adequate price competition | The Contracting Education Academy

August 5, 2019 By AMK

New DoD policy aims to crack down on alleged price gouging by TransDigm

Defense procurement officials have taken a step toward cracking down on what they have called price gouging within the military spare parts market. They issued a new edict that requires DoD contracting officers to gather cost and pricing data when they enter into agreements with TransDigm Group.

The memo, signed on Friday by Kim Herrington, DoD’s acting director for Defense Pricing and Contracting, tells contracting officers they must “require” that TransDigm turn over uncertified cost data to support the prices the company is charging the government. The mandate applies to situations where TransDigm or its subsidiaries are the only makers of a particular part, a scenario that applies to the vast majority of the company’s business.

The order also tells contracting officers to treat many of their contracts for parts the company makes as non-competitive — even when two or more resellers are bidding to supply the same item.

“The definition of adequate price competition does not address the fact that a sole manufacturer (such as TransDigm) participating in a competition can effectively control the competition by its ability to establish the material pricing for all other offerors,” Herrington wrote. “In these situations, the department does not consider such rigged competitions to be adequate price competition, based on independently submitted offers.”

The memo is highly unusual in that it targets one particular company, rather than laying out a broadly-applicable policy.

It was prompted by a February 2019 DoD inspector general report which found that TransDigm was routinely earning “excess profits” in its Defense contracts. For 17 of the 47 parts in a sample auditors examined, they calculated the company’s profit margins at 1,000% or more, and deemed all but one of the parts to have been marked up to unreasonable levels.

Keep reading article at: https://federalnewsnetwork.com/defense-main/2019/06/new-dod-policy-aims-to-crack-down-on-alleged-price-gouging-by-transdigm/

July 12, 2018 By AMK

Proposed rule would create a separate, more restrictive standard for ‘adequate price competition’

On June 12, 2018, the Department of Defense (“DoD”), the General Services Administration, and NASA proposed a new rule that would limit the “adequate price competition” exception to certified cost or pricing data requirements on all DoD, NASA, and Coast Guard procurements.

Currently, FAR 15.403-1 prohibits contracting officers from requiring contractors to submit certified cost or pricing data to support a contract action when the contracting officer determines that the prices agreed upon are based on “adequate price competition,” which the regulation defines in one of three ways:

Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement where award will be made in a best-value competition and there is no finding that the price of the otherwise successful offeror is unreasonable;
Only one offer is received from a responsible offeror, but there was a reasonable expectation that two or more responsible offerors, competing independently, would submit priced offers, the offer received was submitted with the expectation of competition, and the determination that the proposed price is based on adequate price competition and is reasonable has been approved at a level above the contracting officer; or
Price analysis clearly demonstrates that the proposal price is reasonable in comparison with current or recent prices for the same or similar items, adjusted to reflect changes in market conditions, economic conditions, quantities, or terms and conditions under contracts that resulted from adequate price competition.

The proposed rule, however, would eliminate the second and third definitions for the DoD, NASA, and the Coast Guard. Instead, for these agencies, a price would be based on adequate price competition “only if two or more responsible offerors, competing independently, submit responsive and viable offers.”

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=715666

Defense procurement officials have taken a step toward cracking down on what they have called price gouging within the military spare parts market. They issued a new edict that requires DoD contracting officers to gather cost and pricing data when they enter into agreements with TransDigm Group.

On June 12, 2018, the Department of Defense (“DoD”), the General Services Administration, and NASA proposed a new rule that would limit the “adequate price competition” exception to certified cost or pricing data requirements on all DoD, NASA, and Coast Guard procurements.

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