Adequate Price Competition
Section 822 2017 NDAA rule change for Adequate Competition
The Federal Acquisition Regulation (FAR) implemented Section 822 of the Fiscal Year 2017 National Defense Authorization Act (NDAA) which requires contactors to submit additional certified cost or pricing data when only one offer is received in response to a competitive solicitation. Certified cost and pricing data is required when the following three criteria are met:
- Awarding any negotiated contract.
- Awarding a subcontract at any tier if the contractor and each higher-tier subcontractor were required to submit certified cost or pricing data.
- Modifying a contract.
Currently the requirement for certified cost or pricing data threshold is $2 million, but the Government may not require certified cost or pricing when an exception to the requirement is met. The first and one of the most common exceptions is “adequate price competition”. FAR amended its definition of “adequate price competition” for DOD, NASA and the Coast Guard in its July 12, 2019 issuance. FAR Part 15.403-1(c) was revised for these three agencies that in order to have “adequate price competition”, the Government/Contractors must receive two or more responsive offers. If only one offer is received, there is no adequate competition even if the contractor believed it would have competition and the offer is otherwise fair and reasonable.
The “old rule” (summarized below) allowed the use of the following to justify “adequate price competition”:
Actual Competition: Two or more offerors submitted offers that satisfy the Government’s requirements in a best-value competition;
Expected Competition: Only one offer was submitted, but that offer was submitted with the expectation that at least one other offeror was capable of submitting a meaningful offer; or
Comparison with Other Competitions: Price analysis clearly demonstrates that the offered price was reasonable based on a comparison with similar contracts that resulted form adequate price competition.
What Does this Mean?
If you have contracts issue by DOD, NASA and the Coast Guard, the Government can no longer utilize “no bids” in support of “adequate price competition” when evaluating a contract proposal. Therefore, if the Government is not obtaining additional bidders a company may be required to submit certified cost and pricing data more frequently. As a Contractor obtaining proposals from subcontractors, you can no longer use “no bids” or comparison with other competitions as “adequate price competition” in support of the procurement. Therefore, this may require your company to obtain certified cost and pricing data more frequently from subcontractors.
If agencies need further data to support an adequate price analysis, they may request additional cost and pricing data. Contractors may also find agencies directing them to provide certified cost or pricing data in competitive procurements even for proposals below the threshold for submission of certified cost or pricing data. Contractors will be expected to apply these standards to their supply chains through Contractor Purchasing System Review (CPSR). We expect DCMA to change their CPSR Guidebook to that of the new requirements in FAR 15.403-1(c); therefore, contractors that continually only receive one proposal or quote in response to a competitive procurement should “beef” up their price analysis and support for a “fair and reasonable price” and in some cases obtained certified cost and pricing data.
FAR 15.403-1 Prohibition on obtaining certified cost or pricing data (10 U.S.C. 2306 A and 41 U.S.C. CHAPTER 35)
(c) Standards for exceptions from certified cost or pricing data requirements—
- (1) Adequate price competition. (i) A price is based on adequate price competition when—
- (A) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement;
- (B) Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection; and
- (C) There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the price is unreasonable must be supported by a statement of the facts and approved at a level above the contracting officer.
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