Contracting Test 4 Flashcards
The following are what kind of differences? Reluctance of Commercial Firms A different Culture The defense department is a final consumer Conflicting Goals Fairness Use of taxpayer money
Systemic and cultural Differences
The following are what kind of differences? Higher Performance Requirements Buying In smaller Lot Sizes Cost in Pricing Issues Liability Supportability/Obsolescence Warranties
Product Differences
a logical way to determine a minimum acceptable price
Cost (Penetration) Plus Pricing Strategy
1) a leader-follower concept, allowing competitors to set prices and then following suit, and (2) a more traditional pricing formula such as direct material and labor costs plus 40 percent.
Rule-of-thumb (myopic) pricing
is a short-term approach based on other than normal cost recovery or profit motives. It involves pricing to recover variable costs and perhaps some fixed costs to the extent that a low enough price is offered to beat the competition
Buy-in (Foot in the Door) Pricing
What is the best method of price analysis
Other proposed prices
Basic Pricing Policy
Government Price objective 1. Purchase From Responsible Sources at fair and reasonable prices 2. Price each contract separately & independently 3. Exclude contingencies
Factors of reasonable price
- Supply and demand 2. General economic Conditions 3. Competition
a possible future event or condition arising from presently known or unknown causes and the outcome cannot be determined at the present time
Contingency
How many types of contingency are there?
2 1. Contingencies can arise from permanently known and existing conditions with the effects of these conditions to be foreseeable within reasonable limits of accuracy 2. Contingencies can arise from known or unknown conditions, where the effects cannot be measured to provide equitable results to the contractor and the government
Law that requires that gov’t obtain certified cost or pricing data when Award of any negotiated contract >$750,000 Modifications Even if cost or pricing data not required on initial contract Considering positive & negative adjustments exceed $750,000
Truth in Negotiations Act (TINA) - applies in the absence of market forces
Exception to TINA
Adequate Price Competition Price set by law/reg Commercial Item* Waiver by HCA (head of contract agency)
Who creates the IGE?
The Customer
When does TINA apply?
in the absence of normal market forces
Analyzes prices in their entirety
Price Analysis Always required
Analyzes prices by reviewing the individual elements of cost (price) & the appropriateness & necessity of each element of cost
Cost Analysis Required if TINA applies
Independently reviewing cost elements to determine are they realistic for the work to be performed
Cost Realism Analysis Required on every cost type contract
Price Analysis Methods
- Comparison of prices received in response to the solicitation (other proposed prices) 2. Comparison of previously proposed prices with current proposed prices for the same or similar items 3. Parametric estimating methods 4. Comparison with competitive published price 5. Comparison with independent Government cost estimates
Preferred price analysis technique
Comparison of prices received in response to the solicitation
Cost tied to a single cost objective
Direct Cost
Cost tied to multiple contracts
Indirect Cost
Do contractors have to use a specific cost estimation method?
No, whichever method must be equitably and consistently applied
Three common cost estimating methods
- Round Table 2. Comparison 3. Detailed - best
FAR part for Market Research
FAR Part 10
How many price comparison techniques
5
FAR part concerning contract pricing (contract cost principles)
FAR part 31
Allowable costs must comply with:
1.reasonableness 2.allocability 3. standards promulgate by the CAS board, if aplicable; otherwise, generally accepted accounting principles and practices appropriate to the circumstances 4. terms of the contract and any limitations set forth in 5. FAR part 31.201-2
A cost is ______ if it is assignable or chargeable to one or more cost objectives on the basis of relative_____ or other equitable relationship
Allocable
When may a direct cost be treated as an indirect cost?
For reasons of practicality, the contractor may treat any direct cost of a minor dollar amount as an indirect cost if the accounting treatment – (1) Is consistently applied to all final cost objectives; and (2) Produces substantially the same results as treating the cost as a direct cost.
A cost is ______ if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits or other equitable relationship
Allocable
Can a cost be allocable , but not allowable?
Yes, FAR 31.201
When is a rental equivalency calculation required?
When one offeror does not use GPE
How does the customer/requiring agency develop the IGE
Visual Analysis or Value Analysis
When does TINA apply to a MOD?
When TINA applies to the base and the MOD is valued over 750K
What Factors affect comparison?
Government Unique Requirements Geographic Location Extent Competition Quantity or Size Technology Purchasing Power Market Conditions
When is cost analysis required
When TINA applies?
The sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, plus any allocable cost of money, less any allocable credits
Total Cost - sum of direct and indirect costs
Generally recognized as ordinary and necessary for the conduct of the business or contract performance
Reasonable cost
No final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose in like circumstances have been included in any indirect cost pool to be allocated to that or any other final cost objective
Double Dipping - True
Adjustments required by law or regulation in order to complete price evaluation
Price Related Factor
