4 Should-cost review.

215.407-5 Estimating systems.

215.407-5-70 Disclosure, maintenance, and review requirements.

215.408 Solicitation provisions and contract clauses.

215.470 Estimated data prices.

Subpart 215.5 - PREAWARD, AWARD, AND POSTAWARD NOTIFICATIONS, PROTESTS, AND

MISTAKES

215.503 Notifications to unsuccessful offerors.

215.506 Postaward debriefing of offerors.

215.506-70 Opportunity for follow-up questions.

215.570 Solicitation provision.

Subpart 215.6 - UNSOLICITED PROPOSALS

215.602 Policy.

215.604 Agency points of contact.

Parent topic: Defense Federal Acquisition Regulation

Subpart 215.1 - SOURCE SELECTION PROCESSES AND

TECHNIQUES

215.101 Best value continuum.

215.101-2 Lowest price technically acceptable source selection process.

215.101-2-70 Limitations and prohibitions.

The following limitations and prohibitions apply when considering the use of the lowest price

technically acceptable source selection procedures.
(a) Limitations.

(1) In accordance with section 813 of the National Defense Authorization Act for Fiscal Year 2017

(Pub. L. 114-328) as amended by section 822 of the National Defense Authorization Act for Fiscal

Year 2018 (Pub. L. 115-91) (see 10 U.S.C. 3241 note prec.), the lowest price technically acceptable

source selection process shall only be used when—

(i) Minimum requirements can be described clearly and comprehensively and expressed in terms of

performance objectives, measures, and standards that will be used to determine the acceptability of

offers;

(ii) No, or minimal, value will be realized from a proposal that exceeds the minimum technical or

performance requirements;

(iii) The proposed technical approaches will require no, or minimal, subjective judgment by the

source selection authority as to the desirability of one offeror’s proposal versus a competing

proposal;

(iv) The source selection authority has a high degree of confidence that reviewing the technical

proposals of all offerors would not result in the identification of characteristics that could provide

value or benefit;

(v) No, or minimal, additional innovation or future technological advantage will be realized by using

a different source selection process;

(vi) Goods to be procured are predominantly expendable in nature, are nontechnical, or have a short

life expectancy or short shelf life (See PGI 215.101-2-70(a)(1)(vi) for assistance with evaluating

whether a requirement satisfies this limitation);

(vii) The contract file contains a determination that the lowest price reflects full life-cycle costs (as

defined at FAR 7.101) of the product(s) or service(s) being acquired (see PGI 215.101-2-70(a)(1)(vii)

for information on obtaining this determination); and

(viii) The contracting officer documents the contract file describing the circumstances justifying the

use of the lowest price technically acceptable source selection process.

(2) In accordance with section 813 of the National Defense Authorization Act for Fiscal Year 2017, as

amended by section 822 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L.

115-91) (see 10 U.S.C. 3241 note prec.), contracting officers shall avoid, to the maximum extent

practicable, using the lowest price technically acceptable source selection process in the case of a

procurement that is predominately for the acquisition of—

(i) Information technology services, cybersecurity services, systems engineering and technical

assistance services, advanced electronic testing, or other knowledge-based professional services;

(ii) Items designated by the requiring activity as personal protective equipment (except see

paragraph (b)(1) of this section); or

(iii) Services designated by the requiring activity as knowledge-based training or logistics services in

contingency operations or other operations outside the United States, including in Afghanistan or

Iraq.

(b) Prohibitions.
(1) In accordance with section 814 of the National Defense Authorization Act for Fiscal Year 2017

(Pub. L. 114-328) as amended by section 882 of the National Defense Authorization Act for Fiscal

Year 2018 (Pub. L. 115-91), contracting officers shall not use the lowest price technically acceptable

source selection process to procure items designated by the requiring activity as personal protective

equipment or an aviation critical safety item, when the requiring activity advises the contracting

officer that the level of quality or failure of the equipment or item could result in combat casualties.

See 252.209-7010 for the definition and identification of critical safety items.

(2) In accordance with section 832 of the National Defense Authorization Act for Fiscal Year 2018

(see 10 U.S.C. 4232), contracting officers shall not use the lowest price technically acceptable

source selection process to acquire engineering and manufacturing development for a major defense

acquisition program for which budgetary authority is requested beginning in fiscal year 2019.

(3) Contracting officers shall make award decisions based on best value factors and criteria, as

determined by the resource sponsor (in accordance with agency procedures), for an auditing

contract. The use of the lowest price technically acceptable source selection process is prohibited

(10 U.S.C. 240f).

215.101-70 Best value when acquiring tents or other temporary structures.

(a) In accordance with section 368 of the National Defense Authorization Act for Fiscal Year 2012

(Pub. L. 112-81), when acquiring tents or other temporary structures for use by the Armed Forces,

the contracting officer shall award contracts that provide the best value. Temporary structures

covered by this paragraph are nonpermanent buildings, including tactical shelters, nonpermanent

modular or pre-fabricated buildings, or portable or relocatable buildings, such as trailers or

equipment configured for occupancy (see also 246.270-2 ). Determination of best value includes

consideration of the total life-cycle costs of such tents or structures, including the costs associated

with any equipment, fuel, or electricity needed to heat, cool, or light such tents or structures (see

FAR 7.105(a)(3)(i) and PGI 207.105 (a)(3)(i)).

(b) The requirements of this section apply to any agency or department that acquires tents or other

temporary structures on behalf of DoD (see FAR 17.503(d)(2)).

Subpart 215.2 - SOLICITATION AND RECEIPT OF

PROPOSALS AND INFORMATION

215.203 RESERVED

215.203-70 Requests for proposals - tiered evaluation of offers.

(a) The tiered or cascading order of precedence used for tiered evaluation of offers shall be

consistent with FAR Part 19.

(b) Consideration shall be given to the tiers of small businesses (e.g., 8(a), HUBZone small business,

service-disabled veteran-owned small business, small business) before evaluating offers from other

than small business concerns.
(c) The contracting officer is prohibited from issuing a solicitation with a tiered evaluation of offers

unless—

(1) The contracting officer conducts market research, in accordance with FAR Part 10 and Part 210,

to determine—

(i) Whether the criteria in FAR Part 19 are met for setting aside the acquisition for small business; or

(ii) For a task or delivery order, whether there are a sufficient number of qualified small business

concerns available to justify limiting competition under the terms of the contract; and

(2) If the contracting officer cannot determine whether the criteria in paragraph (c)(1) of this section

are met, the contracting officer includes a written explanation in the contract file as to why such a

determination could not be made (Section 816 of Pub. L. 109-163).

215.209 Solicitation provisions and contract clauses.

(a) For source selections when the procurement is $100 million or more, contracting officers should

use the provision at FAR 52.215-1, Instructions to Offerors—Competitive Acquisition, with its

Alternate I.

215.270 Peer Reviews.

Agency officials shall conduct Peer Reviews in accordance with 201.170 .

Subpart 215.3 - SOURCE SELECTION

215.300 Scope of subpart.

When conducting negotiated, competitive acquisitions utilizing FAR part 15 procedures, contracting

officers shall follow the principles and procedures in Principal Director, Defense Pricing and

Contracting memorandum provided at PGI 215.300 .

215.303 Responsibilities.

(b)(2) For high-dollar value and other acquisitions, as prescribed by agency procedures, the source

selection authority shall approve a source selection plan before the solicitation is issued. Follow the

procedures at PGI 215.303 (b)(2) for preparation of the source selection plan.

215.304 Evaluation factors and significant subfactors.

(c)(i) In acquisitions that require use of the clause at FAR 52.219-9, Small Business Subcontracting

Plan, other than those based on the lowest price technically acceptable source selection process (see

FAR 15.101-2), the extent of participation of small businesses to include service-disabled veteran-
owned small business concerns, HUBZone small business concerns, small disadvantaged business

concerns, and women-owned small business concerns in performance of the contract shall be

addressed in source selection. The contracting officer shall evaluate the extent to which offerors

identify and commit to small business performance of the contract, whether as a joint venture,

teaming arrangement, or subcontractor.

(A) See PGI 215.304 (c)(i)(A) for examples of evaluation factors.

(B) Proposals addressing the extent of small business performance shall be separate from

subcontracting plans submitted pursuant to the clause at FAR 52.219-9 and shall be structured to

allow for consideration of offers from small businesses.

(C) When an evaluation assesses the extent that small businesses are specifically identified in

proposals, the small businesses considered in the evaluation shall be listed in any subcontracting

plan submitted pursuant to FAR 52.219-9 to facilitate compliance with 252.219-7003 .

(ii) In accordance with 10 U.S.C. 4293, consider the purchase of capital assets (including machine

tools) manufactured in the United States, in source selections for all major defense acquisition

programs as defined in 10 U.S.C. 4201.

(iii) See 247.573-2(c) for additional evaluation factors required in solicitations for the direct

purchase of ocean transportation services.

(iv) In accordance with section 812 of the National Defense Authorization Act for Fiscal Year 2011,

consider the manufacturing readiness and manufacturing-readiness processes of potential

contractors and subcontractors as a part of the source selection process for major defense

acquisition programs.

(v) Include an evaluation factor regarding supply chain risk (see subpart 239.73) when acquiring

information technology, whether as a service or as a supply, that is a covered system, is a part of a

covered system, or is in support of a covered system, as defined in 239.7301. For additional

guidance see PGI 215.304 (c)(v).

(vi) Ensure source selections emphasize sustainment factors and objective reliability and

maintainability evaluation criteria in competitive contracts for the—

(A) Technical maturation and risk reduction phase of weapon system design (see guidance at PGI

207.105 (b)(14)(ii)(2));

(B) Engineering and manufacturing development phase of a weapon system, including embedded

software (10 U.S.C. 4328); or

(C) Production and deployment phase of a weapon system, including embedded software (10 U.S.C.

4328).

(vii) See 226.7202 for an additional evaluation factor required in solicitations when using the

Demonstration Project for Contractors Employing Persons with Disabilities.

(viii)(A) When procuring supplies or services, the contracting officer shall ensure Supplier

Performance Risk System (SPRS) assessments of price risk and supplier risk are considered as a

part of the award decision. See 204.7603.

(B) When procuring an end product identified by a material identifier that is available as described
at 204.7603, the contracting officer shall also consider SPRS assessments of item risk in the award

decision.

See DoD Class Deviation 2013-O0018, Past Performance Evaluation Thresholds and Reporting

Requirements, issued on September 24, 2013, which updates the DoD thresholds for evaluating a

contractor’s past performance in source selections for competitive acquisitions. This deviation is in

effect until incorporated into the DFARS or otherwise rescinded.

215.305 Proposal evaluation.

(a)(2) Past performance evaluation.

(A) When a past performance evaluation is required by FAR 15.304, and the solicitation includes the

clause at FAR 52.219-8, Utilization of Small Business Concerns, the evaluation factors shall include

the past performance of offerors in complying with requirements of that clause. When a past

performance evaluation is required by FAR 15.304, and the solicitation includes the clause at FAR

52.219-9, Small Business Subcontracting Plan, the evaluation factors shall include the past

performance of offerors in complying with requirements of that clause.

(B) Contracting officers shall consider an offeror’s failure to make a good faith effort to comply with

its comprehensive subcontracting plan under the Test Program described at 219.702-70 as part of

the evaluation of the past performance.

215.306 Exchanges with offerors after receipt of proposals.

(c) Competitive range.

(1) For acquisitions with an estimated value of $100 million or more, contracting officers should

conduct discussions. Follow the procedures at FAR 15.306 (c) and (d).

215.370 Evaluation factor for employing or subcontracting with members of

the Selected Reserve.

215.370-1 Definition.

As used in this section—

Selected Reserve has the meaning given that term in 10 U.S.C. 10143. Selected Reserve members

normally attend regular drills throughout the year and are the group of Reserves most readily

available to the President.

215.370-2 Evaluation factor.

In accordance with Section 819 of the National Defense Authorization Act for Fiscal Year 2006 (Pub.

L. 109-163), the contracting officer may use an evaluation factor that considers whether an offeror
intends to perform the contract using employees or individual subcontractors who are members of

the Selected Reserve. See PGI 215.370-2 for guidance on use of this evaluation factor.

215.370-3 Solicitation provision and contract clause.

Use the clause at 252.215-7006, Use of Employees or Individual Subcontractors Who Are Members

of the Selected Reserve, in solicitations and resulting contracts that include an evaluation factor

considering whether an offeror intends to perform the contract using employees or individual

subcontractors who are members of the Selected Reserve.

215.371 Only one offer.

215.371-1 Policy.

It is DoD policy, if only one offer is received in response to a competitive solicitation—

(a) To take the required actions to promote competition (see 215.371-2 ); and

(b) To ensure that the price is fair and reasonable (see 215.371-3 ) and to comply with the statutory

requirement for certified cost or pricing data (see FAR 15.403-4).

215.371-2 Promote competition.

Except as provided in sections 215.371-4 and 215.371-5 —

(a) If only one offer is received when competitive procedures were used and the solicitation allowed

fewer than 30 days for receipt of proposals, the contracting officer shall—

(1) Consult with the requiring activity as to whether the requirements document should be revised in

order to promote more competition (see FAR 6.502(b) and 11.002); and

(2) Resolicit, allowing an additional period of at least 30 days for receipt of proposals; and

(b) For competitive solicitations in which more than one potential offeror expressed an interest in an

acquisition, but only one offer was ultimately received, follow the procedures at PGI 215.371-2 .

215.371-3 Fair and reasonable price and the requirement for additional cost or pricing

data.

For acquisitions that exceed the simplified acquisition threshold, if only one offer is received when

competitive procedures were used and it is not necessary to resolicit in accordance with 215.371-2

(a), then the contracting officer shall comply with the following:

(a) If no additional cost or pricing data are required to determine through cost or price analysis that

the offered price is fair and reasonable, the contracting officer shall require that any cost or pricing

data provided in the proposal be certified if the acquisition exceeds the certified cost or pricing data
threshold and an exception to the requirement for certified cost or pricing data at FAR

15.403-1(b)(2) through (5) does not apply.

(b) Otherwise, the contracting officer shall obtain additional cost or pricing data to determine a fair

and reasonable price. If the acquisition exceeds the certified cost or pricing data threshold and an

exception to the requirement for certified cost or pricing data at FAR 15.403-1(b)(2) through (5)

does not apply, the cost or pricing data shall be certified.

(c) If the contracting officer is still unable to determine that the offered price is fair and reasonable,

the contracting officer shall enter into negotiations with the offeror to establish a fair and

reasonable price. The negotiated price should not exceed the offered price.

(d) If the contracting officer is unable to negotiate a fair and reasonable price, see FAR 15.405(d).

215.371-4 Exceptions.

(a) The requirements at section 215.371-2 do not apply to -

(1) Acquisitions at or below the simplified acquisition threshold;

(2) Acquisitions, as determined by the head of the contracting activity, in support of contingency or

humanitarian or peacekeeping operations; to facilitate defense against or recovery from cyber,

nuclear, biological, chemical, or radiological attack; to facilitate the provision of international

disaster assistance; or to support response to an emergency or major disaster;

(3) Small business set-asides under FAR subpart 19.5, set asides offered and accepted into the 8(a)

Program under FAR subpart 19.8, or set asides under the HUBZone Program (see FAR 19.1305(c)),

the Service-Disabled Veteran-Owned Small Business Procurement Program (see FAR 19.1405(c)), or

the Women-Owned Small Business Program (see FAR 19.1505(d));

(4) Acquisitions of science and technology, as specified in 235.016(a); or

(5) Acquisitions of architect-engineer services (see FAR 36.601-2); or

(6) Acquisitions under a commercial solutions opening pursuant to subpart 212.70.

(b) The applicability of an exception in paragraph (a) of this section does not eliminate the need for

the contracting officer to seek maximum practicable competition and to ensure that the price is fair

and reasonable.

215.371-5 Waiver.

(a) The head of the contracting activity is authorized to waive the requirement at 215.371-2 to

resolicit for an additional period of at least 30 days.

(b) This waiver authority cannot be delegated below one level above the contracting officer.
215.371-6 Solicitation provision.

Use the provision at 252.215-7007 , Notice of Intent to Resolicit, in competitive solicitations,

including solicitations using FAR part 12 procedures for the acquisition of commercial products and

commercial services, that will be solicited for fewer than 30 days, unless an exception at 215.371-4

applies or the requirement is waived in accordance with 215.371-5 .

Subpart 215.4 - CONTRACT PRICING

215.401 Definitions.

As used in this subpart—

“Market prices” means current prices that are established in the course of ordinary trade between

buyers and sellers free to bargain and that can be substantiated through competition or from

sources independent of the offerors.

“Relevant sales data” means information on sales of the same or similar items that can be used to

establish price reasonableness taking into consideration the age, volume, and nature of the

transactions (including any related discounts, refunds, rebates, offsets or other adjustments).

215.402 Pricing policy.

(a)(i) Pursuant to section 831 of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L.

112-239)—

(A) The contracting officer is responsible for determining if the information provided by the offeror

is sufficient to determine price reasonableness. This responsibility includes determining whether

information on the prices at which the same or similar items have previously been sold is adequate

for evaluating the reasonableness of price, and determining the extent of uncertified cost data that

should be required in cases in which price information is not adequate;

(B) The contracting officer shall not limit the Government’s ability to obtain information that may be

necessary to support a determination of fair and reasonable pricing by agreeing to contract terms

that preclude obtaining necessary supporting information; and

(C) When obtaining uncertified cost data, the contracting officer shall require the offeror to provide

the information in the form in which it is regularly maintained in the offeror’s business operations.

(ii) Follow the procedures at PGI 215.402 when conducting cost or price analysis, particularly with

regard to acquisitions for sole source commercial products or commercial services.

215.403 Obtaining certified cost or pricing data.
215.403-1 Prohibition on obtaining certified cost or pricing data (10 U.S.C. chapter 271

and 41 U.S.C. chapter 35).

(b) Exceptions to certified cost or pricing data requirements.

(i) Follow the procedures at PGI 215.403-1 (b).

(ii) Submission of certified cost or pricing data shall not be required in the case of a contract,

subcontract, or modification of a contract or subcontract to the extent such data relates to an

indirect offset.

(c) Standards for exceptions from certified cost or pricing data requirements.

(1) Adequate price competition.

(A) For acquisitions under dual or multiple source programs—

(1) The determination of adequate price competition must be made on a case-by-case basis. Even

when adequate price competition exists, in certain cases it may be appropriate to obtain additional

data to assist in price analysis; and

(2)Adequate price competition normally exists when—

(i) Prices are solicited across a full range of step quantities, normally including a 0-100 percent split,

from at least two offerors that are individually capable of producing the full quantity; and

(ii) The reasonableness of all prices awarded is clearly established on the basis of price analysis (see

FAR 15.404-1(b)).

(B) If only one offer is received in response to a competitive solicitation, see 215.371-3.

(3) Commercial products or commercial services.

(A) Follow the procedures at PGI (c)(3)(A) for pricing commercial products or commercial services.

(B) When applying the commercial product or commercial service exception under FAR

15.403-1(b)(3), see 212.102(a)(ii) regarding prior commercial product or commercial service

determinations.

(4) Waivers.

(A) The head of the contracting activity may, without power of delegation, apply the exceptional

circumstances authority when a determination is made that—

(1) The property or services cannot reasonably be obtained under the contract, subcontract, or

modification, without the granting of the waiver;

(2) The price can be determined to be fair and reasonable without the submission of certified cost or

pricing data; and

(3) There are demonstrated benefits to granting the waiver. Follow the procedures at PGI 215.403-1

(c)(4)(A) for determining when an exceptional case waiver is appropriate, for approval of such

waivers, for partial waivers, and for waivers applicable to unpriced supplies or services.
(B) By November 30th of each year, departments and agencies shall provide a report to the Office of

the Principal Director, Defense Pricing and Contracting, (Price, Cost and Finance), of all waivers

granted under FAR 15.403-1(b)(4), during the previous fiscal year, for any contract, subcontract, or

modification expected to have a value of $20 million or more. See PGI (c)(4)(B) for the format and

guidance for the report.

(C) DoD has waived the requirement for submission of certified cost or pricing data for the Canadian

Commercial Corporation and its subcontractors (but see 215.408 (3) and 225.870-4 (c)).

(D) DoD has waived certified cost or pricing data requirements for nonprofit organizations (including

educational institutions) on cost-reimbursement-no-fee contracts. The contracting officer shall

require—

(1) Submission of data other than certified cost or pricing data to the extent necessary to determine

price reasonableness and cost realism; and

(2) Certified cost or pricing data from subcontractors that are not nonprofit organizations when the

subcontractor’s proposal exceeds the certified cost or pricing data threshold at FAR 15.403-4(a)(1).

215.403-3 Requiring data other than certified cost or pricing data.

Follow the procedures at PGI 215.403-3 .

(a) In accordance with 10 U.S.C. 3705 —

(1) Contracting officers shall not determine the price of a contract or subcontract to be fair and

reasonable based solely on historical prices paid by the Government (see PGI 215.403-3 Requiring

data other than certified cost or pricing data.(4)); and

(4) In lieu of the factors for consideration listed in FAR 15.403-3(a)(4), a determination by the head

of the contracting activity (see PGI 215.403-3 Requiring data other than certified cost or pricing

data.(7)) that it is in the best interest of the Government to make the award to an offeror that does

not make a good faith effort to comply with a reasonable request to submit data other than certified

cost or pricing data shall be based on consideration of pertinent factors, including the following:

(i) The effort to obtain the data.

(ii) Availability of other sources of supply of the item or service.

(iii) The urgency or criticality of the Government's need for the item or service.

(iv) Reasonableness of the price of the contract, subcontract, or modification of the contract or

subcontract based on information available to the contracting officer.

(v) Rationale or justification made by the offeror for not providing the requested data.

(vi) Risk to the Government if award is not made.

(c) Commercial products or commercial services. For determinations of price reasonableness of

major weapon systems acquired as commercial products, see 234.7002(d)
215.403-5 Instructions for submission of certified cost or pricing data and data other than

certified cost or pricing data.

(b)(3) For contractors following the contract cost principles in FAR subpart 31.2, Contracts With

Commercial Organizations, pursuant to the procedures in FAR 42.1701(b), the administrative

contracting officer shall require contractors to comply with the submission items in Table 215.403-1

in order to ensure that their forward pricing rate proposal is submitted in an acceptable form in

accordance with FAR 15.403-5(b)(3). The contracting officer should request that the proposal be

submitted to the Government at least 90 days prior to the proposed effective date of the rates. To

ensure the proposal is complete, the contracting officer shall request that the contractor complete

the Contractor Forward Pricing Rate Proposal Adequacy Checklist at Table 215.403-1 , and submit it

with the forward pricing rate proposal.

Table 215.403-1 – Contractor Forward Pricing Rate Proposal Adequacy Checklist

Complete the following checklist, providing the location of requested information, or an explanation

of why the requested information is not provided, and submit it with the forward pricing rate

proposal.

Contractor Forward Pricing Rate Proposal Adequacy Checklist
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

Is there a properly completed first page of

the proposal as specified by the

contracting officer?

Initial proposal elements include:

a. Name and address of contractor;

b. Name and telephone number of point of

contact;

c. Period covered;

d. The page of the proposal that

addresses—

1. Whether your organization is subject to

cost accounting standards (CAS);

2. Whether your organization has

submitted a CAS Disclosure Statement,

and whether it has been determined

adequate;

3. Whether you have been notified that you

are or may be in noncompliance with your

Disclosure Statement or CAS (other than a

noncompliance that the cognizant Federal

agency official had determined to have an

immaterial cost impact), and if yes, an

explanation;

4. Whether any aspect of this proposal is

inconsistent with your disclosed practices

or applicable CAS, and, if so, an

explanation; and whether the proposal is

consistent with established estimating and

accounting principles and procedures and

FAR part 31, Cost Principles, and, if not, an

explanation;

e. The following statement: “This forward

pricing rate proposal reflects our

estimates, as of the date of submission

entered in (f) below and conforms with

Table 215.403-1 . By submitting this

proposal, we grant the Contracting Officer

and authorized representative(s) the right

to examine those records, which include

books, documents, accounting procedures

and practices, and other data, regardless of

type and form or whether such supporting

information is specifically referenced or

included in the proposal as the basis for

each estimate, that will permit an adequate

evaluation of the proposed rates and

factors.”;

f. Date of submission; and

g. Name, title, and signature of authorized

representative.

Proposal

Cover Page
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

Summary of proposed direct and indirect

rates and factors, including the proposed

pool and base costs for each proposed

indirect rate and factor.

Immediately

following the

proposal

cover page

Table of Contents or index.

a. Does the proposal include a table of

contents or index identifying and

referencing all supporting data

accompanying or identified in the

proposal?

b. For supporting documentation not

provided with the proposal, does the basis

of each estimate in the proposal include

the location of the documentation and the

point of contact (custodian) name, phone

number, and email address?

Does the proposal disclose known or

anticipated changes in business activities

or processes that could materially impact

the proposed rates (if not previously

provided)? For example—

a. Management initiatives to reduce costs;

b. Changes in management objectives as a

result of economic conditions and

increased competitiveness;

c. Changes in accounting policies,

procedures, and practices including (i)

reclassification of expenses from direct to

indirect or vice versa; (ii) new methods of

accumulating and allocating indirect costs

and the related impact; and (iii) advance

agreements; d. Company reorganizations

(including acquisitions or divestitures);

e. Shutdown of facilities; or

f. Changes in business volume and/or

contract mix/type.

Do proposed costs based on judgmental

factors include an explanation of the

estimating processes and methods used,

including those used in projecting from

known data?
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

Does the proposal show trends and

budgetary data? Does the proposal provide

an explanation of how the data, as well as

any adjustments to the data, were used?

The proposal should reconcile to the

supporting data referenced. If the proposal

does not reconcile to the supporting data

referenced, identify applicable page(s) and

explain.

The proposal should be internally

consistent. If the proposal is not internally

consistent, identify applicable page(s) and

explain.

Direct Labor

Direct Labor Rates Methodology and Basis

of Each Estimate. a. Does the proposal

include an explanation of the methodology

used to develop the direct labor rates and

identify the basis of each estimate? b. Does

the proposal include or identify the

location of the supporting documents for

the base-period labor rates (e.g., payroll

records)?

Does the proposal identify escalation

factors for the out-year labor rates, the

costs to which escalation is applicable, and

the basis of each factor used?

Does the proposal identify planned or

anticipated changes in the composition of

labor rates, labor categories, union

agreements, headcounts, or other factors

that could significantly impact the direct

labor rates?

Indirect Rates

(Fringe, Overhead,

G&A, etc.)
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

Indirect Rates Methodology and Basis of

Each Estimate. a. Does the proposal

identify the basis of each estimate and

provide an explanation of the methodology

used to develop the indirect rates?

b. Does the proposal include or identify the

location of the supporting documents for

the proposed rates?

Does the proposal identify indirect

expenses by burden center, by cost

element, by year (including any voluntary

deletions, if applicable) in a format that is

consistent with the accounting system used

to accumulate actual expenses?

Does the proposal identify any

contingencies?

Does the proposal identify planned or

anticipated changes in the nature, type, or

level of indirect costs, including fringe

benefits?

Does the proposal identify corporate, home

office, shared services, or other incoming

allocated costs and the source for those

costs, including location and point of

contact (custodian) name, phone number,

and email address?

Does the proposal separately identify all

intermediate cost pools and provide a

reconciliation to show where the costs will

be allocated?

Does the proposal identify the escalation

factors used to escalate indirect costs for

the out-years, the costs to which escalation

is applicable, and the basis of each factor

used?
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

Does the proposal provide details of the

development of the allocation base?

Does the proposal include or reference the

supporting data for the allocation base

such as program budgets, negotiation

memoranda, proposals, contract values,

etc.?

Does the proposal identify how the

proposed allocation bases reconcile with its

long range plans, strategic plan, operating

budgets, sales forecasts, program budgets,

etc.?

Cost of Money

(COM)

Cost of Money. a. Are Cost of Money rates

submitted on Form CASB-CMF, with the

Treasury Rate used to compute COM

identified and a summary of the net book

value of assets, identified as distributed

and non-distributed?

b. Does the proposal identify the support

for the Form CASB-CMF, for example, the

underlying reports and records supporting

the net book value of assets contained in

the form?

OTHER

Does the proposal include a comparison of

prior forecasted costs to actual results in

the same format as the proposal and an

explanation/analysis of any differences?
SUBMISSION

ITEM

PROPOSAL

PAGE No.

(if

applicable)

If not

provided,

EXPLAIN

(may use

continuation

pages)

GENERAL

INSTRUCTIONS

If this is a revision to a previous rate

proposal or a forward pricing rate

agreement, does the new proposal provide

a summary of the changes in the

circumstances or the facts that the

contractor asserts require the change to

the rates?

215.404 Proposal analysis.

215.404-1 Proposal analysis techniques.

(a) General.

(i) Follow the procedures at PGI 215.404-1 for proposal analysis.

(ii) For spare parts or support equipment, perform an analysis of—

(A) Those line items where the proposed price exceeds by 25 percent or more the lowest price the

Government has paid within the most recent 12-month period based on reasonably available data;

(B) Those line items where a comparison of the item description and the proposed price indicates a

potential for overpricing;

(C) Significant high-dollar-value items. If there are no obvious high-dollar-value items, include an

analysis of a random sample of items; and

(D) A random sample of the remaining low-dollar value items. Sample size may be determined by

subjective judgment, e.g., experience with the offeror and the reliability of its estimating and

accounting systems.

(b) Price analysis for commercial and noncommercial items.

(i) In the absence of adequate price competition in response to the solicitation, pricing based on

market prices is the preferred method to establish a fair and reasonable price (see PGI 215.404-1

(b)(i)).

(ii) If the contracting officer determines that the information obtained through market research is

insufficient to determine the reasonableness of price, the contracting officer shall consider

information submitted by the offeror of recent purchase prices paid by the Government and
commercial customers for the same or similar commercial products or commercial services under

comparable terms and conditions in establishing price reasonableness on a subsequent purchase if

the contracting officer is satisfied that the prices previously paid remain a valid reference for

comparison. Price reasonableness shall not be based solely on historical prices paid by the

Government (see 215.403-3(a)(1)). The contracting officer shall consider the totality of other

relevant factors such as the time elapsed since the prior purchase and any differences in the

quantities purchased ( 10 U.S.C. 3703(e) ).

(iii) If the contracting officer determines that the offeror cannot provide sufficient information as

described in paragraph (b)(ii) of this section to determine the reasonableness of price, the

contracting officer should request the offeror to submit information on—

(A) Prices paid for the same or similar items sold under different terms and conditions;

(B) Prices paid for similar levels of work or effort on related products or services;

(C) Prices paid for alternative solutions or approaches; and

(D) Other relevant information that can serve as the basis for determining the reasonableness of

price.

(iv) If the contracting officer determines that the pricing information submitted is not sufficient to

determine the reasonableness of price, the contracting officer shall request other relevant

information, to include cost data. However, no cost data may be required in any case in which there

are sufficient non-Government sales of the same item to establish reasonableness of price (section

831 of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239)).

(v) When evaluating pricing data, the contracting officer shall consider materially differing terms

and conditions, quantities, and market and economic factors (see PGI 215.404-1 Proposal analysis

techniques.(b)(v)). For similar items, the contracting officer shall also consider material differences

between the similar item and the item being procured (see FAR 15.404-1(b)(2)(ii)(B)). Material

differences are those that could reasonably be expected to influence the contracting officer's

determination of price reasonableness. The contracting officer shall consider the following factors

when evaluating the relevance of the information available:

(A) Market prices.

(B) Age of data.

(1) Whether data is too old to be relevant depends on the industry (e.g., rapidly evolving

technologies), product maturity (e.g., stable), economic factors (e.g., new sellers in the

marketplace), and various other considerations.

(2) A pending sale may be relevant if, in the judgement of the contracting officer, it is probable at

the anticipated price, and the sale could reasonably be expected to materially influence the

contracting officer’s determination of price reasonableness. The contracting officer may consult with

the cognizant administrative contracting officers (ACOs) as they may have information about

pending sales.

(C) Volume and completeness of transaction data. Data must include a sufficient number of

transactions to represent the range of relevant sales to all types of customers. The data must also

include key information, such as date, quantity sold, part number, part nomenclature, sales price,

and customer. If the number of transactions is insufficient or the data is incomplete, the contracting
officer shall request additional sales data to evaluate price reasonableness. If the contractor cannot

provide sufficient sales data, the contracting officer shall request other relevant information.

(D) Nature of transactions. The nature of a sales transaction includes the information necessary to

understand the transaction, such as terms and conditions, date, quantity sold, sale price, unique

requirements, the type of customer (government, distributor, retail end-user, etc.), and related

agreements. It also includes warranties, key product technical specifications, maintenance

agreements, and preferred customer rewards.

(vi) The contracting officer shall consider catalog prices to be reliable when they are regularly

maintained and supported by relevant sales data (including any related discounts, refunds, rebates,

offsets, or other adjustments). The contracting officer may request that the offeror support

differences between the proposed price(s), catalog price(s), and relevant sales data.

(vii) The contracting officer may consult with the DoD cadre of experts who are available to provide

expert advice to the acquisition workforce in assisting with commercial product or commercial

service determinations and price reasonableness determinations. The DoD cadre of experts is

identified at PGI 215.404-1 (b)(vii).

(viii) When procuring a service or an end product identified by a material identifier that is available

as described at 204.7603, the contracting officer shall consider the Supplier Performance Risk

System price risk assessments in determining if a proposed price is consistent with historical prices

paid for an item or otherwise creates a risk to the Government. See also 215.403-3(a)(1).

(h) Review and justification of pass-through contracts. Follow the procedures at PGI 215.404-1 (h)(2)

when considering alternative approaches or making the determination that the contracting approach

selected is in the best interest of the Government, as required by FAR 15.404-1(h)(2).

215.404-2 Data to support proposal analysis.

See PGI 215.404-2 for guidance on obtaining field pricing or audit assistance.

215.404-3 Subcontract pricing considerations.

Follow the procedures at PGI 215.404-3 when reviewing a subcontractor’s proposal.

215.404-4 Profit.

(b) Policy.

(1) Contracting officers shall use a structured approach for developing a prenegotiation profit or fee

objective on any negotiated contract action when certified cost or pricing data is obtained, except

for cost-plus-award-fee contracts (see 215.404-74 , 216.405-2 , and FAR 16.405-2) or contracts with

Federally Funded Research and Development Centers (FFRDCs) (see 215.404-75 ). There are three

structured approaches—

(A) The weighted guidelines method;
(B) The modified weighted guidelines method; and

(C) An alternate structured approach.

(c) Contracting officer responsibilities.

(1) Also, do not perform a profit analysis when assessing cost realism in competitive acquisitions.

(2) When using a structured approach, the contracting officer—

(A) Shall use the weighted guidelines method (see 215.404-71 ), except as provided in paragraphs

(c)(2)(B) and (c)(2)(C) of this subsection.

(B) Shall use the modified weighted guidelines method (see 215.404-72 ) on contract actions with

nonprofit organizations other than FFRDCs.

(C) May use an alternate structured approach (see 215.404-73 ) when—

(1) The contract action is—

(i) At or below the certified cost or pricing data threshold (see FAR 15.403-4(a)(1));

(ii) For architect-engineer or construction work;

(iii) Primarily for delivery of material from subcontractors; or

(iv) A termination settlement; or

(2) The weighted guidelines method does not produce a reasonable overall profit objective and the

head of the contracting activity approves use of the alternate approach in writing.

(D) Shall use the weighted guidelines method to establish a basic profit rate under a formula-type

pricing agreement, and may then use the basic rate on all actions under the agreement, provided

that conditions affecting profit do not change.

(E) Shall document the profit analysis in the contract file.

(5) Although specific agreement on the applied weights or values for individual profit factors shall

not be attempted, the contracting officer may encourage the contractor to—

(A) Present the details of its proposed profit amounts in the weighted guidelines format or similar

structured approach; and

(B) Use the weighted guidelines method in developing profit objectives for negotiated subcontracts.

(6) The contracting officer must also verify that relevant variables have not materially changed (e.g.,

performance risk, interest rates, progress payment rates, distribution of facilities capital).

(d) Profit-analysis factors.

(1) Common factors. The common factors are embodied in the DoD structured approaches and need

not be further considered by the contracting officer.
215.404-70 DD Form 1547, Record of Weighted Guidelines Method Application.

Follow the procedures at PGI 215.404-70 for use of DD Form 1547 whenever a structured approach

to profit analysis is required.

215.404-71 Weighted guidelines method.

215.404-71-1 General

(a) The weighted guidelines method focuses on four profit factors -

(1) Performance risk;

(2) Contract type risk;

(3) Facilities capital employed; and

(4) Cost efficiency.

(b) The contracting officer assigns values to each profit factor; the value multiplied by the base

results in the profit objective for that factor. Except for the cost efficiency special factor, each profit

factor has a normal value and a designated range of values. The normal value is representative of

average conditions on the prospective contract when compared to all goods and services acquired by

DoD. The designated range provides values based on above normal or below normal conditions. In

the price negotiation documentation, the contracting officer need not explain assignment of the

normal value, but should address conditions that justify assignment of other than the normal value.

The cost efficiency special factor has no normal value. The contracting officer shall exercise sound

business judgment in selecting a value when this special factor is used (see 215.404-71-5).

215.404-71-2 Performance risk.

(a) Description. This profit factor addresses the contractor's degree of risk in fulfilling the contract

requirements. The factor consists of two parts:

(1) Technical - the technical uncertainties of performance.

(2) Management/cost control - the degree of management effort necessary -

(i) To ensure that contract requirements are met; and

(ii) To reduce and control costs.

(b) Determination. The following extract from the DD Form 1547 is annotated to describe the

process.
Item Contractor risk

factors

Assigned

weighting

Assigned

value

Base

(item

20)

Profit

objective

21 Technical (1) (2) N/A N/A

22 Management/Cost

Control (1) (2) N/A N/A

23 Performance Risk

(Composite) N/A (3) (4) (5)

(1) Assign a weight (percentage) to each element according to its input to the total performance risk.

The total of the two weights equals 100 percent.

(2) Select a value for each element from the list in paragraph (c) of this subsection using the

evaluation criteria in paragraphs (d) and (e) of this subsection.

(3) Compute the composite as shown in the following example:

Assigned

weighting

(percent)

Assigned value

(percent)

Weighted value

(percent)

Technical 60 5.0 3.0

Management/Cost Control 40 4.0 1.6

Composite Value 100 4.6

(4) Insert the amount from Block 20 of the DD Form 1547. Block 20 is total contract costs, excluding

facilities capital cost of money.

(5) Multiply (3) by (4).

(c) Values: Normal and designated ranges.

Normal value (percent) Designated range

Standard 5 3% to 7%

Technology Incentive 9 7% to 11%

(1) Standard. The standard designated range should apply to most contracts.
(2) Technology incentive. For the technical factor only, contracting officers may use the technology

incentive range for acquisitions that include development, production, or application of innovative

new technologies. The technology incentive range does not apply to efforts restricted to studies,

analyses, or demonstrations that have a technical report as their primary deliverable.

(d) Evaluation criteria for technical. (1) Review the contract requirements and focus on the critical

performance elements in the statement of work or specifications. Factors to consider include -

(i) Technology being applied or developed by the contractor;

(ii) Technical complexity;

(iii) Program maturity;

(iv) Performance specifications and tolerances;

(v) Delivery schedule; and

(vi) Extent of a warranty or guarantee.

(2) Above normal conditions. (i) The contracting officer may assign a higher than normal value in

those cases where there is a substantial technical risk. Indicators are -

(A) Items are being manufactured using specifications with stringent tolerance limits;

(B) The efforts require highly skilled personnel or require the use of state-of-the-art machinery;

(C) The services and analytical efforts are extremely important to the Government and must be

performed to exacting standards;

(D) The contractor's independent development and investment has reduced the Government's risk or

cost;

(E) The contractor has accepted an accelerated delivery schedule to meet DoD requirements; or

(F) The contractor has assumed additional risk through warranty provisions.

(ii) Extremely complex, vital efforts to overcome difficult technical obstacles that require personnel

with exceptional abilities, experience, and professional credentials may justify a value significantly

above normal.

(iii) The following may justify a maximum value -

(A) Development or initial production of a new item, particularly if performance or quality

specifications are tight; or

(B) A high degree of development or production concurrency.

(3) Below normal conditions. (i) The contracting officer may assign a lower than normal value in

those cases where the technical risk is low. Indicators are -

(A) Requirements are relatively simple;

(B) Technology is not complex;
(C) Efforts do not require highly skilled personnel;

(D) Efforts are routine;

(E) Programs are mature; or

(F) Acquisition is a follow-on effort or a repetitive type acquisition.

(ii) The contracting officer may assign a value significantly below normal for -

(A) Routine services;

(B) Production of simple items;

(C) Rote entry or routine integration of Government-furnished information; or

(D) Simple operations with Government-furnished property.

(4) Technology incentive range. (i) The contracting officer may assign values within the technology

incentive range when contract performance includes the introduction of new, significant

technological innovation. Use the technology incentive range only for the most innovative contract

efforts. Innovation may be in the form of -

(A) Development or application of new technology that fundamentally changes the characteristics of

an existing product or system and that results in increased technical performance, improved

reliability, or reduced costs; or

(B) New products or systems that contain significant technological advances over the products or

systems they are replacing.

(ii) When selecting a value within the technology incentive range, the contracting officer should

consider the relative value of the proposed innovation to the acquisition as a whole. When the

innovation represents a minor benefit, the contracting officer should consider using values less than

the norm. For innovative efforts that will have a major positive impact on the product or program,

the contracting officer may use values above the norm.

(e) Evaluation criteria for management/cost control. (1) The contracting officer should evaluate -

(i) The contractor's management and internal control systems using contracting office data,

information and reviews made by field contract administration offices or other DoD field offices;

(ii) The management involvement expected on the prospective contract action;

(iii) The degree of cost mix as an indication of the types of resources applied and value added by the

contractor;

(iv) The contractor's support of Federal socioeconomic programs;

(v) The expected reliability of the contractor's cost estimates (including the contractor's cost

estimating system);

(vi) The adequacy of the contractor's management approach to controlling cost and schedule; and

(vii) Any other factors that affect the contractor's ability to meet the cost targets (e.g., foreign
currency exchange rates and inflation rates).

(2) Above normal conditions. (i) The contracting officer may assign a higher than normal value when

there is a high degree of management effort. Indicators of this are -

(A) The contractor's value added is both considerable and reasonably difficult;

(B) The effort involves a high degree of integration or coordination;

(C) The contractor has a good record of past performance;

(D) The contractor has a substantial record of active participation in Federal socioeconomic

programs;

(E) The contractor provides fully documented and reliable cost estimates;

(F) The contractor makes appropriate make-or-buy decisions; or

(G) The contractor has a proven record of cost tracking and control.

(ii) The contracting officer may justify a maximum value when the effort -

(A) Requires large scale integration of the most complex nature;

(B) Involves major international activities with significant management coordination (e.g., offsets

with foreign vendors); or

(C) Has critically important milestones.

(iii) If the contractor demonstrates efficient management and cost control through the submittal of a

timely, qualifying proposal (as defined in217.7401) in furtherance of definitization of an

undefinitized contract action, and the proposal demonstrates effective cost control from the time of

award to the present, the contracting officer may add 1 percentage point to the value determined for

management/cost control up to the maximum of 7 percent.

(3) Below normal conditions. (i) The contracting officer may assign a lower than normal value when

the management effort is minimal. Indicators of this are -

(A) The program is mature and many end item deliveries have been made;

(B) The contractor adds minimal value to an item;

(C) The efforts are routine and require minimal supervision;

(D) The contractor provides poor quality, untimely proposals;

(E) The contractor fails to provide an adequate analysis of subcontractor costs;

(F) The contractor does not cooperate in the evaluation and negotiation of the proposal;

(G) The contractor's cost estimating system is marginal;

(H) The contractor has made minimal effort to initiate cost reduction programs;

(I) The contractor's cost proposal is inadequate;
(J) The contractor has a record of cost overruns or another indication of unreliable cost estimates

and lack of cost control; or

(K) The contractor has a poor record of past performance.

(ii) The following may justify a value significantly below normal -

(A) Reviews performed by the field contract administration offices disclose unsatisfactory

management and internal control systems (e.g., quality assurance, property control, safety,

security); or

(B) The effort requires an unusually low degree of management involvement.

215.404-71-3 Contract type risk and working capital adjustment.

(a) Description. The contract type risk factor focuses on the degree of cost risk accepted by the

contractor under varying contract types. The working capital adjustment is an adjustment added to

the profit objective for contract type risk. It only applies to fixed-price contracts that provide for

progress payments. Though it uses a formula approach, it is not intended to be an exact calculation

of the cost of working capital. Its purpose is to give general recognition to the contractor's cost of

working capital under varying contract circumstances, financing policies, and the economic

environment.

(b) Determination. The following extract from the DD 1547 is annotated to explain the process.

Item Contractor risk factors Assigned

value Base Profitobjective

24a

Contract Type Risk (based on

incurred costs at the time of

qualifying proposal submission)

(1) (2)(i) (3)

24b

Contract Type Risk (based on

Government estimated cost to

complete)

(1) (2)(ii) (3)

24c Totals (3) (3)

Item Contractor risk

factors

Costs

financed

Length

factor

Interest

rate

Profit

objective

25 Working Capital

(4) (5) (6) (7) (8)

(1) Select a value from the list of contract types in paragraph (c) of this section using the evaluation

criteria in paragraph (d) of this section. See paragraph (d)(2) of this section.
(2)(i) Insert the amount of costs incurred as of the date the contractor submits a qualifying proposal,

such as under an undefinitized contract action, (excluding facilities capital cost of money) into the

Block 24a column titled Base.

(ii) Insert the amount of Government estimated cost to complete (excluding facilities capital cost of

money) into the Block 24b column titled Base.

(3) Multiply (1) by (2)(i) and (2)(ii), respectively for Blocks 24a and 24b. Add Blocks 24a and 24b and

insert the totals in Block 24c.

(4) Only complete this block when the prospective contract is a fixed-price contract containing

provisions for progress payments.

(5) Insert the amount computed per paragraph (e) of this subsection.

(6) Insert the appropriate figure from paragraph (f) of this subsection.

(7) Use the interest rate established by the Secretary of the Treasury (see

https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/rates...). Do not use any other

interest rate.

(8) Multiply (5) by (6) by (7). This is the working capital adjustment. It shall not exceed 4 percent of

the contract costs in Block 20.

(c) Values: Normal and designated ranges.

Contract type Notes

Normal

value

(percent)

Designated

range (percent)

Firm-fixed-price, no financing (1) 5.0 4 to 6.

Firm-fixed-price, with performance-based

payments (6) 4.0 2.5 to 5.5

Firm-fixed-price, with progress payments (2) 3.0 2 to 4.

Fixed-price incentive, no financing (1) 3.0 2 to 4.

Fixed-price incentive, with performancebased payments (6) 2.0 0.5 to 3.5.

Fixed-price with redetermination

provision (3)

Fixed-price incentive, with progress

payments (2) 1.0 0 to 2.
Contract type Notes

Normal

value

(percent)

Designated

range (percent)

Cost-plus-incentive-fee (4) 1.0 0 to 2.

Cost-plus-fixed-fee (4) 0.5 0 to 1.

Time-and-materials (including overhaul

contracts priced on time-and-materials

basis)

(5) 0.5 0 to 1.

Labor-hour (5) 0.5 0 to 1.

Firm-fixed-price, level-of-effort (5) 0.5 0 to 1.

(1) “No financing” means either that the contract does not provide progress payments or

performance-based payments, or that the contract provides them only on a limited basis, such as

financing of first articles. Do not compute a working capital adjustment.

(2) When the contract contains provisions for progress payments, compute a working capital

adjustment (Block 25).

(3) For the purposes of assigning profit values, treat a fixed-price contract with redetermination

provisions as if it were a fixed-price incentive contract with below normal conditions.

(4) Cost-plus contracts shall not receive the working capital adjustment.

(5) These types of contracts are considered cost-plus-fixed-fee contracts for the purposes of

assigning profit values. They shall not receive the working capital adjustment in Block 25. However,

they may receive higher than normal values within the designated range to the extent that portions

of cost are fixed.

(6) When the contract contains provisions for performance-based payments, do not compute a

working capital adjustment.

(d) Evaluation criteria - (1) General. The contracting officer should consider elements that affect

contract type risk such as -

(i) Length of contract;

(ii) Adequacy of cost data for projections;

(iii) Economic environment;

(iv) Nature and extent of subcontracted activity;

(v) Protection provided to the contractor under contract provisions (e.g., economic price adjustment

clauses);
(vi) The ceilings and share lines contained in incentive provisions;

(vii) Risks associated with contracts for foreign military sales (FMS) that are not funded by U.S.

appropriations; and

(viii) When the contract contains provisions for performance-based payments -

(A) The frequency of payments;

(B) The total amount of payments compared to the maximum allowable amount specified at FAR

32.1004(b)(2); and

(C) The risk of the payment schedule to the contractor.

(2) Mandatory. (i) The contracting officer shall assess the extent to which costs have been incurred

prior to definitization of the contract action (also see 217.7404-6(a) and 243.204-70-6). When

considering the reduced cost risks associated with allowable incurred costs on an undefinitized

contract action, it is appropriate to apply separate contract risk factors for allowable incurred costs

and estimated costs to complete when completing the contract risk sections of DD Form 1547,

Record of Weighted Guidelines. When costs have been incurred prior to definitization, generally

regard the contract type risk to be in the low end of the designated range. If a substantial portion of

the costs has been incurred prior to definitization, the contracting officer may assign a value as low

as zero percent, regardless of contract type. However, if a contractor submits a qualifying proposal

to definitize an undefinitized contract action and the contracting officer for such action definitizes

the contract after the end of the 180-day period beginning on the date on which the contractor

submitted the qualifying proposal as defined in 217.7401, the profit allowed on the contract shall

accurately reflect the cost risk of the contractor as such risk existed on the date the contractor

submitted the qualifying proposal.

(ii) Contracting officers shall document in the price negotiation memorandum the reason for

assigning a specific contract type risk value, to include the extent to which any reduced cost risk

during the undefinitized period of performance was considered, in determining the negotiation

objective.

(3) Above normal conditions. The contracting officer may assign a higher than normal value when

there is substantial contract type risk. Indicators of this are -

(i) Efforts where there is minimal cost history;

(ii) Long-term contracts without provisions protecting the contractor, particularly when there is

considerable economic uncertainty;

(iii) Incentive provisions (e.g., cost and performance incentives) that place a high degree of risk on

the contractor;

(iv) FMS sales (other than those under DoD cooperative logistics support arrangements or those

made from U.S. Government inventories or stocks) where the contractor can demonstrate that there

are substantial risks above those normally present in DoD contracts for similar items; or

(v) An aggressive performance-based payment schedule that increases risk.

(4) Below normal conditions. The contracting officer may assign a lower than normal value when the

contract type risk is low. Indicators of this are -
(i) Very mature product line with extensive cost history;

(ii) Relative short-term contracts;

(iii) Contractual provisions that substantially reduce the contractor's risk;

(iv) Incentive provisions that place a low degree of risk on the contractor;

(v) Performance-based payments totaling the maximum allowable amount(s) specified at FAR

32.1004(b)(2); or

(vi) A performance-based payment schedule that is routine with minimal risk.

(e) Costs financed. (1) Costs financed equal total costs multiplied by the portion (percent) of costs

financed by the contractor.

(2) Total costs equal Block 20 (i.e., all allowable costs excluding facilities capital cost of money),

reduced as appropriate when -

(i) The contractor has little cash investment (e.g., subcontractor progress payments liquidated late in

period of performance);

(ii) Some costs are covered by special financing provisions, such as advance payments; or

(iii) The contract is multiyear and there are special funding arrangements.

(3) The portion that the contractor finances is generally the portion not covered by progress

payments, i.e., 100 percent minus the customary progress payment rate (see FAR 32.501). For

example, if a contractor receives progress payments at 80 percent, the portion that the contractor

finances is 20 percent. On contracts that provide progress payments to small businesses, use the

customary progress payment rate for large businesses.

(f) Contract length factor. (1) This is the period of time that the contractor has a working capital

investment in the contract. It -

(i) Is based on the time necessary for the contractor to complete the substantive portion of the work;

(ii) Is not necessarily the period of time between contract award and final delivery (or final

payment), as periods of minimal effort should be excluded;

(iii) Should not include periods of performance contained in option provisions; and

(iv) Should not, for multiyear contracts, include periods of performance beyond that required to

complete the initial program year's requirements.

(2) The contracting officer -

(i) Should use the following table to select the contract length factor;

(ii) Should develop a weighted average contract length when the contract has multiple deliveries;

and

(iii) May use sampling techniques provided they produce a representative result.
Table

Period to perform substantive portion (in months) Contract length factor

21 or less .40

22 to 27 .65

28 to 33 .90

34 to 39 1.15

40 to 45 1.40

46 to 51 1.65

52 to 57 1.90

58 to 63 2.15

64 to 69 2.40

70 to 75 2.65

76 or more 2.90

(3) Example: A prospective contract has a performance period of 40 months with end items being

delivered in the 34th, 36th, 38th, and 40th months of the contract. The average period is 37 months

and the contract length factor is 1.15.

215.404-71-4 Facilities capital employed.

(a) Description. This factor focuses on encouraging and rewarding capital investment in facilities

that benefit DoD. It recognizes both the facilities capital that the contractor will employ in contract

performance and the contractor's commitment to improving productivity.

(b) Contract facilities capital estimates. The contracting officer shall estimate the facilities capital

cost of money and capital employed using—

(1) An analysis of the appropriate Forms CASB-CMF and cost of money factors (48 CFR 9904.414

and FAR 31.205-10); and

(2) DD Form 1861, Contract Facilities Capital Cost of Money.
(c) Use of DD Form 1861. See PGI 215.404-71 -4(c) for obtaining field pricing support for preparing

DD Form 1861.

(1) Purpose. The DD Form 1861 provides a means of linking the Form CASB-CMF and DD Form

1547, Record of Weighted Guidelines Application. It—

(i) Enables the contracting officer to differentiate profit objectives for various types of assets (land,

buildings, equipment). The procedure is similar to applying overhead rates to appropriate overhead

allocation bases to determine contract overhead costs.

(ii) Is designed to record and compute the contract facilities capital cost of money and capital

employed which is carried forward to DD Form 1547.

(2) Completion instructions. Complete a DD Form 1861 only after evaluating the contractor's cost

proposal, establishing cost of money factors, and establishing a prenegotiation objective on cost.

Complete the form as follows:

(i) List overhead pools and direct-charging service centers (if used) in the same structure as they

appear on the contractor's cost proposal and Form CASB-CMF. The structure and allocation base

units-of-measure must be compatible on all three displays.

(ii) Extract appropriate contract overhead allocation base data, by year, from the evaluated cost

breakdown or prenegotiation cost objective and list against each overhead pool and direct-charging

service center.

(iii) Multiply each allocation base by its corresponding cost of money factor to get the facilities

capital cost of money estimated to be incurred each year. The sum of these products represents the

estimated contract facilities capital cost of money for the year's effort.

(iv) Total contract facilities cost of money is the sum of the yearly amounts.

(v) Since the facilities capital cost of money factors reflect the applicable cost of money rate in

Column 1 of Form CASB-CMF, divide the contract cost of money by that same rate to determine the

contract facilities capital employed.

(d) Preaward facilities capital applications. To establish cost and price objectives, apply the facilities

capital cost of money and capital employed as follows:

(1) Cost of Money.

(i) Cost Objective. Use the imputed facilities capital cost of money, with normal, booked costs, to

establish a cost objective or the target cost when structuring an incentive type contract. Do not

adjust target costs established at the outset even though actual cost of money rates become

available during the period of contract performance.

(ii) Profit Objective. When measuring the contractor's effort for the purpose of establishing a

prenegotiation profit objective, restrict the cost base to normal, booked costs. Do not include cost of

money as part of the cost base.

(2) Facilities Capital Employed. Assess and weight the profit objective for risk associated with

facilities capital employed in accordance with the profit guidelines at 215.404-71 -4.

(e) Determination. The following extract from the DD Form 1547 has been annotated to explain the
process.

Item Contractor Facilities

Capital Employed Assigned Value AmountEmployed Profit Objective

26. Land N/A (2) N/A

27. Buildings N/A (2) N/A

28. Equipment (1) (2) (3)

(1) Select a value from the list in paragraph (f) of this subsection using the evaluation criteria in

paragraph (g) of this subsection.

(2) Use the allocated facilities capital attributable to land, buildings, and equipment, as derived in

DD Form 1861, Contract Facilities Capital Cost of Money.

(i) In addition to the net book value of facilities capital employed, consider facilities capital that is

part of a formal investment plan if the contractor submits reasonable evidence that—

(A) Achievable benefits to DoD will result from the investment; and

(B) The benefits of the investment are included in the forward pricing structure.

(ii) If the value of intracompany transfers has been included in Block 20 at cost (i.e., excluding

general and administrative (G&A) expenses and profit), add to the contractor's allocated facilities

capital, the allocated facilities capital attributable to the buildings and equipment of those corporate

divisions supplying the intracompany transfers. Do not make this addition if the value of

intracompany transfers has been included in Block 20 at price (i.e., including G&A expenses and

profit).

(3) Multiply (1) by (2).

(f) Values: Normal and designated ranges.

Asset Type Normal Value Designated Range

Land 0% N/A

Buildings 0% N/A

Equipment 17.5% 10% to 25%

(g) Evaluation criteria.
(1) In evaluating facilities capital employed, the contracting officer—

(i) Should relate the usefulness of the facilities capital to the goods or services being acquired under

the prospective contract;

(ii) Should analyze the productivity improvements and other anticipated industrial base enhancing

benefits resulting from the facilities capital investment, including—

(A) The economic value of the facilities capital, such as physical age, undepreciated value, idleness,

and expected contribution to future defense needs; and

(B) The contractor's level of investment in defense related facilities as compared with the portion of

the contractor's total business that is derived from DoD; and

(iii) Should consider any contractual provisions that reduce the contractor's risk of investment

recovery, such as termination protection clauses and capital investment indemnification.

(2) Above normal conditions.

(i) The contracting officer may assign a higher than normal value if the facilities capital investment

has direct, identifiable, and exceptional benefits. Indicators are—

(A) New investments in state-of-the-art technology that reduce acquisition cost or yield other

tangible benefits such as improved product quality or accelerated deliveries; or

(B) Investments in new equipment for research and development applications.

(ii) The contracting officer may assign a value significantly above normal when there are direct and

measurable benefits in efficiency and significantly reduced acquisition costs on the effort being

priced. Maximum values apply only to those cases where the benefits of the facilities capital

investment are substantially above normal.

(3) Below normal conditions.

(i) The contracting officer may assign a lower than normal value if the facilities capital investment

has little benefit to DoD. Indicators are—

(A) Allocations of capital apply predominantly to commercial product lines;

(B) Investments are for such things as furniture and fixtures, home or group level administrative

offices, corporate aircraft and hangars, gymnasiums; or

(C) Facilities are old or extensively idle.

(ii) The contracting officer may assign a value significantly below normal when a significant portion

of defense manufacturing is done in an environment characterized by outdated, inefficient, and

labor-intensive capital equipment.

215.404-71-5 Cost efficiency factor.

(a) This special factor provides an incentive for contractors to reduce costs. To the extent that the

contractor can demonstrate cost reduction efforts that benefit the pending contract, the contracting
officer may increase the prenegotiation profit objective by an amount not to exceed 4 percent of

total objective cost (Block 20 of the DD Form 1547) to recognize these efforts (Block 29).

(b) To determine if using this factor is appropriate, the contracting officer shall consider criteria,

such as the following, to evaluate the benefit the contractor’s cost reduction efforts will have on the

pending contract:

(1) The contractor’s participation in Single Process Initiative improvements;

(2) Actual cost reductions achieved on prior contracts;

(3) Reduction or elimination of excess or idle facilities;

(4) The contractor’s cost reduction initiatives (e.g., competition advocacy programs, technical

insertion programs, obsolete parts control programs, spare parts pricing reform, value engineering,

outsourcing of functions such as information technology). Metrics developed by the contractor such

as fully loaded labor hours (i.e., cost per labor hour, including all direct and indirect costs) or other

productivity measures may provide the basis for assessing the effectiveness of the contractor’s cost

reduction initiatives over time;

(5) The contractor’s adoption of process improvements to reduce costs;

(6) Subcontractor cost reduction efforts;

(7) The contractor’s effective incorporation of commercial products or commercial services and

commercial processes; or

(8) The contractor’s investment in new facilities when such investments contribute to better asset

utilization or improved productivity.

(c) When selecting the percentage to use for this special factor, the contracting officer has maximum

flexibility in determining the best way to evaluate the benefit the contractor’s cost reduction efforts

will have on the pending contract. However, the contracting officer shall consider the impact that

quantity differences, learning, changes in scope, and economic factors such as inflation and deflation

will have on cost reduction.

215.404-72 Modified weighted guidelines method for nonprofit organizations other than

FFRDCs.

(a) Definition. As used in this subpart, a nonprofit organization is a business entity—

(1) That operates exclusively for charitable, scientific, or educational purposes;

(2) Whose earnings do not benefit any private shareholder or individual;

(3) Whose activities do not involve influencing legislation or political campaigning for any candidate

for public office; and

(4) That is exempted from Federal income taxation under section 501 of the Internal Revenue Code.

(b) For nonprofit organizations that are entities that have been identified by the Secretary of

Defense or a Secretary of a Department as receiving sustaining support on a cost-plus-fixed-fee basis
from a particular DoD department or agency, compute a fee objective for covered actions using the

weighted guidelines method in 215.404-71 , with the following modifications:

(1) Modifications to performance risk (Blocks 21-23 of the DD Form 1547).

(i) If the contracting officer assigns a value from the standard designated range (see 215.404-71

-2(c)), reduce the fee objective by an amount equal to 1 percent of the costs in Block 20 of the DD

Form 1547. Show the net (reduced) amount on the DD Form 1547.

(ii) Do not assign a value from the technology incentive designated range.

(2) Modifications to contract type risk (Block 24 of the DD Form 1547). Use a designated range of –1

percent to 0 percent instead of the values in 215.404-71 -3. There is no normal value.

(c) For all other nonprofit organizations except FFRDCs, compute a fee objective for covered actions

using the weighted guidelines method in 215.404-71 , modified as described in paragraph (b)(1) of

this subsection.

215.404-73 Alternate structured approaches.

(a) The contracting officer may use an alternate structured approach under 215.404-4 (c).

(b) The contracting officer may design the structure of the alternate, but it shall include—

(1) Consideration of the three basic components of profit—performance risk, contract type risk

(including working capital), and facilities capital employed. However, the contracting officer is not

required to complete Blocks 21 through 30 of the DD Form 1547.

(2) Offset for facilities capital cost of money.

(i) The contracting officer shall reduce the overall prenegotiation profit objective by the amount of

facilities capital cost of money under Cost Accounting Standard (CAS) 414, Cost of Money as an

Element of the Cost of Facilities Capital (48 CFR 9904.414). Cost of money under CAS 417, Cost of

Money as an Element of the Cost of Capital Assets Under Construction (48 CFR 9904.417), should

not be used to reduce the overall prenegotiation profit objective. The profit amount in the

negotiation summary of the DD Form 1547 must be net of the offset.

(ii) This adjustment is needed for the following reason: The values of the profit factors used in the

weighted guidelines method were adjusted to recognize the shift in facilities capital cost of money

from an element of profit to an element of contract cost (see FAR 31.205-10) and reductions were

made directly to the profit factors for performance risk. In order to ensure that this policy is applied

to all DoD contracts that allow facilities capital cost of money, similar adjustments shall be made to

contracts that use alternate structured approaches.

215.404-74 Fee requirements for cost-plus-award-fee contracts.

In developing a fee objective for cost-plus-award-fee contracts, the contracting officer shall—

(a) Follow the guidance in FAR 16.405-2 and 216.405-2 ;
(b) Not use the weighted guidelines method or alternate structured approach;

(c) Apply the offset policy in 215.404-73 (b)(2) for facilities capital cost of money, i.e., reduce the

base fee by the amount of facilities capital cost of money; and

(d) Not complete a DD Form 1547.

215.404-75 Fee requirements for FFRDCs.

For nonprofit organizations that are FFRDCs, the contracting officer—

(a) Should consider whether any fee is appropriate. Considerations shall include the FFRDC’s—

(1) Proportion of retained earnings (as established under generally accepted accounting methods)

that relates to DoD contracted effort;

(2) Facilities capital acquisition plans;

(3) Working capital funding as assessed on operating cycle cash needs; and

(4) Provision for funding unreimbursed costs deemed ordinary and necessary to the FFRDC.

(b) Shall, when a fee is considered appropriate, establish the fee objective in accordance with

FFRDC fee policies in the DoD Instruction 5000.77, DoD Federally Funded Research and

Development Center Program.

(c) Shall not use the weighted guidelines method or an alternate structured approach.

215.406 Documentation.

215.406-1 Prenegotiation objectives.

Follow the procedures at PGI 215.406-1 for establishing prenegotiation objectives.

215.406-2 Certificate of current cost or pricing data.

See PGI 215.406-2 for additional information and guidance on Certificates of Current Cost or Pricing

Data.

215.406-3 Documenting the negotiation.

Follow the procedures at PGI 215.406-3 for documenting the negotiation.

215.407 Special cost or pricing areas.
215.407-1 Defective certified cost or pricing data.

(c)(i) When a contractor voluntarily discloses defective pricing after contract award, the contracting

officer shall discuss the disclosure with the Defense Contract Audit Agency (DCAA). This discussion

will assist in the contracting officer determining the involvement of DCAA, which could be a limitedscope audit (e.g., limited to the affected cost elements of the defective pricing disclosure), a fullscope audit, or technical assistance as appropriate for the circumstances (e.g., nature or dollar

amount of the defective pricing disclosure). At a minimum, the contracting officer shall discuss with

DCAA the following:

(A) Completeness of the contractor’s voluntary disclosure on the affected contract.

(B) Accuracy of the contractor’s cost impact calculation for the affected contract.

(C) Potential impact on existing contracts, task or deliver orders, or other proposals the contractor

has submitted to the Government.

(ii) Voluntary disclosure of defective pricing is not a voluntary refund as defined in 242.7100 and

does not waive the Government entitlement to the recovery of any overpayment plus interest on the

overpayments in accordance with FAR 15.407-1(b)(7).

(iii) Voluntary disclosure of defective pricing does not waive the Government’s rights to pursue

defective pricing claims on the affected contract or any other Government contract.

215.407-2 Make-or-buy programs.

(a) General. See PGI for guidance on factors to consider when deciding whether to request a makeor-buy plan and for factors to consider when evaluating make-or-buy plan submissions.

(e) Program requirements.

(1) Items and work included. The minimum dollar amount is $1.5 million.

215.407-3 Forward pricing rate agreements.

(b)(i) Use forward pricing rate agreement (FPRA) rates when such rates are available, unless waived

on a case-by-case basis by the head of the contracting activity.

(ii) Advise the ACO of each case waived.

(iii) Contact the ACO for questions on FPRAs or recommended rates.

215.407-4 Should-cost review.

(a) General. See PGI 215.407-4 for guidance on determining whether to perform a program or

overhead should-cost review.

(b) Program should-cost review. Major weapon system should-cost program reviews shall be
conducted in a manner that is transparent, objective, and provides for the efficiency of the DoD

systems acquisition process (section 837 of the National Defense Authorization Act for Fiscal Year

2018 (Pub. L. 115-91)).

(i) Major weapon system should-cost reviews may include the following features:

(A) A thorough review of each contributing element of the program cost and the justification for each

cost.

(B) An analysis of non-value added overhead and unnecessary reporting requirements.

(C) Benchmarking against similar DoD programs, similar commercial programs (where appropriate),

and other programs by the same contractor at the same facility.

(D) An analysis of supply chain management to encourage competition and incentive cost

performance at lower tiers.

(E) A review of how to restructure the program (Government and contractor) team in a streamlined

manner, if necessary.

(F) Identification of opportunities to break out Government-furnished equipment versus prime

contractor-furnished materials.

(G) Identification of items or services contracted through third parties that result in unnecessary

pass-through costs.

(H) Evaluation of ability to use integrated developmental and operational testing and modeling and

simulation to reduce overall costs.

(I) Identification of alternative technology and materials to reduce developmental or lifecycle costs

for a program.

(J) Identification and prioritization of cost savings opportunities.

(K) Establishment of measurable targets and ongoing tracking systems.

(ii) The should-cost review shall provide for sufficient analysis while minimizing the impact on

program schedule by engaging stakeholders early, relying on information already available before

requesting additional data, and establishing a team with the relevant expertise early.

(iii) The should-cost review team shall be comprised of members, including third-party experts if

necessary, with the training, skills, and experience in analysis of cost elements, production or

sustainment processes, and technologies relevant to the program under review. The review team

may include members from the Defense Contract Management Agency, the department or agency’s

cost analysis center, and appropriate functional organizations, as necessary.

(iv) The should-cost review team shall establish a process for communicating and collaborating with

the contractor throughout the should-cost review, including notification to the contractor regarding

which elements of the contractor’s operations will be reviewed and what information will be

necessary to perform the review, as soon as practicable, both prior to and during the review.

(v) The should-cost review team report shall ensure, to the maximum extent practicable, review of

current, accurate, and complete data, and shall identify cost savings opportunities associated with
specific engineering or business changes that can be quantified and tracked.

215.407-5 Estimating systems.

215.407-5-70 Disclosure, maintenance, and review requirements.

(a) Definitions.

(1) “Acceptable estimating system” is defined in the clause at 252.215-7002 , Cost Estimating

System Requirements.

(2) “Contractor” means a business unit as defined in FAR 2.101.

(3) “Estimating system” is as defined in the clause at 252.215-7002 , Cost Estimating System

Requirements.

(4) “Significant deficiency” is defined in the clause at 252.215-7002 , Cost Estimating System

Requirements.

(b) Applicability.

(1) DoD policy is that all contractors have acceptable estimating systems that consistently produce

well-supported proposals that are acceptable as a basis for negotiation of fair and reasonable prices.

(2) A large business contractor is subject to estimating system disclosure, maintenance, and review

requirements if—

(i) In its preceding fiscal year, the contractor received DoD prime contracts or subcontracts totaling

$50 million or more for which certified cost or pricing were required; or

(ii) In its preceding fiscal year, the contractor received DoD prime contracts or subcontracts totaling

$10 million or more (but less than $50 million) for which certified cost or pricing data were required

and the contracting officer, with concurrence or at the request of the ACO, determines it to be in the

best interest of the Government (e.g., significant estimating problems are believed to exist or the

contractor's sales are predominantly Government).

(c) Policy.

(1) The contracting officer shall—

(i) Through use of the clause at 252.215-7002 , Cost Estimating System Requirements, apply the

disclosure, maintenance, and review requirements to large business contractors meeting the criteria

in paragraph (b)(2)(i) of this section;

(ii) Consider whether to apply the disclosure, maintenance, and review requirements to large

business contractors under paragraph (b)(2)(ii) of this section; and

(iii) Not apply the disclosure, maintenance, and review requirements to other than large business

contractors.

(2) The cognizant contracting officer, in consultation with the auditor, for contractors subject to
paragraph (b)(2) of this section, shall—

(i) Determine the acceptability of the disclosure and approve or disapprove the system; and

(ii) Pursue correction of any deficiencies.

(3) The auditor conducts estimating system reviews.

(4) An acceptable system shall provide for the use of appropriate source data, utilize sound

estimating techniques and good judgment, maintain a consistent approach, and adhere to

established policies and procedures.

(5) In evaluating the acceptability of a contractor's estimating system, the contracting officer, in

consultation with the auditor, shall determine whether the contractor's estimating system complies

with the system criteria for an acceptable estimating system as prescribed in the clause at

252.215-7002 , Cost Estimating System Requirements.

(d) Disposition of findings—

(1) Reporting of findings. The auditor shall document findings and recommendations in a report to

the contracting officer. If the auditor identifies any significant estimating system deficiencies, the

report shall describe the deficiencies in sufficient detail to allow the contracting officer to

understand the deficiencies.

(2) Initial determination. (i) The contracting officer shall review all findings and recommendations

and, if there are no significant deficiencies, shall promptly notify the contractor, in writing, that the

contractor's estimating system is acceptable and approved; or

(ii) If the contracting officer finds that there are one or more significant deficiencies (as defined in

the clause at 252.215-7002 , Cost Estimating System Requirements) due to the contractor’s failure

to meet one or more of the estimating system criteria in the clause at 252.215-7002 , the contracting

officer shall—

(A) Promptly make an initial written determination on any significant deficiencies and notify the

contractor, in writing, providing a description of each significant deficiency in sufficient detail to

allow the contractor to understand the deficiency;

(B) Request the contractor to respond, in writing, to the initial determination within 30 days; and

(C) Promptly evaluate the contractor’s responses to the initial determination, in consultation with

the auditor or functional specialist, and make a final determination.

(3) Final determination. (i) The contracting officer shall make a final determination and notify the

contractor, in writing, that——

(A) The contractor's estimating system is acceptable and approved, and no significant deficiencies

remain, or

(B) Significant deficiencies remain. The notice shall identify any remaining significant deficiencies,

and indicate the adequacy of any proposed or completed corrective action. The contracting officer

shall—

(1) Request that the contractor, within 45 days of receipt of the final determination, either correct
the deficiencies or submit an acceptable corrective action plan showing milestones and actions to

eliminate the deficiencies;

(2) Disapprove the system in accordance with the clause at 252.215-7002 , Cost Estimating System

Requirements; and

(3) Withhold payments in accordance with the clause at 252.242-7005 , Contractor Business

Systems, if the clause is included in the contract.

(ii) Follow the procedures relating to monitoring a contractor's corrective action and the correction

of significant deficiencies in PGI 215.407-5 -70(e).

(e) System approval. The contracting officer shall promptly approve a previously disapproved

estimating system and notify the contractor when the contracting officer determines that there are

no remaining significant deficiencies.

(f) Contracting officer notifications. The cognizant contracting officer shall promptly distribute

copies of a determination to approve a system, disapprove a system and withhold payments, or

approve a previously disapproved system and release withheld payments, to the auditor; payment

office; affected contracting officers at the buying activities; and cognizant contracting officers in

contract administration activities.

215.408 Solicitation provisions and contract clauses.

(1) Use the clause at 252.215-7002, Cost Estimating System requirements, in all solicitations and

contracts to be awarded on the basis of certified cost or pricing data.

(2) When contracting with the Canadian Commercial Corporation -

(i)(A) Use the provision at 252.215-7003, Requirement for Submission of Data Other Than Certified

Cost or Pricing Data - Canadian Commercial Corporation -

(1) In lieu of 252.215-7010, Requirements for Certified Cost or Pricing Data and Data Other Than

Certified Cost or Pricing Data, in a solicitation, including solicitations using FAR part 12 procedures

for the acquisition of commercial products and commercial services, for a sole source acquisition

from the Canadian Commercial Corporation that is -

(i) Cost-reimbursement, if the contract value is expected to exceed $700,000; or

(ii) Fixed-price, if the contract value is expected to exceed $500 million; or

(2) In lieu of 252.215-7010, in a solicitation, including solicitations using FAR part 12 procedures for

the acquisition of commercial products and commercial services, for a sole source acquisition from

the Canadian Commercial Corporation that does not meet the thresholds specified in paragraph

(2)(i)(A)(1) of this section, if approval is obtained as required at 225.870-4(c)(2)(ii); and

(B) Do not use 252.225-7003 in lieu of 252.215-7010 in competitive acquisitions; and

(ii)(A) Use the clause at 252.215-7004, Requirement for Submission of Data Other Than Certified

Cost or Pricing Data - Modifications - Canadian Commercial Corporation -

(1) In a solicitation, including solicitations using FAR part 12 procedures for the acquisition of
commercial products and commercial services, for a sole source acquisition, from the Canadian

Commercial Corporation and resultant contract that is -

(i) Cost-reimbursement, if the contract value is expected to exceed $700,000; or

(ii) Fixed-price, if the contract value is expected to exceed $500 million;

(2) In a solicitation, including solicitations using FAR part 12 procedures for the acquisition of

commercial products and commercial services, for a sole source acquisition from the Canadian

Commercial Corporation and resultant contract that does not meet the thresholds specified in

paragraph (2)(ii)(A)(1) of this section, if approval is obtained as required at 225.870-4(c)(2)(ii); or

(3)(i) In a solicitation, including solicitations using FAR part 12 procedures for the acquisition of

commercial products and commercial services, for a competitive acquisition that includes FAR

52.215-21, Requirement for Data Other Than Certified Cost or Pricing Data - Modifications, or that

meets the thresholds specified in paragraph (2)(ii)(A)(1) of this section.

(ii) The contracting officer shall then select the appropriate clause to include in the contract

(52.215-21 only if award is not to the Canadian Commercial Corporation; or 252.215-7004 if award is

to the Canadian Commercial Corporation and necessary approval is obtained in accordance with

225.870-4(c)(2)(ii)); and

(B) The contracting officer may specify a higher threshold in paragraph (b) of the clause

252.215-7004.

(3) Use the provision at 252.215-7008, Only One Offer, in competitive solicitations that exceed the

simplified acquisition threshold, including solicitations using FAR part 12 procedures for the

acquisition of commercial products and commercial services.

(4) When the solicitation requires the submission of certified cost or pricing data, the contracting

officer should include 252.215-7009, Proposal Adequacy Checklist, in the solicitation to facilitate

submission of a thorough, accurate, and complete proposal.

(5) When reasonably certain that the submission of certified cost or pricing data or data other than

certified cost or pricing data will be required or when using the provision at 252.215-7008 -

(i) Use the basic or alternate of the provision at 252.215-7010, Requirements for Certified Cost or

Pricing Data and Data Other Than Certified Cost or Pricing Data, in lieu of the provision at FAR

52.215-20, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost or

Pricing Data, in solicitations, including solicitations using FAR part 12 procedures for the acquisition

of commercial products and commercial services.

(A) Use the basic provision when submission of certified cost or pricing data is required to be in the

FAR Table 15-2 format, or if it is anticipated, at the time of solicitation, that the submission of

certified cost or pricing data may not be required.

(B) Use the alternate I provision to specify a format for certified cost or pricing data other than the

format required by FAR Table 15-2;

(ii) Use the provision at 252.215-7011, Requirements for Submission of Proposals to the

Administrative Contracting Officer and Contract Auditor, when using the basic or alternate of the

provision at 252.215-7010 and copies of the proposal are to be sent to the ACO and contract auditor;

and
(iii) Use the provision at 252.215-7012, Requirements for Submission of Proposals via Electronic

Media, when using the basic or alternate of the provision at 252.215-7010 and submission via

electronic media is required.

(6) Use the provision at 252.215-7013, Supplies and Services Provided by Nontraditional Defense

Contractors, in all solicitations.

(7) Use the clause at 252.215-7014, Exception from Certified Cost or Pricing Data Requirements for

Foreign Military Sales Indirect Offsets, in solicitations and contracts that contain the provision at

252.215-7010, Requirements for Certified Cost or Pricing Data and Data Other Than Certified Cost

or Pricing Data, when it is reasonably certain that -

(i) The contract is expected to include costs associated with an indirect offset; and

(ii) The submission of certified cost or pricing data or data other than certified cost or pricing data

will be required.

(8) Use the clause at 252.215-7015, Program Should-Cost Review, in all solicitations and contracts

for the development or production of a major weapon system, as defined in 234.7001.

215.470 Estimated data prices.

(a) DoD requires estimates of the prices of data in order to evaluate the cost to the Government of

data items in terms of their management, product, or engineering value.

(b) When data are required to be delivered under a contract, include DD Form 1423, Contract Data

Requirements List, in the solicitation. See PGI 215.470 (b) for guidance on the use of DD Form 1423.

(c) The contracting officer shall ensure that the contract does not include a requirement for data

that the contractor has delivered or is obligated to deliver to the Government under another contract

or subcontract, and that the successful offeror identifies any such data required by the solicitation.

However, where duplicate data are desired, the contract price shall include the costs of duplication,

but not of preparation, of such data.

Subpart 215.5 - PREAWARD, AWARD, AND POSTAWARD

NOTIFICATIONS, PROTESTS, AND MISTAKES

215.503 Notifications to unsuccessful offerors.

If the Government exercises the authority provided in 239.7305(d), the notifications to unsuccessful

offerors, either preaward or postaward, shall not reveal any information that is determined to be

withheld from disclosure in accordance with 10 U.S.C. 3252 (see subpart 239.73).

215.506 Postaward debriefing of offerors.

(b) Notwithstanding FAR 15.506(b), when requested by a successful or unsuccessful offeror, a
written or oral debriefing is required for contract awards valued at $10 million or more (section 818

of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. 115-91)).

(d) In addition to the requirements of FAR 15.506(d), the minimum debriefing information shall

include the following:

(i) For award of a contract in excess of $10 million and not in excess of $100 million with a small

business or nontraditional defense contractor, an option for the small business or nontraditional

defense contractor to request disclosure of the agency's written source selection decision document,

redacted to protect the confidential and proprietary information of other offerors for the contract

award.

(ii) For award of a contract in excess of $100 million, disclosure of the agency's written source

selection decision document, redacted to protect the confidential and proprietary information of

other offerors for the contract award.

(e) If the Government exercises the authority provided in 239.7305 (d), the debriefing shall not

reveal any information that is determined to be withheld from disclosure in accordance with 10

U.S.C. 3252 (see subpart 239.73).

215.506-70 Opportunity for follow-up questions.

When providing a required postaward debriefing to successful and unsuccessful offerors,

contracting officers shall—

(a) Provide an opportunity to submit additional written questions related to the required debriefing

not later than 2 business days after receiving the postaward debriefing;

(b) Respond in writing to timely submitted additional questions within 5 business days after receipt

of the questions; and

(c) Not consider the postaward debriefing to be concluded until the later of—

(1) The date that the postaward debriefing is delivered, orally or in writing; or

(2) If additional written questions related to the debriefing are timely received, the date the agency

delivers its written response.

215.570 Solicitation provision.

Use the provision at 252.215-7016, Notification to Offerors—Postaward Debriefings, in competitive

negotiated solicitations for contract awards valued at $10 million or more, including solicitations

using FAR part 12 procedures for the acquisition of commercial products and commercial services.

Subpart 215.6 - UNSOLICITED PROPOSALS
215.602 Policy.

The policy at FAR 15.602 applies to commercial solutions openings.

215.604Agency points of contact.

(a)(3) The guidance at FAR 15.604(a)(3) applies to commercial solutions openings.