price analysis | The Contracting Education Academy

February 26, 2015 By AMK

GSA Schedules and DoD’s confusing FAR 8.4 deviation

On March 13, 2014, Defense Procurement and Acquisition Policy (DPAP) issued a class deviation to FAR 8.404(d). This deviation directed that ordering activity contracting officers are responsible for making a determination of fair and reasonable pricing when using GSA’s Federal Supply Schedules (FSS). The deviation essentially incorporates complex FAR 15.404-1 price analysis techniques into the streamlined FSS ordering procedures with the vague caveat that the complexity and circumstances of each acquisition should determine the level of detail of the analysis required.

In discussing the rationale for this deviation, DPAP has consistently focused on the variation in pricing across the FSS program. In particular, the example of a $29 stapler listed on an FSS contract has been cited by DPAP as creating a “significant” risk that Department of Defense (DoD) contracting officers will simply order the $29 stapler rather than search for a cheaper stapler on another FSS contract. For those of us of a certain age, the use of this example reminds one of the $600 toilet seat reportedly purchased by the DoD back in the 1980s. Like the toilet seat purchase, however, there is greater context that undercuts the stapler example cited by DPAP.

Keep reading this article at: http://www.federaltimes.com/story/government/acquisition/blog/2015/02/13/gsa-advantage-dpap-far-waldron/23365305/

January 26, 2015 By AMK

Acquisition 101: When a bargain isn’t a bargain

When my wife and I purchased our first vacuum cleaner, we selected a cheap model. It met all the specs of what we needed, did a minimally acceptable job and lasted little more than a year before it died. Not learning the lesson that buying the first vacuum should have taught us, we immediately bought another cheap vacuum to replace the first one, and it died an early death about 18 months later. We finally did learn our lesson with the third vacuum and paid slightly more for a better vacuum that has lasted six years (and counting).

Much like our predicament with the rotating vacuums, federal contracting professionals are facing increasing pressure to purchase goods and services as cheaply as possible using a method commonly referred to as “lowest price/technically acceptable” (LPTA)—even if it means minimal acceptability. This push is laudable in theory, but the reality is often higher prices and a smaller pool of quality contractors, while robbing contracting officers of any discretion to choose a solution or product that is more cost-effective in the long term.

Keep reading this article at: http://www.govexec.com/contracting/2015/01/acquisition-101-when-bargain-isnt-bargain/102672/

About the authors: Eric Crusius, a partner with Fed Nexus Law, focuses on government contracts, cybersecurity, employment law and complex litigation. Mitchell Bashur, an associate at Fed Nexus Law, also contributed to this column.

May 14, 2014 By AMK

Learn all about government contract cost-price analysis in June

The Contracting Education Academy at Georgia Tech is offering a course focusing on the Fundamentals of Cost & Price Analysis in government contracting in June.

To see details or to register, click here.

The Academy’s comprehensive, two-week course begins with an in-depth review of the market research process, and provides instruction to help students understand and analyze contractor pricing strategies.

Attendees learn to accomplish cost-volume-profit analysis, calculate contribution margin estimates, and develop cost estimating relationships in order to accomplish an effective price analysis pursuant to FAR Subpart 15.4.

After learning the basic elements of price and cost analysis, students will build and defend a pre-negotiation objective, including a minimum and maximum pricing objective with a weighted guidelines assessment.

Cost and price analysis is part of a plan of total market surveillance designed to understand the relationship of market forces on the acquisition of technology, products and services.

This course is ideal for new hires in the contracting career field. In addition, for government contractors, this course provides invaluable insights into the government contracting decision-making process. Student performance is assessed by graded exams on math fundamentals and applied course material as well as an exercise for student participation and completion of negotiations.

CON 170 – Fundamentals of Cost & Price Analysis is Defense Acquisition University-equivalent training that satisfies the FAC-C and DAWIA certification programs. For more information or to register, please visit: http://www.pe.gatech.edu/courses/con-170-fundamentals-cost-and-price-analysis

November 6, 2013 By AMK

LPTA contracts gaining favor among agencies, but give vendors less incentive to innovate, study says

Lowest price technically acceptable procurements have been gaining favor among agencies, but that gives vendors less incentive to be innovative if the approach costs more, an Oct. 24 Market Connections and Centurion Research study says.

Under LPTA, agencies focus more on price than on past performance as long as the vendor meets minimal job requirements. So if a vendor comes to an agency with a unique solution that costs more than a competitor who comes with a more basic solution, the agency is more likely to choose the cheaper solution as long as it meets the minimum requirements.

The practice has been utilized by the Defense Department through its Better Buying Initiative, the study says, but has proliferated through other agencies as well.

The study showed that of the $27 billion in procurements it analyzed, the Veterans Affairs Department was the biggest user of LPTA outside of the DoD.

Keep reading this article at: http://www.fiercegovernment.com/story/lpta-contracts-gaining-favor-among-agencies-give-vendors-less-incentive-inn/2013-10-28

September 30, 2013 By AMK

USPS didn’t justify $210M in noncompetitive purchases, IG says

The Postal Service likely didn’t justify $210 million in noncompetitive purchases made over two fiscal years, which puts USPS at risk for not obtaining the best price when awarding contracts, a Sept. 25 USPS inspector general report says.

Contracting officials at the USPS did not document a finding of price or cost reasonableness or write up a necessary justification in 21 of 56 statistically-sampled noncompetitive contract awards worth $37 million that the inspector general audited. Based on those findings, auditors project that at least $210 million worth of Postal Service purchases in fiscals 2011 and 2012 likewise lacked documentation to show that the noncompetitive award was necessary and not unnecessarily expensive. The mail deliverer spent $1.3 billion on contracts those two fiscal years.

Agencies must conduct a price or cost analysis to support that noncompetitive contract prices were fair and reasonable. And there must be documentation that that process took place.

Keep reading this article at: http://www.fiercegovernment.com/story/usps-didnt-justify-nearly-40-million-noncompetitive-purchases-ig-says/2013-09-26

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