252.215-7002 Cost Estimating System

Requirements.

As prescribed in 215.408 (1), use the following clause:

COST ESTIMATING SYSTEM REQUIREMENTS (DEC 2012)

(a) Definitions.

“Acceptable estimating system” means an estimating system that complies with the system criteria

in paragraph (d) of this clause, and provides for a system that—

(1) Is maintained, reliable, and consistently applied;

(2) Produces verifiable, supportable, documented, and timely cost estimates that are an acceptable

basis for negotiation of fair and reasonable prices;

(3) Is consistent with and integrated with the Contractor’s related management systems; and

(4) Is subject to applicable financial control systems.

“Estimating system” means the Contractor's policies, procedures, and practices for budgeting and

planning controls, and generating estimates of costs and other data included in proposals submitted

to customers in the expectation of receiving contract awards. Estimating system includes the

Contractor's—

(1) Organizational structure;

(2) Established lines of authority, duties, and responsibilities;

(3) Internal controls and managerial reviews;

(4) Flow of work, coordination, and communication; and

(5) Budgeting, planning, estimating methods, techniques, accumulation of historical costs, and other

analyses used to generate cost estimates.

“Significant deficiency” means a shortcoming in the system that materially affects the ability of

officials of the Department of Defense to rely upon data and information produced by the system

that is needed for management purposes.

(b) General. The Contractor shall establish, maintain, and comply with an acceptable estimating

system.

(c) Applicability. Paragraphs (d) and (e) of this clause apply if the Contractor is a large business and

either—

(1) In its fiscal year preceding award of this contract, received Department of Defense (DoD) prime

contracts or subcontracts, totaling $50 million or more for which certified cost or pricing data were

required; or
(2) In its fiscal year preceding award of this contract—

(i) 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

(ii) Was notified, in writing, by the Contracting Officer that paragraphs (d) and (e) of this clause

apply.

(d) System requirements.

(1) The Contractor shall disclose its estimating system to the Administrative Contracting Officer

(ACO), in writing. If the Contractor wishes the Government to protect the data and information as

privileged or confidential, the Contractor must mark the documents with the appropriate legends

before submission.

(2) An estimating system disclosure is acceptable when the Contractor has provided the ACO with

documentation that—

(i) Accurately describes those policies, procedures, and practices that the Contractor currently uses

in preparing cost proposals; and

(ii) Provides sufficient detail for the Government to reasonably make an informed judgment

regarding the acceptability of the Contractor's estimating practices.

(3) The Contractor shall—

(i) Comply with its disclosed estimating system; and

(ii) Disclose significant changes to the cost estimating system to the ACO on a timely basis.

(4) The Contractor’s estimating 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. An acceptable estimating system shall accomplish the following

functions:

(i) Establish clear responsibility for preparation, review, and approval of cost estimates and budgets.

(ii) Provide a written description of the organization and duties of the personnel responsible for

preparing, reviewing, and approving cost estimates and budgets.

(iii) Ensure that relevant personnel have sufficient training, experience, and guidance to perform

estimating and budgeting tasks in accordance with the Contractor's established procedures.

(iv) Identify and document the sources of data and the estimating methods and rationale used in

developing cost estimates and budgets.

(v) Provide for adequate supervision throughout the estimating and budgeting process.

(vi) Provide for consistent application of estimating and budgeting techniques.

(vii) Provide for detection and timely correction of errors.

(viii) Protect against cost duplication and omissions.
(ix) Provide for the use of historical experience, including historical vendor pricing data, where

appropriate.

(x) Require use of appropriate analytical methods.

(xi) Integrate data and information available from other management systems.

(xii) Require management review, including verification of compliance with the company's

estimating and budgeting policies, procedures, and practices.

(xiii) Provide for internal review of, and accountability for, the acceptability of the estimating

system, including the budgetary data supporting indirect cost estimates and comparisons of

projected results to actual results, and an analysis of any differences.

(xiv) Provide procedures to update cost estimates and notify the Contracting Officer in a timely

manner throughout the negotiation process.

(xv) Provide procedures that ensure subcontract prices are reasonable based on a documented

review and analysis provided with the prime proposal, when practicable.

(xvi) Provide estimating and budgeting practices that consistently generate sound proposals that are

compliant with the provisions of the solicitation and are adequate to serve as a basis to reach a fair

and reasonable price.

(xvii) Have an adequate system description, including policies, procedures, and estimating and

budgeting practices, that comply with the Federal Acquisition Regulation and Defense Federal

Acquisition Regulation Supplement.

(e) Significant deficiencies.

(1) The Contracting Officer will provide an initial determination to the Contractor, in writing, of any

significant deficiencies. The initial determination will describe the deficiency in sufficient detail to

allow the Contractor to understand the deficiency.

(2) The Contractor shall respond within 30 days to a written initial determination from the

Contracting Officer that identifies significant deficiencies in the Contractor's estimating system. If

the Contractor disagrees with the initial determination, the Contractor shall state, in writing, its

rationale for disagreeing.

(3) The Contracting Officer will evaluate the Contractor's response and notify the Contractor, in

writing, of the Contracting Officer’s final determination concerning—

(i) Remaining significant deficiencies;

(ii) The adequacy of any proposed or completed corrective action; and

(iii) System disapproval, if the Contracting Officer determines that one or more significant

deficiencies remain.

(f) If the Contractor receives the Contracting Officer’s final determination of significant deficiencies,

the Contractor shall, within 45 days of receipt of the final determination, either correct the

significant deficiencies or submit an acceptable corrective action plan showing milestones and

actions to eliminate the significant deficiencies.
(g) Withholding payments. If the Contracting Officer makes a final determination to disapprove the

Contractor’s estimating system, and the contract includes the clause at 252.242-7005 , Contractor

Business Systems, the Contracting Officer will withhold payments in accordance with that clause.

(End of clause)

Parent topic: 252.215 RESERVED