Thursday, September 26, 2019

DoD Adds "Value Analysis" as a Factor in Determining Price Reasonableness

DoD is proposing to revise its FAR (Federal Acquisition Regulations) Supplement to implement provisions contained in the 2017 NDAA (National Defense Authorization Act) to address how contracting officers may require offerors to submit relevant information to support market research when acquiring commercial items.

Agencies must conduct market research to support the determination of price reasonableness of commercial items. Sometimes however, market research comes up empty with nothing to support the reasonableness of the prices an offeror is proposing.

This new rule will not impose any new requirements on offerors but will allow offerors to submit information or analysis relating to the value of a commercial item to aid in the Government's determination of the reasonableness of the price of those items. Contracting officers in turn, may consider such information or analysis, in addition to any other information available in justifying price reasonableness.

This proposed rule introduces a new term; 'value analysis'. Value analysis means a systematic and objective evaluation of the function of a product and its related costs, whose purpose is to ensure optimum value. Value analysis is used to understand what features or characteristics of a given product or service, or offered terms and conditions warrant consideration as having legitimate value to the Government. A contracting officer may consider such information or analysis in addition to the information required to be submitted. 

Read more about this proposed rule here. Note that the proposal directs the reader to a PGI (Procedures, Guidance, and Information) reference for additional guidance on the use of value analysis that has not yet been published.

Seems like this is a good opportunity for offerors to inform contracting officers of any added value of the commercial items beyond the essential or basic Government requirements.

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