Blog

June 07, 2013

Noncompetitive Price Analyses

The techniques in 15.404-1(b)(2) are set out in order of preference. 15.404-1(b)(3) introduces this concept and says that the techniques other than (b)(2)(i) and (ii) may be used as required by the circumstances surrounding the procurement if, and only if, (i) and (ii) aren't available. So you can look at this step-by-step narrative as compliance with FAR 15.404-1(b)(3) requirements. 

The narrative is a walk-through of the techniques, explaining why one isn't available for use before you move on to the next one, and stopping at the one you're using. A brief example, on a noncompetitive service procurement: 

Competitive price analysis was not an available technique because this was a noncompetitive procurement (see Source Justification, Tab XX, for more details)[15.404-1(b)(2)(i)]. In addition, the offeror was unable to produce documentation showing that this was a price previously paid by a third party under substantially similar terms and conditions [15.404-1(b)(2)(ii)]. Because this procurement is for services, no parametric comparisons were available for analysis purposes [15.404-1(b)(2)(iii)]. The analyst was able to compare the proposed rates to substantially similar rates included on competitively published price lists [15.404-1(b)(2)(iv)]. The following documents the results of that comparative price analysis:

As you can see, this will be a template approach that can be quickly updated with details from the procurement then dropped into your price analysis. Other than arguable FAR compliance, this approach accomplishes several important goals:

  •  Reducing questions during your CPSR.
  • "Telling the story" of the procurement.
  • On The Ground Education/Training for your buyers and SCAs. 

That last one is maybe the most important in my opinion. Often times SCAs and Buyers default to whatever technique they're used to or is most commonly used in your organization without even asking questions that could move the review higher up on the prioritized list. It's important to realize that the more preferred the technique is, the easier your documentation requirements are to support the findings and the less DCMA can question your results.

Put another way - the FAR makes the things that it wants you to do easier to accomplish. Think about it from an objective evidence standpoint regarding price analyses: on a competitive lowest cost procurement, all you need are two quotes and a bid matrix and you're done. Prices previously paid, one invoice from a third party and a matrix. Parametric requires market research showing the parametric range for the commodity purchased. Once you get past (b)(2)(iii), documentation requirements increase. For (b)(2)(iv), you'll need a narrative explaining how the offeror compares to the contractors used for comparison and show how the LCAT requirements align along with copies of the lists used. With (b)(2)(v), you need to fully document how you developed your ICE AND show how that ICE is fair and reasonable to the government WITH objective evidentiary back-up before your analysis can even begin. Go lower than that and you're writing a thesis to get by without questions from the CPSR Analyst.

 

When used correctly, the step-by-step narrative requirement makes SCAs and Buyers document how they got to where they ended up, and pushes them to try a more preferred technique. The more preferred the technique is that they use, the less work required to complete the analysis. An ounce of prevention and a pound of cure.