Pricing | The Contracting Education Academy

July 4, 2019 By AMK

Shoddy contracting practices lead to overbilling at EPA

The Environmental Protection Agency is overpaying contractors due to poor contract management controls, according to an audit released Monday by the agency’s office of inspector general.

The audit—conducted from March 2018 to February 2019—examined 11 of 64 total invoices made through a single task order on a $100 million IT contract awarded in 2011 to SRA International following a response to an anonymous hotline complaint about invoices and payments. According to the audit’s “limited review,” all 11 invoices EPA IG tested within the task order “did not comply with contract requirements,” leading to an overbilling of more than $5,100 paid to the contractor.

“Our limited review noted $5,158.29 for an unallowable fixed fee billed and paid by the EPA,” the audit states. “However, without adequate review of all invoices submitted under [the task order], the EPA does not know whether there are further unallowable costs that it has paid for under the task order.”

The IG cites various reasons issues occurred, including staffing problems, high turnover, poor contract file management disorganization and inadequate oversight.

Keep reading article at: https://www.nextgov.com/it-modernization/2019/05/shoddy-contracting-practices-lead-overbilling-epa/157143/

June 12, 2019 By AMK

Defense contracting fraud: A persistent problem

During the five year period from 2013-2017, there were 1,059 criminal cases of defense contracting fraud resulting in the conviction of 1,087 defendants, including 409 businesses, according to a newly released Department of Defense report to Congress. There were another 443 fraud-related civil cases resulting in judgments against 546 defendants.

During that same period, the Department of Defense entered into more than 15 million contracts with contractors who had been indicted, fined, and/or convicted of fraud, or who reached settlement agreements. The value of those contracts exceeded $334 billion, according to the DoD report. See Report on Defense Contracting Fraud, DoD report to Congress, December 2018.

The report was prepared in response to a requirement in the FY2018 defense authorization act at the initiative of Sen. Bernie Sanders. It was released this week under the Freedom of Information Act.

A previous report covering the period of 2001-2010 was produced by the Department of Defense in 2011, also at the request of Senator Sanders. The earlier report likewise found extensive fraud including criminal and civil offensive in defense contracting.

“Simply put, the Pentagon continues to be riddled with waste, fraud and abuse of taxpayer funds to a degree unmatched across the federal government,” Sen. Sanders said in 2017. “It is unacceptable that the Department of Defense continues to lose vast sums of taxpayer money because of fraud perpetrated by major defense contractors. This has got to end.”

Keep reading article at: https://fas.org/blogs/secrecy/2019/05/defense-contracting-fraud

June 5, 2019 By AMK

A Pentagon contractor’s 9,400% profit on a half-inch metal pin is challenged

As the Pentagon weighs whether to recommend legislation to require more disclosure by contractors, the House Committee on Oversight and Reform will review the audit and TransDigm’s pricing policies in a hearing on Wednesday.

The inspector general’s report “exposes how a company entrusted with supporting our military men and women took advantage of American taxpayers by overcharging the government more than $16 million” in parts sales sold between 2015 and 2017, Oversight Chairman Elijah Cummings said in a statement. The hearing will “investigate whether these pricing issues are more widespread, and demand answers,” he said.

From 2013 through 2015, according to the audit, the contractor increased the price of a valve that opens and closes to change the pressure of fuel moving through an engine to $9,801 from $543. In those years, TransDigm also charged $1,443 each for a “non-vehicular clutch disk” that cost $32 to make.

Planes, Copters

The Pentagon’s inspector general first raised pricing concerns over TransDigm in a 2006 report, followed by the one this year that was released in redacted form in February.

TransDigm manufactures spare parts for airplanes and helicopters including the AH-64 Apache, C-17 Globemaster III, F-16 Fighting Falcon and the CH-47 Chinook. From April 2012 through January 2017, DOD issued 4,942 contracts valued at $471 million to TransDigm.

Liza Sabol, a spokeswoman for the Cleveland-based company, said in an email “that we are not providing comments on specific questions related to the IG report.”

Keep reading article at: http://amp.timeinc.net/fortune/2019/05/14/transdigm-pentagon-costs

June 4, 2019 By AMK

Can contracts be awarded without pricing?

Since the enactment of the Competition in Contracting Act in 1984, price has been an essential element of every contract awarded by the Federal Government under the Federal Acquisition Regulation, along with technical capability and (more recently) past performance. In addition, before making an award, every contracting officer must determine that the price offered by the winning offeror(s) is “fair and reasonable.”

Agencies have wide discretion in establishing the value of the factors and subfactors under each of these three elements, and frequently price is identified as the least important of the factors to be evaluated.

But what if the price on a solicitation was not a factor to be evaluated at all? As part of the Professional Services Council’s long-standing acquisition reform advocacy agenda, we supported just such an experiment and it is now in effect for some agencies.

In Section 825 of the Fiscal Year 2017 National Defense Authorization Act (NDAA), Congress provided that, for multiple-award indefinite delivery/indefinite quantity (ID/IQ) contracts, DoD, NASA and Coast Guard buying activities are not required to evaluate cost or price during the evaluation of the formation of the ID/IQ contract, provided other conditions are met. If cost or price is not evaluated at formation, however, cost or price must be an evaluation factor in conjunction with the issuance of any task or delivery order under such awarded contract. The Professional Services Council strongly supported that legislative proposal.

What all of these ID/IQ solicitations and resulting contracts have in common is that there is actually no work associated with the formation of the base contract. All of the actual work is solicited under task or delivery orders issued once the base contract is in place. As such, we argued that agencies were creating irrelevant price evaluation factors in order to comply with the then-existing statutory requirement to evaluate price at contract formation, and agencies were not making true comparative evaluations of offerors’ pricing since there was no factual basis for doing so. And it didn’t matter whether the ID/IQ contract provided for fixed prices, labor hour pricing, or hybrid pricing.

Keep reading article at: https://www.pscouncil.org/a/Content/2019/Can_Contracts_Be_Awarded_Without_Pricing.aspx

May 8, 2019 By cs

Don’t miss our contract cost and price analysis course in July

Georgia Tech’s course on the Fundamentals of Cost and Price Analysis (CON 170) features an in-depth review of the market research process. By attending, students gain fundamental quantitative pricing skills.

The 10-day course is being offered on July 15-26, 2019 on the Tech campus in the Global Learning Center in Midtown Atlanta. Registration details can be seen here.

Attendees will learn how to accomplish Cost-Volume-Profit analysis, calculate Contribution Margin Estimates, and develop Cost Estimating Relationships to achieve effective price analysis pursuant to FAR Subpart 15.4. These are the skills needed to negotiate pricing of contracts, subcontracts, and contract modifications.

Georgia Tech’s course includes an examination of the regulations and processes governing the use of cost analysis and requiring certified cost and pricing data.

After learning the basic elements of price and cost analysis, students receive instruction on how to build and defend a pre-negotiation objective, including a minimum and maximum pricing objective with a Weighted Guidelines Assessment. Students also learn how to defend pricing objectives by practicing face-to-face negotiations.

By attending, you’ll learn how to:

Identify the Government’s Pricing Objective
Review an Independent Government Cost Estimate
Apply Price-Related Factors
Review General Cost Principles on Allowability
Evaluate Direct and Indirect Costs
Determine the Applicability of Cost and Price Analysis
Practice Cost and Price Analysis Techniques
Conduct Cost Realism Analysis

Attendees receive expert instruction, a printed guide to be used back on the job, valuable handouts, and exclusive web-based resources. A complimentary breakfast is provided each morning, along with snacks throughout each class day.

This is a federal core course, required for FAC-C and DAWIA certification. Register here.

The Contracting Education Academy at Georgia Tech is an official Defense Acquisition University (DAU) equivalency training provider. Georgia Tech’s coursework also is recognized by the Federal Acquisition Institute (FAI).

The Environmental Protection Agency is overpaying contractors due to poor contract management controls, according to an audit released Monday by the agency’s office of inspector general.

As the Pentagon weighs whether to recommend legislation to require more disclosure by contractors, the House Committee on Oversight and Reform will review the audit and TransDigm’s pricing policies in a hearing on Wednesday.

Planes, Copters

Georgia Tech’s course on the Fundamentals of Cost and Price Analysis (CON 170) features an in-depth review of the market research process. By attending, students gain fundamental quantitative pricing skills.

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