Federal Register / Vol. 79, No. 238 / Thursday, December 11, 2014 / Rules and Regulations 73493 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Part 215 

RIN 0750–AH86 

Defense Federal Acquisition 

Regulation Supplement; Forward 

Pricing Rate Proposal Adequacy 

Checklist (DFARS Case 2012–D035) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to provide guidance to 

contractors for the submittal of forward 

pricing rate proposals. 

DATES: Effective December 11, 2014. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Mark Gomersall, telephone 571–372– 

6099. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD published a proposed rule at 78 

FR 28790 on May 16, 2013, to revise the 

DFARS at 215.403–5 by adding 

instructions to contracting officers to 

request contractors to submit the 

proposed forward pricing rate proposal 

(FPRP) adequacy checklist at Table 

215.403–1 with forward pricing rate 

proposals. 

II. Discussion and Analysis 

DoD reviewed the public comments in 

the development of the final rule. A 

discussion of the comments and the 

resultant changes are provided as 

follows: 

A. Need for the Rule 

Comment: One respondent stated that 

companies and the Government (the 

Defense Contract Management Agency 

(DCMA) and the Defense Contract Audit 

Agency (DCAA)) have over the years 

been successful in articulating positions 

for each side to understand and resolve 

rate positions through negotiation either 

at the contract level or at the business 

level through a Forward Pricing Rate 

Agreement (FPRA). The respondents 

indicated the existing regulations are 

adequate without any further 

modifications to support the process. 

Response: The objective of this rule is 

to provide guidance to contractors for 

the submittal of FPRPs. This rule 

amends the DFARS at 215.403–5 by 

adding instructions to contracting 

officers to request contractors to submit 

the FPRP adequacy checklist with 

FPRPs. This guidance is intended to 

ensure submission of thorough, 

accurate, and complete proposals, 

provide consistency, and communicate 

common expectations to prevent rework 

and improve the efficiency of the 

negotiations process. 

B. Audit Timeliness 

Comment: Two respondents stated 

that the rule does not address the issues 

associated with the DCAA’s inability to 

audit industry submissions in a timely 

fashion. The respondents believe that 

the perceived issues with contractor 

FPRP submissions are the result of 

DCAA’s approach to FPRP audits and 

are not related to the adequacy of the 

FPRP submissions. One respondent 

stated that the additional requirements 

imposed by the FPRP adequacy 

checklist would also lengthen the 

already prolonged DCAA audit cycle for 

FPRPs and further erode timeliness and 

usefulness of audit reports. 

Response: The purpose of the FPRP 

adequacy checklist is to promote the 

submission of thorough, accurate, and 

complete proposals; provide 

consistency; and communicate common 

expectations to prevent rework and 

improve the efficiency of the 

negotiations process. Establishment of 

common expectations for contractors 

and the Government will promote 

adequate initial submissions of 

proposals, which will shorten the 

acquisition cycle making for more 

efficient negotiations for both 

contractors and the Government. 

C. Incurred Cost Audits 

Comment: One respondent suggested 

that DCAA should begin auditing the 

most recent incurred cost submissions 

to gain a thorough understanding of the 

contractor’s operations necessary to best 

opine on contractor forward pricing 

estimates. The respondent stated that 

DCAA is woefully behind on the 

contractually required (FAR 52.216–7, 

Allowable Cost and Payment clause) 

duty to audit contractor incurred cost 

submissions as promptly as practical. 

Contractors’ historical incurred costs are 

key inputs for estimates for FPRPs. 

Response: FAR 52.216–7(d)(2)(ii) 

requires that ‘‘The appropriate 

Government representative and the 

Contractor shall establish the final 

indirect cost rates as promptly as 

practical, after receipt of the 

Contractor’s proposal.’’ The purpose of 

the FPRP adequacy checklist is to 

improve the efficiency of the FPRA 

negotiations process. The Government 

employs multiple avenues to obtain an 

appropriate understanding about the 

contractor’s operations. The 

Government has a responsibility to 

perform appropriate review of 

contractor proposals to establish wellsupported negotiation positions and to 

negotiate effectively to wisely use 

taxpayer money and to ensure that 

contract prices are fair and reasonable to 

both the contractor and the Government. 

Taxpayers receive a direct tangible 

benefit from the auditing of FPRPs. 

Meanwhile, DCAA is working to reduce 

the inventory of incurred cost audits to 

become current. 

D. Business Systems Audits 

Comment: DCAA should conduct 

better and more accurate transaction 

testing. DCAA has made business 

system audits a low priority and appears 

to be only conducting them 

sporadically. Unable to rely on 

contractor business systems and 

coupled with not having audited recent 

contractor incurred cost submissions, 

DCAA has made detailed testing of large 

samples of recent incurred cost 

transactions a part of their FPRP audit 

program. 

Response: DoD agrees that contractor 

business systems and internal controls 

are the first line of defense against 

waste, fraud, and abuse. Weak control 

systems increase the risk of unallowable 

and unreasonable costs being charged to 

Government contracts. However, the 

purpose of this rule is to provide 

guidance to contractors for the submittal 

of FPRPs. DCAA’s audit approach is to 

design appropriate tests of details in 

support of the proposed forward pricing 

rates, not to conduct incurred cost 

audits within FPRP audits. DCAA is 

working to reduce its backlog of 

incurred cost audits so that the agency 

can conduct the audits more promptly. 

E. Reliance on Outside Audits 

Comment: One respondent suggested 

that DCAA should balance 

independence with efficiency. DCAA is 

unwilling to rely on relevant auditing 

and analysis by others. Citing the belief 

that absolute independence is required, 

DCAA typically will not rely on the 

contractor’s internal audit department, 

other Government oversight 

organizations such as the Defense 

Contract Management Agency (DCMA), 

or even other DCAA auditors. 

Response: In order to comply with 

Generally Accepted Government 

Auditing Standards (GAGAS), DCAA’s 

audit opinion must be derived from the 

results of sufficient audit procedures 

performed on the underlying contractor 

data. In most cases, DCAA is not 

provided the necessary access to the 


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working papers supporting contractor 

internal audits. DCAA will work with 

DCMA and other contract 

administration offices (CAO’s) to 

leverage the monitoring and analytical 

work they perform; however, DCAA 

cannot include CAO developed rates 

without applying adequate audit 

procedures to the underlying contractor 

data. 

F. FPRP Adequacy Checklist Flexibility 

Comment: Two respondents stated 

that the FPRP adequacy checklist 

should be more flexible to allow the 

Government and contractors to better 

explain and understand the FPRPs. The 

FPRP adequacy checklist does not 

provide for any tailoring by a company 

based upon the company’s cost 

structure. Documentation necessary to 

audit rates at one contractor can be 

irrelevant to the rates at another 

contractor. Requiring companies to 

create additional documentation, much 

of which may be irrelevant to the FPRP 

and yet obligate DCAA to audit it, will 

not change the outcome of a rate 

negotiation, but is certain to create 

obstacles to the process. 

Response: The FPRP adequacy 

checklist communicates common 

expectations for both contractors and 

the Government. The FPRP adequacy 

checklist topics are high level and 

generic, focused on the contractor 

communicating the rates proposed and 

their bases. Contractors provide 

checklist responses within the context 

of their accounting/estimating systems 

and the structure of their FPRP. The 

FPRP adequacy checklist is not geared 

to stimulate the contractor to create 

documentation other than the basic 

information that both the Government 

and contractor need to support and 

negotiate fair and reasonable rates and 

wisely use taxpayer monies. 

Comment: One respondent stated that 

FPRPs should be a proposal by a 

company on how it is going to manage 

the risk of future performance. They 

represent forecasting future costs and 

the risk associated with those costs. 

Clearly, this formulation will vary by 

company and will be based on 

assumptions that the companies make 

and articulate as part of their proposals. 

The FPRP adequacy checklist does not 

take this core issue into consideration. 

It is generic in nature, not exhaustive, 

and does not account for the fact that 

some circumstances will not apply to a 

specific FPRP. 

Response: The FPRP adequacy 

checklist is intended to be high level 

and generic, not exhaustive in nature, 

allowing each contractor to respond 

within the context of its proposal and 

estimating/accounting system structure. 

While a contractor will manage the risk 

of future costs, when the contractor is 

contracting with the Government there 

must be a basic understanding of the 

rates proposed and the bases of 

estimates so Government 

representatives can be good stewards of 

taxpayers’ money when negotiating a 

fair and reasonable price. Where a 

specific FPRP adequacy checklist topic 

does not apply for a contractor, then 

that topic should be identified as ‘‘Not 

Applicable.’’ 

Comment: One respondent stated that 

a one size fits all FPRP adequacy 

checklist would not be effective to 

identify the appropriate information and 

data necessary to the Government for 

the audit or FPRA process because of 

the variety of cost elements and segment 

types. 

Response: The FPRP adequacy 

checklist identifies common 

expectations for both the contractor and 

the Government with a focus on the 

proposed rates and the underlying bases 

of estimates. The goal is for the proposal 

to be adequate to support negotiations 

that will allow the Government 

contracting officer to ensure that the 

price is fair and reasonable. The 

Government will meet with the 

contractor upon receipt of an adequate 

proposal and, based upon the results of 

a walk-through meeting, identify 

appropriate evidence to support 

negotiations and audit. 

G. FPRP Submittal Timing 

Comment: The respondents claimed 

that the proposed rule creates 

unintended and harmful liabilities for 

contractors. Under the Truth in 

Negotiations Act (TINA), companies 

must provide the Government with 

pricing information that is current, 

accurate, and complete. Requiring 

companies to submit forward pricing 

rates at least 90 days in advance of their 

effective date directly conflicts with 

TINA and the False Claims Act. 

Intentional or knowing violation of 

TINA provisions are potentially false 

claims. In addition, key bases for 

estimates such as budgets or sales 

projections may simply not be available 

90 days prior to submission of rate 

proposals. Beyond that, the budgetary 

and factual data upon which FPRPs are 

based (1) may simply not be available 90 

days in advance, (2) may be subject to 

more current data, or (3) may be affected 

by certain large proposals that may 

require a resubmission of rates when a 

contract award would have a significant 

impact on bases/rates. One respondent 

requested a separate rule to address the 

requirement for submission of forward 

pricing rates at least 90 days in advance 

of the effective date of those rates, 

which would also address a waiver of 

liability/prosecution for civil or 

criminal penalties that might arise from 

compliance with the rule. 

Response: Submitting FPRPs 90 days 

in advance of their effective date is 

reasonable. The parties (Government 

and contractor) need time to negotiate 

forward pricing rates prior to their 

effective date, which is often the start of 

the contractor’s fiscal year. Prior to the 

start of their fiscal year, contractors have 

established strategic plans and put 

budgets in place to manage their 

businesses. The 90 day timeframe is not 

creating a conflict with the provisions of 

TINA. In accordance with FAR 42.1701, 

the contractor’s FPRP shall include 

‘‘cost or pricing data that are accurate, 

complete, and current as of the date of 

submission’’ and contractors are 

expected to communicate updates 

during the negotiation of the proposed 

rates. Per FAR 15.407–3, Forward 

pricing rate agreements, paragraph (a), 

‘‘All data submitted in connection with 

the FPRA, updated as necessary, form a 

part of the total data that the offeror 

certifies to be accurate, complete, and 

current at the time of the agreement on 

price for an initial contract or for a 

contract modification.’’ Paragraph (b) 

states ‘‘Conditions that may affect the 

agreement’s validity shall be reported 

promptly to the ACO.’’ (The ACO is the 

Government Administrative Contracting 

Officer.) It should be understood by the 

parties that the proposed rates are based 

on forecasts and contractors must 

provide updates whenever the validity 

of the agreement may be affected. 

H. Incorporation of FAR Table 15–2 Into 

the FPRP Adequacy Checklist 

Comment: A number of respondents 

stated that the incorporation of FAR 

Table 15–2 into the FPRP adequacy 

checklist is inappropriate. These 

comments included the following: 

(1) The table is suited to contractor 

proposals for goods or services, and not 

to FPRPs. As a result of DCAA’s 

application of Table 15–2, DCAA now 

requires significantly more data from 

contractors to demonstrate adequacy. 

This additional data is not tailored 

based on a risk assessment of the 

contractor’s operations. Prior to the 

application of Table 15–2 to FPRPs, 

contractors and the Government had 

been more successful in achieving 

timely audits of contractors’ FPRP 

submissions and negotiations of FPRAs. 

(2) DoD should issue a separate rule 

addressing the checklist’s incorporation 

of Table 15–2 requirements. By 

referencing Table 15–2 throughout, the 


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FPRP adequacy checklist implicitly 

applies Table 15–2 to FPRPs. However, 

the table’s requirements have not been 

applied as such under the current FAR. 

The respondent maintained that FAR 

Table 15–2 is only required when 

submitting ‘‘certified’’ cost or pricing 

data associated with a specific pricing 

action subject to TINA, such as a bid or 

proposal for a new contract award or 

contract modification. The respondent 

suggested that any attempt to require 

Table 15–2 for all FPRPs must go 

through proper, separate, rulemaking. 

(3) Many elements of the proposed 

FPRP adequacy checklist are irrelevant 

to an FPRP submission. For example, 

the first item on the FPRP adequacy 

checklist reads, ‘‘Is there a properly 

completed first page of the proposal or 

a summary format as specified by the 

contracting officer?’’ This corresponds 

to Table 15–2. The respondent further 

pointed out that there is no solicitation, 

no contract, no profit or fee, no 

Government property used, and CAS 

applicability is already readily known 

by both the contractor and Government. 

(4) One respondent stated that a 

fundamental issue that the GAO raised 

with DCAA audits was DCAA’s lack of 

adherence to Generally Accepted 

Government Auditing Standards 

(GAGAS). The respondent believes that 

in response to the GAO report, DCAA 

took the position that the items listed on 

the proposed DFARS FPRP adequacy 

checklist have always been a 

requirement of Table 15–2. The 

respondent does not believe that Table 

15–2 is applicable to an FPRP. 

Response: To promote the submission 

of thorough, accurate, and complete 

proposals, this rule is communicating 

common expectations, that FPRPs 

include basic information which 

identifies the proposed rates and 

explains the bases of estimates, and 

requiring that the contractors 

communicate the inclusion of this basic 

information via an FPRP adequacy 

checklist. The goal of the FPRP 

adequacy checklist is to promote the 

initial submission of adequate proposals 

and to achieve a more efficient 

negotiation process for establishing 

forward pricing rates. While a contractor 

will not sign a ‘‘Certificate of Current 

Cost or Pricing Data’’ until award of a 

contract (or modification) for supplies 

or services, FAR 42.1701(b) requires the 

Contracting Officer to obtain the FPRP 

including cost or pricing data that are 

current, accurate and complete. The 

references in the proposed rule to FAR 

15.408 Table 15–2 were intended to 

help offerors understand the minimum 

criteria to ensure their FPRPs 

adequately comply with each 

submission item. However, to remove 

any misunderstandings of the intent and 

content of the table submission items, 

the FPRP adequacy checklist references, 

including references to FAR 15.408 

Table 15–2, have been removed in this 

final rule. Furthermore, item no. 1 of the 

FPRP adequacy checklist is revised to 

identify only those specific items 

required on the first page of a forward 

pricing rate proposal. 

I. Paperwork Reduction Act 

Comment: One respondent claimed 

that DoD has not complied with its 

obligations under the Paperwork 

Reduction Act and the implementing 

regulations in 5 CFR part 1320. 

Response: The supporting data 

referenced by the respondent exceeds 

the information collection requirements 

established under this rule. The 

Paperwork Reduction Act estimates 

published with the proposed rule 

accurately reflect the contractors’ costs 

to fulfill the information collection 

requirements of this rule. 

J. Public Meetings 

Comment: One respondent suggested 

that DoD and the public should engage 

in an interactive process to identify the 

real objectives of this rule and the best 

methods for achieving those solutions. 

Response: The purpose of the rule is 

to provide guidance to contractors for 

the submittal of FPRPs that are 

thorough, accurate, and complete. The 

rule provides for consistency of 

submittals and establishes common 

expectations for a contractor and the 

Government to make negotiations more 

efficient. A meeting is not necessary 

given that the objective is clear. 

K. Increased Administrative Efforts and 

Costs 

Comment: One respondent stated that 

the proposed FPRP adequacy checklist 

also includes information beyond the 

scope of a basis of estimate (BOE). An 

example is the following submission 

item: ‘‘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?’’ Such data and format 

are not relevant to the current BOE 

developed by the contractor. The 

respondent claimed that there is no 

benefit to the Government from 

requiring the contractor to provide 

duplicative information that was not 

used in the development of the BOE. 

Rather, contractors will incur additional 

costs to meet these administrative 

requirements. 

Two respondents stated that there are 

many items within the proposed FPRP 

adequacy checklist that would add 

significant time and effort to the 

contractor’s FPRP submission as well as 

require additional explanations to 

DCAA on the adequacy of the submittal 

against the FPRP adequacy checklist. 

The respondents suggested that DoD 

should consider the vast amounts of 

paperwork and data reformatting that 

would be required to comply with the 

proposed rule. It is not just questions 

that have to be answered; there would 

be an exponential increase when the 

questions are applied to each forward 

pricing rate. If adopted the rule would 

create an enormous volume of paper 

and data for the sole purpose of DCAA 

audit consumption. This would be done 

without any requirement for timely 

completion of audits. These additional 

efforts would increase contractor 

administrative costs and Government 

audit costs which run directly contrary 

to DoD’s Better Buying Power 

memoranda. 

Response: The purpose of the FPRP 

adequacy checklist is to ensure that 

FPRPs are complete and well-supported, 

and provide an adequate basis for 

Government analysis and negotiation. 

This will assist both parties by 

significantly reducing the need for fact 

finding, and allowing for more efficient 

proposal analysis by the Government. 

The FPRP adequacy checklist identifies 

those elements which would typically 

be included in a well-supported and 

complete FPRP. However, the FPRP 

adequacy checklist itself does not 

mandate development of content which 

is not appropriate for a specific 

proposal. The FPRP adequacy checklist 

includes a column which the contractor 

can use to briefly explain why a specific 

checklist item is not applicable. It 

should be noted that there is no intent 

for a separate instance of the FPRP 

adequacy checklist to be completed for 

each proposed rate. Rather, the 

contractor will submit a single 

completed FPRP adequacy checklist in 

support of the entire FPRP. 

Forward pricing rates are projections 

of the future. It is fundamental to 

understand how accurately a contractor 

has been able to estimate past periods. 

A basic requirement for proposals for 

both supplies/services and FPRAs is the 

presentation of trend and budgetary 

data. The elements commented as not 

being relevant to the current BOE are 

important for Government 

representatives to consider when 

negotiating rates. The FPRP adequacy 

checklist recognizes that the support for 

out-year rates may be less detailed than 

for the base year, and/or that the 

estimating methodology for out-year 

rates may be different from the base 


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73496 Federal Register / Vol. 79, No. 238 / Thursday, December 11, 2014 / Rules and Regulations 

year. The FPRP adequacy checklist 

merely leads the contractor to clearly 

document the estimating approaches 

used, the escalation applied, etc., so that 

the proposal submitted to the 

Government provides an adequate basis 

for analysis and negotiation. 

Comment: One respondent stated that 

companies generally support forward 

pricing rates for periods ranging from 

one to ten years depending on the 

markets in which they compete. 

Generally, a five year period is 

customary in an FPRP. Checklists such 

as the one being proposed have a 

tendency to be applied literally by 

regulators without the benefit of the 

application of professional judgment. 

For a shipbuilding contractor that may 

have a ten year pricing window, the 

fidelity of the pricing estimates at the 

back end of the pricing window are not 

as robust as those in earlier years. This 

FPRP adequacy checklist would have 

contractors generate paper purely for the 

sake of complying with the checklist, 

without adding value to the acquisition 

process. 

Response: Both contractors and 

Government representatives are 

expected to exercise professional 

judgment in using the FPRP adequacy 

checklist during the process. The 

contractor is expected to construct its 

proposal as fits its business scenario, 

explaining the bases and derivation of 

the rates for each proposed period and 

the underlying assumptions. Experience 

with FPRPs has demonstrated that out 

years are not well-supported even with 

the underlying strategic decisions which 

affected the pool and base estimates. 

L. FPRP Risk Assessment 

Comment: One respondent stated that, 

at their core, FPRPs represent the degree 

of risk that a company is willing to 

accept in proposals for pricing rates. 

They are developed using forecasts of 

future costs in which judgment is 

applied to address risk. That risk is 

subjective and will vary significantly by 

company and market conditions. The 

degree of risk is addressed by the 

assumptions that contractors articulate 

in their FPRP. The FPRP adequacy 

checklist misses the entire point of the 

contractors’ risk assessment. 

Response: The purpose of the FPRP 

adequacy checklist focuses on whether 

the FPRP is adequate with the proposed 

rates and the underlying bases of 

estimate identified and ready to be a 

foundation for negotiation with the 

Government. From this point the 

Government will engage with the 

contractor for a more thorough 

understanding of underlying contractor 

assumptions and the risk the contractor 

has designed. While some checklist 

items address assumptions/risk to some 

degree; the FPRP adequacy checklist is 

not designed to go into this level of 

detail. The checklist is designed to 

address risk at a higher level. 

Contractors’ assignment of risk in 

estimating future cost is subjective 

depending on company and market 

conditions. Contractors can use their 

own judgment and risk factors to 

develop their future cost forecasts. 

However, the valuation of the risk or 

estimate should be based on available 

data and documented assumptions. 

III. Executive Orders 12866 and 13563 

Executive Orders (E.O.s) 12866 and 

13563 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). E.O. 13563 emphasizes the 

importance of quantifying both costs 

and benefits, of reducing costs, of 

harmonizing rules, and of promoting 

flexibility. This is not a significant 

regulatory action and, therefore, was not 

subject to review under section 6(b) of 

E.O. 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

rule is not a major rule under 5 U.S.C. 

804. 

IV. Regulatory Flexibility Act 

A final regulatory flexibility analysis 

has been prepared consistent with the 

Regulatory Flexibility Act, 5 U.S.C. 601, 

et seq., and is summarized as follows: 

This rule amends the DFARS at 

215.403–5 by adding instructions to 

contracting officers to request 

contractors to submit the FPRP 

adequacy checklist with FPRPs. The 

objective is to provide guidance to 

contractors for the submittal of FPRPs. 

No significant issues were raised by 

the public comments in response to the 

initial regulatory flexibility analysis 

published with the proposed rule. 

DoD does not expect this rule to have 

a significant economic impact on a 

substantial number of small entities 

within the meaning of the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq., 

because only a small percentage of 

Government contractors are requested to 

submit an FPRP, as set forth at FAR 

42.1701(a). The Government will ask 

only those contractors with a significant 

volume of Government contracts to 

submit such proposals. 

The rule does not duplicate, overlap, 

or conflict with any other Federal rules. 

V. Paperwork Reduction Act 

The rule contains information 

collection requirements that require the 

approval of the Office of Management 

and Budget under the Paperwork 

Reduction Act (44 U.S.C chapter 35). 

OMB has cleared this information 

collection under OMB Control Number 

0704–0497, titled DFARS part 215, 

Negotiation. 

List of Subjects in 48 CFR Part 215 

Government procurement. 

Manuel Quinones, 

Editor, Defense Acquisition Regulations 

System. 

Therefore, 48 CFR part 215 is 

amended as follows: 

PART 215—CONTRACTING BY 

NEGOTIATION 

■ 1. The authority citation for 48 CFR 

part 215 continues to read as follows: 

Authority: 41 U.S.C. 1303 and 48 CFR 

chapter 1. 

■ 2. Add 215.403–5 to read as follows: 

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. 


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CONTRACTOR FORWARD PRICING RATE PROPOSAL ADEQUACY CHECKLIST

Submission item Proposal page No. 

(if applicable) 

If not provided, 

explain (may use 

continuation pages) 

General Instructions 

1. Is there a properly completed first page of the proposal as specified by the contracting 

officer? 

Proposal Cover Page.

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. 

2. 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.

3. 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— 

4. 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. 

5. 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? 

6. 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? 

7. 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. 

8. 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 

9. 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)? 

10. 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? 


tkelley on DSK3SPTVN1PROD with RULES
73498 Federal Register / Vol. 79, No. 238 / Thursday, December 11, 2014 / Rules and Regulations 

CONTRACTOR FORWARD PRICING RATE PROPOSAL ADEQUACY CHECKLIST—Continued 

Submission item Proposal page No. 

(if applicable) 

If not provided, 

explain (may use 

continuation pages) 

11. 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.) 

12. 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? 

13. 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? 

14. Does the proposal identify any contingencies? 

15. Does the proposal identify planned or anticipated changes in the nature, type, or level 

of indirect costs, including fringe benefits? 

16. 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? 

17. Does the proposal separately identify all intermediate cost pools and provide a reconciliation to show where the costs will be allocated? 

18. 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? 

19. Does the proposal provide details of the development of the allocation base? 

20. Does the proposal include or reference the supporting data for the allocation base such 

as program budgets, negotiation memoranda, proposals, contract values, etc.? 

21. 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) 

22. 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 

23. 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? 

24. 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? 

[FR Doc. 2014–28811 Filed 12–10–14; 8:45 am] 

BILLING CODE 5001–06–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 225 and 236 

RIN 0750–AI33 

Defense Federal Acquisition 

Regulation Supplement: Use of Military 

Construction Funds in Countries 

Bordering the Arabian Sea (DFARS 

Case 2014–D016) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD has adopted as final, 

without change, an interim rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to implement sections of the 

Military Construction and Veterans 

Affairs, and Related Agencies 

Appropriations Act, 2014, that restricts 

use of military construction funds in 

various countries, including countries 

bordering the Arabian Sea. 

DATES: Effective December 11, 2014. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Amy G. Williams, telephone 571–372– 

6106. 

SUPPLEMENTARY INFORMATION: 


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