ACC_APG_Cost_Realism_Evaluation_Information_Symposium_Slides.pdf

UNCLASSIFIED

5 March 2018 Source Selection Support

Center of Excellence ~ S3CoE U.S. Army Contracting Command

Cost Realism Evaluation Information ACC APG S3CoE SYMPOSIUM SERIES

Agenda

• Welcome from ACC APG Executive Director

• Share Ground Rules and Fundamental Principles

• Objectives o Recap outstanding action items and updates from 14 Dec 17 symposium o Provide rationale for Cost Realism Evaluation topic selection

• Provide Cost Realism Evaluation Information o Define cost realism and why we evaluate cost for realism o How we evaluate cost realism (not all methods employed) o The impacts of the Probable Cost (PC) related to the Source Selection

Decision

• Panel Member Introductions

• Panel ~ Audience Discussion

• Provide other potential FY 18 topics o Protest Trends o Solicit Industry Invitation to brief Team APG acquisition partners on

Industry perspectives related to competitive best value acquisitions

• Closing remarks

Ground Rules and Fundamental Principles Ground Rules:

• Informal Discussion - Not Binding.

• The contracting officer (KO) is ultimately responsible for communications relating to specific solicitations.

• Always rely on the solicitation language, not what you hear today.

• We are not discussing specific solicitations, awards, litigations, etc.

• The positions stated are the opinions of the participants and not that of the Army or AMC.

Fundamental Principles driving Government/Industry communication:

• Improving requirements, solicitations, evaluations and the overall process.

• Maintaining the integrity of the procurement process.

• Ensuring Fairness in Acquisitions.

• Promoting competition.

• Mission Accomplishment while protecting the taxpayer.

Outstanding Action Items Updates from 14 Dec 17

ACTION ITEM STATUS

ACC APG web-link with upcoming acquisitions and updates (via FedBizOpps).

o Web-link in progress; when established information will be posted on FedBizOpps.

Provide written Communication Rules of Engagement (ROE) guidance from AMC Legal.

o Information will be made upon completion.

Reduce time from receipt of proposals to contract awards.

Provide BAA # of white papers and BAA funding.

ACC APG aims to reduce source selection cycle times; continuous process.

o ACC APG will have to discuss with Mission Partners and Legal.

Support Non-DoD and Non-Army Past Performance references.

ACC APG will continue to support all recent and relevant Past Performance references which includes Non-DoD and Non-Army Past Performance references.

Support Virtual Industry Days .

Small Business Round Table Discussions.

o ACC APG still reviewing information.

OSBP-APG meets with Industry on the 2nd and 4th Tuesday of each month.

Legend: ACC APG Action Item Complete.

o Legend: Outstanding ACC APG Government Team Action Item.

Rationale for Topic Selection

Enhance Industry’s understanding of cost realism evaluation information and how it relates to the Source Selection Decision (Best Value).

Improve cost proposal submissions.

Mitigate protest risk related to cost realism evaluation information.

Dispel some communicated Industry perceptions related to cost realism evaluations:

• Some selected successful offerors’ evaluated cost are unrealistic.

• Some selected trade-off successful offerors’ were essentially

LPTAs.

• Some selected successful offerors’ are buying-in by having higher actual costs than proposed.

Cost Realism Defined

FAR 15.404-1(d)(1) Cost Realism Analysis:

• Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine:

o whether the estimated proposed cost elements are realistic for the work to be performed;

o reflect a clear understanding of the requirements; and o are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.

FAR 15.404-1(d)(2)

• A cost realism analysis shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror.

Cost Reimbursement Contacts and Cost Realism

Cost Reimbursement Contracts Cost reimbursement contracts circumstances do not allow the agency to define its requirements sufficiently to allow for a fixed price type contract; or uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use any type of fixed price contract (FAR 16.301(a)(1),16.301(a)(2).

There is a high risk potential in a competitive environment for underestimating proposed costs, with the expectation to recoup allowable incurred costs to perform the contract (buy-in).

Why Cost Realism Evaluated Determine the Government’s best estimate of the cost of any contract that is most likely to result from the offeror’s proposal. The probable cost shall be used for purposes of evaluation to determine the best value.

Prevent buy-in to ensure estimate for total cost for the purpose of obligating funds and establishing a ceiling that the Contractor may not exceed (except at its own risk) without the approval of the contracting officer.

How Government Performs Cost Realism

The Government determines the independent cost realism methodology when developing the source selection plan and before issuing the request for proposals (RFPs); the methodology is consistently applied to all proposals received for the specified effort.

There are differing methods used throughout ACC

APG.

The methodology employed (agency discretion) must be reasonably adequate and provide some measure of confidence that the rates proposed are reasonable and realistic in view of other cost information reasonably available to the agency as of the time of its evaluation; it need not achieve scientific certainty (GAO).

The contracting officer ensures the technical team has a sanitized cost volume of the cost proposal (labor categories, labor hours, materials, WBS, assumptions etc. without cost and pricing information) to ensure the technical approach has the commensurate cost elements for the Offeror’s proposed effort.

Cost realism analysis is conducted by evaluating the supportive data that form the bases of the individual elements of cost to determine the probable cost of the performance.

Disparities Proposed Costs vs Probable Costs?

DebriefingsEvaluation Notices

How Government Performs Cost Realism

There are various sources of information that the Government might consider as part of its cost realism evaluation:

o Offerors’ Technical approach, Cost proposal information, Government Technical Evaluation o Materials, basis of estimate, quantities, methods of procurement o Make or Buy Information o Engineering data o Salary Survey Data (BLS or others) o Overhead, Pension/Compensation plans, etc.

o DCAA audits, rate verifications o DCMA Forward Pricing Rate

Agreements/Recommended Rates o Historical data for same or similar items o Independent Government Cost Estimates

(IGCE)

Cost - Term FAR 16.306(d) Level of Effort (LOE) Example

Cost - Completion FAR 16.306(d) Example

Statistical model using direct labor rates proposed by all offerors and its respective subcontractors that proposed direct labor rates on a CPFF basis, historical labor rate data from similar services, calculating the mean average and standard deviation of each respective labor category and its corresponding direct labor rate and to subtract one (1) standard deviation (STDEV) from the mean (average) of each labor rate in order to establish a “statistical floor” from which to compare the proposed direct labor rate.

There is a requirement for delivery of five (5) armored vehicles and an Offeror proposes to use one of the five vehicles to conduct required testing. The Government technical team’s evaluation concluded that the unit tested will be destroyed, therefore the Offeror would be required to produce six (6) vehicles. If after discussions the Offeror’s proposal does not explain how one vehicle will not be destroyed or if not revised to produce 6 vehicles, the cost realism evaluation includes the cost to produce another vehicle which is the probable cost.

Probable Costs Impact Source Selection Decisions Best Value Decisions (DoD SSP 3.9) o Source Selection Authorities’ (SSAs) decisions regarding which proposals are the most advantageous to the Government shall be based on comparative assessments of proposals against all source selection criteria in solicitations.

o Recommendations, minority opinions presented to SSAs, as well as reports and analyses prepared shall be considered by SSAs. Source selection decisions shall represent SSAs’ independent judgements and provide rational basis for awards.

o SSAs’ perform assessments by comparing strengths, weaknesses and cost/price (probable costs) of competing proposals to determine which proposal represents the best values to the Government.

o SSAs are assessing the relative advantages and disadvantages provided by each proposal based on the strengths, weaknesses and cost/price.

Please send post symposium questions or comments to ACC APG S3CoE email address:

usarmy.apg.acc.mbx.acc-apg-s3coe@mail.mil All symposium questions, answers and pending responses will be updated on FedBizOpps no later than 19 Mar 18.

mailto:usarmy.apg.acc.mbx.acc-apg-s3coe@mail.mil