Integrity of Unit Prices

Did you know that FAR (Federal Acquisition Regulations) contains a solicitation provision that requires offerors and contractors, when requested by the contracting officer, to identify in their proposals, any supplies which they will not manufacture or to which they will not contribute significant value (see FAR 52.215-14). Specifically, the clause reads:

Any proposal submitted for the negotiation of prices for items of supplies shall distribute costs within contracts on a basis that ensures that unit prices are in proportion to the items' base cost (e.g. manufacturing or acquisition costs). Any method of distributing costs to line items that distorts unit prices shall not be used. For example, distributing costs equally among line items is not acceptable except when there is little or no variation in base costs. When requested by the Contracting Officer, the Offeror/Contractor shall also identify those supplies that it will not manufacture or to which it will not contribute significant value.

Most contractors and offerors are unfamiliar with this provision and its rare that contracting officers will even request the information. When they do, its probably because they see something in the pricing data that doesn't look right (such as the $600 hammer) or some item where proposed cost exceeds the intrinsic value of that item. And, when the information is requested, contractors/offerors often look befuddled because, even long time contractors, have never been subjected to such a request and are not sure where to start.

This requirement does not apply to acquisitions below the simplified acquisition threshold, construction or architect-engineer services, service contracts where supplies are not required or commercial items (see FAR 15.408(f)).

RFPs, RFQs ... Whatever

We sometimes toss around phrases and acronyms expecting everyone to understand what we're talking about. Sometimes we get things mixed up ourselves - its easy. It is very common to confuse RFPs and RFQs. Some people use the terms synonymously.

The best place to look for definitions of terms used in Government contracting is in FAR 2.101. There are many definitions elsewhere in FAR but Section 2.101 is a fairly comprehensive and a good place to start.

Lets begin with the term "solicitation". "Solicitation" is a generic term used to describe any request to submit offers or quotations to the Government. There are several types of solicitations,

• RFQ - Request for Quotations - Solicitations under Simplified Acquisition Procedures are called RFQs.
• RFP - Request for Proposals - Solicitations under competitive or negotiated procedures are called RFPs.
• IFB - Invitation for Bids - Solicitations under sealed bid procedures are called IFBs.

Contractors (or prospective contractors) make offers to RFQs, RFPs, and IFBs. An offer is a response to a solicitation that, in the case of IFBs and RFPs, if accepted, binds the offeror to perform the resultant contract.

• Responses to IFBs are called bids or sealed bids
• Responses to RFPs are called proposals
• Responses to RFQs are called quotes.

RFPs are used in negotiated acquisitions to communicate Government requirements, anticipated terms and conditions that will apply, information required to be included in the offeror's proposal and factors and significant sub-factors that willbe used to evaluate the proposal and their relative importance.