Subcontractor Cost/Price Analyses Not Completed When Prime Proposal Submitted

DFARS (DoD FAR Supplement) 252.215-7009 is the Proposal Adequacy Checklist that companies should complete whenever a proposal to DoD requires the submission of cost or pricing data. The requirement is not mandatory, its only suggested as a means of facilitating submission of a thorough, accurate, and complete proposal (see DFARS 215.408(5). Although DFARS only suggests that it be prepared, often times procurement offices will make it a requirement for proposal submission thus making it effectively a mandatory document. Its a nice tool and we usually recommend contractors complete the checklist for any proposal. Whether prospective contractors choose to submit one or not, someone in the Government probably will prepare one so its best that contractors be prepared to respond to any queries that might result from a "no" answer.

One of the more problematic questions has been No. 17 which asks whether the prime contractor or higher-tier subcontractor has included the required cost or price analyses that establishes the reasonableness of each of its proposed subcontracts included with the Proposal. If not, the question further asks whether the offeror has included a matrix identifying (i) dates for receipt of subcontractor proposal, (ii) completion of fact finding for purposes of price/cost analysis, and (iii) submission of the price/cost analysis.

DCAA (Defense Contract Audit Agency) is playing hard-ball with this question. In recent guidance to its audit staff, it makes the following observation.

Question: If the prime contractor or higher-tier subcontractor has not completed the required cost or price analyses but has included a matrix identifying dates for receipt of subcontractor proposals, should Question No. 17 be marked as adequate or inadequate? Additionally, should the audit team consider the overall proposal adequate or inadequate for audit and proceed with the audit if this inadequacy exists?

Answer: FAR 15.404-3(b) requires the prime contractor or higher-tier subcontractor to conduct appropriate cost or price analyses to establish the reasonableness of the proposed subcontract prices and include the results of these analyses in the prime contractor’s proposal.

 As such, the inclusion of a matrix does not overcome the inadequacy of the prime contractor not submitting the cost or price analyses with the proposal. If the prime contractor or higher-tier subcontractor has not completed the cost or price analyses, as required by FAR 15.404-3(b), Question No. 17 ... should be marked as inadequate (i.e., answer “no” under “Adequate?”

We're not sure how the DCAA position serves any useful purpose. The DoD in its checklist has already allowed for a time-phased matrix when an offeror's cost/price analysis of subcontractor proposals cannot be completed by the proposal due date. If the offeror did not complete the cost/price analysis and did not supply a schedule for completing them, then the proposal might not be adequate for negotiating a price.