PGI 215.404-3 Subcontract pricing

considerations.

(a) The contracting officer should consider the need for field pricing analysis and evaluation of

lower-tier subcontractor proposals, and assistance to prime contractors when they are being denied

access to lower-tier subcontractor records.

(i) When obtaining field pricing assistance on a prime contractor’s proposal, the contracting officer

should request audit or field pricing assistance to analyze and evaluate the proposal of a

subcontractor at any tier (notwithstanding availability of data or analyses performed by the prime

contractor) if the contracting officer believes that such assistance is necessary to ensure the

reasonableness of the total proposed price. Such assistance may be appropriate when, for example—

(A) There is a business relationship between the contractor and the subcontractor not conducive to

independence and objectivity;

(B) The contractor is a sole source supplier and the subcontract costs represent a substantial part of

the contract cost;

(C) The contractor has been denied access to the subcontractor’s records;

(D) The contracting officer determines that, because of factors such as the size of the proposed

subcontract price, audit or field pricing assistance for a subcontract at any tier is critical to a fully

detailed analysis of the prime contractor’s proposal;

(E) The contractor or higher-tier subcontractor has been cited for having significant estimating

system deficiencies in the area of subcontract pricing, especially the failure to perform adequate

cost analyses of proposed subcontract costs or to perform subcontract analyses prior to negotiation

of the prime contract with the Government; or

(F) A lower-tier subcontractor has been cited as having significant estimating system deficiencies.

(ii) It may be appropriate for the contracting officer or the ACO to provide assistance to a contractor

or subcontractor at any tier, when the contractor or higher-tier subcontractor has been denied

access to a subcontractor’s records in carrying out the responsibilities at FAR 15.404-3 to conduct

price or cost analysis to determine the reasonableness of proposed subcontract prices. Under these

circumstances, the contracting officer or the ACO should consider whether providing audit or field

pricing assistance will serve a valid Government interest.

(iii) When DoD performs the subcontract analysis, DoD shall furnish to the prime contractor or

higher-tier subcontractor, with the consent of the subcontractor reviewed, a summary of the analysis

performed in determining any unacceptable costs included in the subcontract proposal. If the

subcontractor withholds consent, DoD shall furnish a range of unacceptable costs for each element

in such a way as to prevent disclosure of subcontractor proprietary data.

(iv) Price redeterminable or fixed-price incentive contracts may include subcontracts placed on the

same basis. When the contracting officer wants to reprice the prime contract even though the

contractor has not yet established final prices for the subcontracts, the contracting officer may

negotiate a firm contract price—
(A) If certified cost or pricing data on the subcontracts show the amounts to be reasonable and

realistic; or

(B) If certified cost or pricing data on the subcontracts are too indefinite to determine whether the

amounts are reasonable and realistic, but—

(1) Circumstances require prompt negotiation; and

(2) A statement substantially as follows is included in the repricing modification of the prime

contract:

As soon as the Contractor establishes firm prices for each subcontract listed below, the

Contractor shall submit (in the format and with the level of detail specified by the Contracting

Officer) to the Contracting Officer the subcontractor's cost incurred in performing the

subcontract and the final subcontract price. The Contractor and the Contracting Officer shall

negotiate an equitable adjustment in the total amount paid or to be paid under this contract to

reflect the final subcontract price.

(v) If the selection of the subcontractor is based on a trade-off among cost or price and other noncost factors rather than lowest price, the analysis supporting subcontractor selection should include

a discussion of the factors considered in the selection (also see FAR 15.101 and 15.304 and DFARS

215.304). If the contractor’s analysis is not adequate, return it for correction of deficiencies.

(vi) The contracting officer shall make every effort to ensure that fees negotiated by contractors for

cost-plus-fixed-fee subcontracts do not exceed the fee limitations in FAR 15.404-4(c)(4).

Parent topic: PGI 215.404 Proposal analysis.