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COST ANALYSIS
GUIDE
Jo
or
OFFICE OF ACQUISITION MANAGEMENT
COST ADVISORY AND FINANCIAL ANALYSIS DIVISION
WASHINGTON COST ADVISORY BRANCH
U.S. ENVIRONMENTAL PROTECTION AGENCY
401 M. STREET, S.W.
WASHINGTON, D.C. 20460
MARCH 1993
o
o
HEADQUARTERS LIBRARY
ENViftfWMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
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TABLE OF CONTENTS
FOREWORD
CHAPTER 1
CHAPTER 2
CHAPTER 3
CHAPTER 4
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
EXHIBIT F
i
COST ADVISORY BRANCH 1-7
- Types of Assistance Provided 1
- How to Request Assistance 1
- Cost Analysis 2
- Price Analysis 2
- PACER 6
- RFP Reviews 6
- Review of a SF 1412 7
- Assistance at Negotiations 7
- Special Requests 7
FINANCIAL ANALYSIS BRANCH 8
COST POLICY AND RATE NEGOTIATION BRANCH 9
COST ACCOUNTING STANDARDS 10-14
REQUEST FOR COST ANALYSIS FORM 15
REVIEW PROGRAM FOR COST ANALYSIS 16-29
SAMPLE COST ANALYSIS REPORT 30-45
SAMPLE PRICE ANALYSIS REPORT 46-79
SAMPLE PACER 80-95
SAMPLE RFP REVIEW 96-100
THE WASHINGTON COST ADVISOR 101-117
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FOREWORD
The Cost Analysis Guide is prepared by the Washington Cost
Advisory Branch of the Office of Acquisition Management, U.S.
Environmental Protection Agency.
The manual is published to provide guidance to Office of
Acquisition Management personnel engaged in the analysis and
negotiation of contract prices.
This edition supersedes the previous manual dated August 1990.
The guide has been redesigned to increase its utility. The
changes have been so extensive that the guide should be treated
as a new publication and be reread accordingly.
As additional revisions to this guide are issued, copies will be
provided to the reader along with appropriate filing
instructions.
Additional copies of this guide may be obtained from the Chief of
the Washington Cost Advisory Branch.
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Cost Advisory Branch
Types of Assistance Provided bv the Cost Advisory Branch
The Cost Advisory Branch provides the following assistance to the
contracting officers and/or contract specialists:
1. cost analysis reports;
2. price analysis reports;
3. preliminary analytical cost evaluation reports
(PACER);
4. RFP reviews;
5. participation at negotiations/discussions;
6. reviews of SF 1412 exemptions from submission of
certified cost or pricing data; and
7. any special requests for assistance from the
contracting officer and/or contract specialist
such as financial capability reviews, accounting
system reviews, etc.
Howto Request Assistance from the Cost Advisory Branch
To request cost advisory assistance, the contracting
officer/contract specialist must complete a "Request for Cost
Analysis" form and forward it to the appropriate Cost Advisory
Branch. The contracting officer/contract specialist should also
submit the following information with the request:
a copy of the cost proposal (including
subcontractor's information submitted directly to EPA
under separate cover);
a copy of the Request for Proposal (RFP) (including all
amendments);
technical evaluation, if available;
representations and certifications (prime contractor
and subcontractor(s)); and
general financial and organizational information (prime
contractor and subcontractor(s)).
It is also important that the requestor identify the type of
report desired (i.e. cost analysis, price analysis, PACER,
financial capability review, etc.). If the requestor has any
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specific area of concern or any special analysis is desired, he
or she should indicate this clearly on the request. A separate
request for analysis form should be filled out for each offerer
under an RFP unless a PACER is requested. If a PACER is
requested, only one request for analysis form should be
completed.
An example of the Washington Cost Advisory Branch's request for
analysis form is on Appendix A page l. The Cost Advisory
Branches in Cincinnati, Ohio and Research Triangle Park, North
Carolina use similar forms.
Cost Analysis/Price Analysis
FAR 15.805-1(b) states:
When cost or pricing data are required, the
contracting officer should make a cost analysis
to evaluate the reasonableness of individual
cost elements. In addition, the contracting
officer should make a price analysis to ensure
that the overall price offered is fair and
reasonable. When cost or pricing data are not
required, the contracting officer shall make a
price analysis to ensure that the overall price
offered is fair and reasonable.
FAR generally requires cost or pricing data on negotiated
contracts or modifications estimated to exceed $100,000 (FAR
15.804-2).
FAR 15.801 defines cost or pricing data as all facts existing up
to the time of price agreement that prudent buyers and sellers
would reasonably expect to affect price negotiations
significantly. Cost or pricing data are factual, not judgmental,
and therefore are verifiable. Cost or pricing data includes such
items as vendor quotations, management decisions that could have
a significant bearing on costs, etc.
FAR 15.804-6 requires that cost or pricing data be submitted on a
SF 1411. FAR 15.804-6 Table 15-2 gives instructions for the
submittal of a contract pricing proposal on a SF 1411.
cost Analysis
Cost analysis requires that each specific cost element of the
proposal be evaluated in order to form an opinion on whether the
proposed costs represent what the cost of the contract should be
assuming reasonable economy and efficiency. FAR 15.805-3 outlines
the following techniques and procedures to perform cost analysis:
a. Verification of cost or pricing data and
evaluation of cost elements, including-
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1. The necessity for and reasonableness
of proposed costs, including
allowances for contingencies;
2. Projection of the offerer's cost
trends, on the basis of current and
historical cost or pricing data;
3. A technical appraisal of the estimated
labor, material, tooling, and facilities
requirements and of the reasonableness of
scrap and spoilage factors; and
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4. The application of audited or negotiated
indirect cost rates, labor rates, and cost
of money or other factors.
b. Evaluating the effect of the offerer's current
practices on future costs. In conducting this
evaluation, the contracting officer shall ensure
that the effects of inefficient or uneconomical
past practices are not projected into the future.
c. Comparison of costs proposed by the offerer for
individual cost elements with-
1. Actual costs previously incurred by the
same offeror;
2. Previous cost estimates from the offeror
or from other offerers for the same or
similar items;
3. Other cost estimates received in response
to the Government's request;
4. Independent Government cost estimates by
technical personnel; and
5. Forecasts and planned expenditures.
d. Verification that the offerer's cost submissions
are in accordance with the contract cost
principles and procedures in FAR Part 31 and,
when applicable, the requirements and procedures
in 48 CFR Chapter 99 (Appendix B, FAR loose-leaf
edition), Cost Accounting Standards.
e. Review to determine whether any costs or pricing
data necessary to make the contractor's proposal
accurate, complete, and current have not been
either submitted or identified in writing by the
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f.
contractor. If there are such data, the
contracting officer shall attempt to obtain them
and negotiate, using them or making.satisfactory
allowance for the incomplete data.
Analysis of the results of any make-or-buy
program reviews, in evaluating subcontract costs,
The factors to be considered in determining whether a cost is
allowable include the following:
1. I reasonableness;
2. : allocability;
3. i standards promulgated by the CAS Board, if
applicable; otherwise generally accepted
accounting principles and practices appropriate
to the particular circumstances;
4. terms of the contract; and
5. any limitations of FAR Part 31.
A cost is considered reasonable if, in its nature and amount, it
does not exceed that what one would expect a prudent person to
incur in a competitive business. Reasonableness of costs must be
determined with particular care when dealing with organizations
which may not be subject to competitive restraints. What is
reasonable depends upon a variety of consideration and
circumstances. In determining the reasonableness of specific
proposal costs, the following questions are important:
1. Is the type of a cost generally recognized as
ordinary and necessary for the conduct of the
contractor's business or the contractor's
performance?
2. Have the restraints or requirements of generally
accepted business practices, arm's length
bargaining, and Federal and state laws and
regulations been considered?
3. Would a prudent business person incur the cost
under the circumstances, considering his or her
responsibilities to the Government, other
customers, the owners of the business, employees,
and the general public?
4. Does the charge constitute a significant deviation
from the contractor's established practices?
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A cost is allocable if it is assignable or chargeable to one or
more cost objectives on the basis of relative benefits received
or some other equitable relationship. A cost is allocable to a
Government contract if it:
1. is incurred specifically for the contract;
2. benefits both the contract and other work, and can
• be distributed to them in reasonable proportion to
the benefits received; or
3. is necessary to the overall operation of the
business, although a direct relationship to any
particular cost objective can not be shown.
FAR Part 31 contains a list of specific costs which are
identified as unallowable on Government contracts or which
require special attention. Examples of such costs mentioned in
FAR 31.205 include interest, entertainment, fines and penalties,
bad debt, and bid and proposal costs. All contracting personnel
should thoroughly familiarize themselves with the contents of FAR
31.
Appendix B contains the review program for performing a cost
analysis. The review program is a guide used to assure that at a
minimum certain techniques are applied to each proposal reviewed.
Since the program is a guide, it can be modified for each
specific situation encountered.
Appendix B also contains an example of a cost analysis report.
Price Analysis
FAR 15.801 defines price analysis as the process of examining and
evaluating a proposed price without evaluating its separate cost
elements and proposed profit. One or more of the following
techniques may be used to perform price analysis:
1. Comparison of proposed prices received in response
to the solicitation;
2. Comparison of prior quotations and contract prices
with current proposed prices for the same or
similar items;
3. Use of rough yardsticks (such as dollars per pound
or other units) to highlight significant
differences;
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4. Comparison with competitive published price lists,
published market prices, including discount and
rebate schedules; and
5. Comparison of proposed prices with independent
Government cost estimates.
Appendix C contains an example of price analysis report.
PACER (Preliminary Analytical Cost EvaluationReport)
A PACER is used to help the contracting officer determine the
competitive range. A PACER provides a comparison of the cost
proposals submitted under a competitive RFP (Request for
Proposal). The offerors's cost proposals are not subject to
cost analysis during a PACER review. During the PACER review,
the cost analyst determines:
1. if the offerors's proposals are mathematically
correct;
2. if adequate SF 1411s are provided;
3. if current financial statements are provided;
4. if adequate representations and certifications are
provided;
5. if RFP specified labor hours and categories are
proposed;
6. if the other direct costs are proposed in
accordance with the RFP; and
7. if adequate support is provided for the proposed
labor rates and indirect rates.
Suggested interrogatories are also provided for each offerer.
Appendix D contains an example of a PACER.
RFP Review
The Cost Advisory Branch also reviews RFPs prior to their
publication in the Commerce Business Daily. A cost analyst
provides comments which assist in clarifying ambiguous language
or correcting erroneous statements in the RFP. Normally the
review concentrates on the areas of the RFP that address cost
proposal instructions. The clarification or correction of the
RFP prior to release helps avoid the delays in the acquisition
process caused by the need for additional information, revised
proposals or solicitation amendments.
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Appendix E contains an example of a RFP review.
Review of SF1412 Exemptions from Submission of Certified Costor
Pricing Data
According to FAR 15.804-3, the contracting officer shall not
require submission or certification of cost or pricing data when
the contracting officer determines that prices are:.
1. Based on adequate price competition;
2. Based on established catalog or market prices of
commercial items sold in substantial quantities to
the general public; or
3. Set by law or regulation.
To qualify for an exemption under 2 or 3 above, the offerer must
ordinarily claim it on standard Form 1412, Claim for Exemption
from Submission of Certified Cost or Pricing Data.
Cost Advisory Branch personnel are experienced in reviewing
claims for exemption from submission of certified cost or pricing
data.
Assistance at Negotiations/Discussions
Cost Advisory Branch personnel are available to assist the
contracting officer/contract specialist during discussions and
negotiations. They can help the contracting officer communicate
cost recommendations to the contractor. When requesting such
assistance, please give the analyst sufficient notice so they can
adjust their schedule to attend.
Special Recruests from the Contracting Officer/Contract Specialist
Cost Advisory personnel can perform special reviews as requested
by the contracting officer/contract specialist. Examples of such
reviews are financial capability reviews, accounting system
reviews etc.
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Financial Analysis Branch
The Financial Analysis Branch performs the following functions:
1. Financial Monitoring Reviews;
2. Contractor Purchasing System Review Coordination;
3. Final Audits;
4. Ad hoc Contract Management Assistance; and
5. Audit Resolution Coordination for OAM.
For more information on this branch, please contact Dale
Roberson, Chief of the Financial Analysis Branch on (202) 260-
3194.
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The cost Policy and Rat. Negotiation Branch:
1. negotiates indirect cost rates;
2' 8S£r(BS5 fen?1 —**-™tl~ contracting
3. develops cost policy;
4. reviews CAS adequacy and conducts compliance reviews;
5.
«- insSance'cosir*3 *°r Sensation,
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Cost Accounting Standards
A Cost Accounting Standard is a statement formally issued by the
Cost Accounting standards Board that:
1. states a principle or principles to be followed;
2. establishes practices to be applied; and
3. specifies criteria to be employed in selecting from
. alternative principles and practices
in estimating, accumulating and recording costs of contracts
subject (to the rules of the Cost Accounting Standards Board. The
objective of a cost accounting standard is to provide more
comparability among government contractors whose circumstances
are similar by increasing the degree of uniformity in their cost
accounting practices. The Cost Accounting Standard Board has
issued nineteen standards:
CAS 401-Estimating, Accumulating/ Reporting Costs. The
purpose of this standard is to achieve consistency in the cost
accounting practices used by a contractor in estimating costs for
their proposal with those the contractor uses in accumulating and
reporting their costs during contract performance.
CAS 402-Allocating Costs Incurred for Same Purpose. The
purpose of this standard is to insure that each type of cost will
be allocated to a contract or final cost objective only once and
on only one basis. The criteria for allocation should be the
same for similar cost objectives.
CAS 403-Allocation of Home Office Expenses to Segments. This
standard establishes criteria for the allocation of the expenses
of a home office to the segments of the organization such as
plants or other subdivisions reporting directly to the home
office.
CAS 404-Capitalization of Tangible Assets. This standard
requires contractors to establish and adhere to policies of
tangible asset capitalization that satisfy various criteria set
forth in the standard.
CAS 4OS-Accounting for Unallowable Costs. This standard
establishes guidelines for the identification of unallowable
costs and the treatment accorded such costs.
CAS 406-Cost Accounting Period. This standard provides
criteria for the selection of the time periods to be used as cost
accounting periods for contract cost estimating, accumulating and
reporting.
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CAS 407-Standard Coata. This standard provides for the use of
standard costs for estimating, accumulating and reporting direct
labor and material costs. It also provides criteria for the
establishment of standards, accumulation of standard costs, and
accumulation and disposition of variances from standard costs.
CAS 4OS-Compensated Personal Absence. This standard is designed
to insure that the costs of the compensated personal absences are
assigned to the cost accounting period in which the related labor
is performed and which the related wage or salary costs are
recognized.
CAS 409-Depreciation of Tangible Capital Assets. This standard
provides criteria for assigning depreciation costs of tangible
capital assets to the proper cost accounting period. The
standard is based on the concept that depreciation costs should
be a reasonable measure of the service life of a particular
asset.
CAS 410-Allocation of G&A Expenses. This standard provides
criteria for the allocation of the cost of management and
administration of a business unit based on a beneficial and
causal relationship to final cost objectives.
CAS 411-Acquisition Costs of Material. This standard establishes
criteria for the accounting for acquisition costs of material.
The standard includes provisions on the use of material inventory
records to determine acquisition costs. It does not cover
accounting for the acquisition costs of tangible capital assets
or accountability for Government-furnished materials.
CAS 412-Fension Coat. This standard establishes the components
of pension costs, the basis for measuring the amounts of such
costs and the criteria for assigning the costs to cost accounting
periods.
CAS 413-Adjustment and Allocation of Pension cost. This
standard provides guidance for adjusting pension cost by
measuring actuarial gains and losses and assigning such gains and
losses to cost accounting periods. The standard also provides
the bases for allocating pension costs to segments of an
organization.
CAS 414-Cost of Money as an Element of the cost of Facilities
Capital. This standard provides for the explicit recognition of
the cost of money for facilities capital as an element of
contract cost.
CAS 415-Accounting for the cost of Deferred Compensation. This
standard is applicable to the cost of all deferred compensation
except for compensated personal absences and pension plan costs
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covered in CAS 408 and 412 respectively.
CAS 416-Accounting for Insurance Costs. This standard provides
the criteria for the measurement of insurance costs, assignment
to cost accounting periods and allocation to cost objectives.
CAS 417-Cost of Honey as an Element of the Cost of capital Assets
under Construction. This standard provides guidance for the
measurement of the cost of money as an element of the cost of
capital assets under construction.
CAS 418-Allocation of Direct and Indirect Costs. This standard
governs the classification of direct and indirect costs,
accumulation of indirect costs, and selection of bases for
allocating indirect costs.
CAS 420-Accounting for Independent Research and Development
(IR6D) Costs and Bid and Proposal (B&P) Costs. This standard
requires that IR&D and B&P costs be accumulated by individual
projects and allocated according to the same base used to
allocate general and administrative expenses under CAS 410.
The following categories of contracts and subcontracts are exempt
from all CAS requirements:
1. Sealed bid contracts;
2. Negotiated contracts and subcontracts not in excess
of $500,000;
3. Contracts and subcontracts with small businesses;
4. Contracts and subcontracts with foreign governments;
5. Contracts and subcontracts in which the price is set by
law or regulation;
6. Contracts and subcontracts when the price is based on
established catalog or market prices of commercial
items sold in substantial quantities to the general
public;
7. Contracts and subcontracts with educational
institutions other than those to be performed by
Federally Funded Research and Development Centers;
8. Contracts awarded to labor surplus area concerns
pursuant to a labor surplus area set-aside;
9. Contracts and subcontracts awarded to the United
Kingdom contractor for performance substantially in the
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United Kingdom;
10. Contracts and subcontracts to be executed and performed
entirely outside the United States, its territories,
and possessions; and
11. Firm-fixed price contracts and subcontracts awarded
without submission of any cost data; provided that the
failure to submit such data is not attributable to a
waiver of the requirement for certified cost or pricing
data.
Negotiated contracts not exempt in accordance with the above
requirements are subject to CAS. A CAS-covered contract may be
subject to full or modified coverage. The rules for determining
whether full or modified coverage applies are:
a. Full Coverage. Full coverage requires that the business
unit comply with all of the CAS in effect on the date of the
contract award and with any CAS that become applicable because of
later award of a CAS-covered contract. Full coverage applies to
contractor business units that:
1. Receive a single CAS-covered contract award of $10
million or more;
2. Received $10 million or more in CAS-covered
contract awards during its preceding cost
accounting period; or
3. Received less than $10 million in CAS-covered
contract awards during its preceding cost
accounting period but such awards were 10 percent
or more of total sales.
b. Modified Coverage. Modified CAS coverage requires only
that the contractor comply with CAS 401 and 402.
Modified coverage, rather than full, may be applied to:
1. A covered contract of less than $10 million
awarded to a business unit that received less than
$10 million in CAS-covered contracts in the
immediately preceding cost accounting period if
the sum of such awards was less than 10 percent of
the business unit's total sales during that
period.
2. If any one contract is awarded with modified CAS
coverage, all CAS-covered contracts awarded to
that business unit during that cost accounting
period must have modified coverage with the
following exception: if the business unit receives
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a single CAS-covered contract award of $10 million
or more, that contract must be subject to full CAS
coverage. Thereafter, any covered contract
awarded in the same cost accounting period must
also be subject to full CAS coverage.
3. A contract awarded with modified CAS coverage
shall remain subject to such coverage throughout
its life regardless of changes in the business
unit's CAS status during subsequent cost
accounting periods.
Subcontracts. Subcontract awards subject to CAS
require the same type of CAS coverage as would prime
contracts awarded to the same business unit.
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a EPA
UMTiD STATES ENVlRONMINTAt MIOTECTlON AGENCY
WASHINGTON. OC20W
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US Environmental Protection Agency
Procurement ft Contract! Management
Division (PM-214-F) '
Cost Review ft Poky Brandt
Washington. DC 20460
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BEQUEST FOR COST ANAl v<;.c
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Soon MoeaivM? if "Yn." fv HOW Muen'
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15
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A.
B.
C.
D.
D.I
D.2
D.3
D.4
D.5
E.
E.I
E.2
E.3
P.
Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
PURPOSE AND SCOPE
REFERENCES
PRELIMINARY REVIEW STEPS
DETAILED REVIEW STEPS
Direct Labor
Indirect Costs
Other Direct Costs
Facilities Capital Cost of Honey
Subcontracts
ADDITIONAL DETAILED REVIEW STEPS
Cost Accounting Standards
Accounting System
Financial Capability
CONCLUDING STEPS
HQTSt This program is intended to provide a logical sequence
to the cost analysis effort. This program does not replace
individual judgement. The review steps in the program are
intended as general guidance and should be expanded or eliminated
as necessary to fit the current analysis. Those steps not
required should be marked "hot applicable" (N/A).
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Environmental Protection Agency
Cost Advisory Branch
Review Program for cost Analysis
*
A. PURPOSE AND SCOPE
1. The purpose of cost analysis is to:
a. Verify cost or pricing data and
evaluate cost elements, including-
(1) The necessity for and reasonableness
of proposed costs, including
allowances for contingencies;
(2) The projection of the offerer's cost
trends, on the basis of current and
historical cost or pricing data;
(3) A technical appraisal of the estimated
labor, material, tooling, and facilities
requirements and of the reasonableness of
scrap and spoilage factors; and
(4) The application of audited or negotiated
indirect cost rates, labor rates, and cost
of money or other factors.
Evaluate the effect of the offerer's current
practices on future costs. In conducting this
evaluation, analyst shall ensure that the effects
of inefficient or uneconomical past practices are
not projected into the future.
Verify that the offerer's cost submissions
are in accordance with the contract cost
principles and procedures in FAR Part 31 and,
when applicable, the requirements and procedures
in 48 CFR Chapter 99 (Appendix B, FAR loose-leaf
edition), Cost Accounting Standards.
Determine whether any costs or pricing
data necessary to make the contractor's proposal
accurate, complete, and current have not been
either submitted or identified in writing by the
contractor. If there are such data, the analyst
shall attempt to obtain them and use them or make
satisfactory allowance for the incomplete data.
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Environmental Protection Agency
Coat Advisory Branch
Review Program for Coat Analysis
2. The cost analyst is expected to exercise professional
judgement, considering vulnerability and materiality, in
determining the scope of the review.
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Environmental Protection Agency
Cost Advisory Branch
Review Program for cost Analysis
B. REFERENCES
1. FAR 15.805-3 Cost Analysis
2. FAR 31 Contract Cost Principles and Procedures
3. 48 CFR Chapter 99 (Appendix B, FAR Loose-leaf edition)
Cost Accounting Standards
4. EPAAR 1515.970-2
4. DCAA Contract Audit Manual
5. Armed Services Pricing Manual
6. The Washington Cost Advisor Vol.1 Nos.1-4 (Appendix F)
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Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
Work Paper
Reference
PRELIMINARY REVIEW STEPS
1. Review request for cost analysis and
determine if the requestor has provided
the following information. If it has not
been provided, request the information.
a. A copy of the cost proposal
(including subcontractor's information
submitted directly to EPA under
separate cover).
b. A copy of the Request for Proposal
(RFP) (including all amendments)
c. A technical evaluation, if available
If technical evaluation is not
available, qualify the report
accord ing ly.
d. Representations and certifications
(prime contractor and subcontractor(s))
e. General financial and organizational
information (prime contractor and
subcontractor(s))
2. Determine if the requestor has any specific
areas of concern and acknowledge the request
for cost analysis. Provide an estimated
completion date if possible.
3. Determine if a revised proposal is pending.
If a revised proposal is pending, discuss with
the requestor whether to wait and review the
revised proposal.
4. For Washington staff only, determine if a PACER
(Preliminary Analytical Cost Evaluation Report)
review was performed.
a. If a PACER was prepared:
(1) Review the PACER to determine
there were any deficiencies
and/or errors in the proposal.
if
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Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
Work Paper
Reference
b. If a PACER was not prepared:
(1) Reconcile the proposal to determine
if it has been submitted in
accordance with the RFP
instructions.
(2) Determine if any FMR reviews have
been performed at the prime
contractor or any of the
subcontractors.
i. If no FHRs have been
performed, state this in your
report.
ii. If a FMR review has been
performed:
a. Review the FMR and
briefly summarize the
results of the review
and the resolution of
any findings.
b. Contact the financial
analyst and determine
the status of the
issues. If any issues
are outstanding, include
a copy of the FMR with
your cost analysis
report.
5. Determine the adequacy of the proposal in
reference to FAR 15.804.6 Table 15-2 which
gives instructions for the submittal of a
contract pricing proposal on a SF 1411.
6. Verify computations and footings in the
proposal.
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Environmental Protection Agency
Cost Advisory (Branch
Review Program for Cost Analysis
Work Paper
Reference
7. If reviewing a revised proposal, analyze and
explain in detail significant differences
between revised and original proposals.
Significant change^ should be noted in the
report.
8. Determine if the cost analysis can be
performed in-house based on available cost
and pricing data.
a. If the review can be performed using
in-house data, go to the detailed review
steps in Section D.
b. If the data in the files is insufficient or
if the analyst determines that a preaward
review is necessary, request an assist audit
from the cognizant audit agency.
(1) Specifically address any areas of
special concern
(2) Stress the need in the request for
'•should cost". Request that any
understated costs be reported and
monetized.
(3) Upon receipt of the audit report,
determine if the audit addressed
your areas of concern adequately.
(4) Review all audit reports for
any issues to be referred to the
Cost Review and Rate Negotiation
Branch as potential FACp issues.
If any issues are identified,
prepare a memo from the cost
analyst through the cost advisory
branch chief briefly describing
the issue. Include a copy of
the audit report. Also forward
a copy of the memo to the
Financial Analysis Branch.
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Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
(5) Review all audit reports for
any issues to be referred to the
Financial Analysis Branch for
follow up on future FMR reviews.
If any issues are identified,
prepare a memo from the cost
analyst through the cost advisory
branch chief briefly describing
the issue. Include a copy of
the audit report. Also forward
a copy of the memo to the cost
Review and Rate Negotiation
Branch.
Work Paper
Reference
DETAILED REVIEW STEPS
1. Direct Labor
a. Determine the basis of the proposed
labor rates (i.e. category average,
individual, weighted average, straight
average, etc.) including the effective
date.
b. Verify the proposed labor rates with
the cognizant audit agency verbally or
in writing, data in EPA files, or payroll
information submitted by the contractor.
c. Determine the basis (i.e. common review
date, employee anniversary date, etc.)
and reasonableness of the proposed labor
escalation.
d. Determine where the contractor proposes
and recovers their indirect time (i.e.
vacation, sick, holidays, etc.).
e. Review the contractor's policies and
procedures relative to work performed
by exempt employees in excess of 8
hours per day or 40 hours per week.
23
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Environmental Protection Agency
Cost Advisory Branch
Review Program for cost Analysis
Work Paper
Reference
(1) Determine whether the contractor
is recording all hours worked by
exempt employees. Acceptable
accounting methods for accounting
for excess hours worked by exempt
employees include:
- Computing a separate average
labor rate for each labor
period, based on the salary
paid divided by the total
hours worked during the
period, and distributing
the salary cost to all cost
objectives worked on during
the period based on this
rate.
- Determining the pro rata
allocation of total hours
worked during the period
and distributing the
salary cost using the pro
rata allocation.
Computing an estimated hourly
rate for each employee for
the entire year based on the
total hours the employee
expected to work during the
year and distributing the
salary costs to all cost
objectives worked at the
estimated hourly rate. Any
variance between the actual
salary costs and the amount
distributed is charged/
credited to overhead.
(2) Determine whether the contractor
is allocating salary costs paid
to exempt employees to all effort
performed in accordance with
FAR 31.201-4 and CAS 418 (if
applicable).
24
-------
Environmental Protection Agency
Cost Advisory Branch
Review Program for cost Analysis
£. Compute labor costs based on the audit-
determined labor rates and the RFP-
specified labor hours.
Work Paper
Reference
Indirect Costs
a. Determine the basis of the proposed
indirect cost rates.
b. Verify the proposed rates. Primary
verification is a forward pricing
agreement with the cognizant audit
agency. If a forward pricing
agreement is not available, determine
the reasonableness of the proposed
rates based on actual rates, budgets,
input from the cognizant auditors, etc.
c. Determine what impact the current
proposal would have upon the proposed
indirect rates.
d. Determine whether it is prudent to
recommend a indirect rate ceiling
based on FAR 42.707.
e. Compute the impact of the recommended
indirect rates on the proposed costs.
Other Direct Costs
a. Review the proposed other direct costs.
If the ODCs are RFP specified, determine
if any of the ODC items are normally
included in the contractor's indirect
expense pool. If the RFP specified ODCs
are normally charged indirectly, question
the corresponding RFP specified ODCs.
Recommend a clause be inserted in the
contract that states these OCS costs are
charged indirectly. If the ODCs are not
RFP specified, verify the proposed costs
to vendor quotes, source documents, etc.
;
25
-------
Environmental Protection Agency
cost Advisory Branch
Review Program for cost Analysis
For consultant costs, obtain the names
the individuals. Verify the proposed
consultant rates to the signed agreements
including the hourly rates. Determine
if the proposed rate is an experienced
rate or a quoted rate.
Compute the impact'of the recommended
unit rates on the proposed other direct
costs.
Work Paper
Reference
of
4. Facilities Capital Cost of Money (FCCOM)
a. Determine if the contractor has proposed
facilities capital cost of money.
(1) If the contractor has proposed FCCOM:
i. Verify the FCCOM rates.
ii. Verify that the FCCOM rate
is applied to the appropriate
base.
iii. Recommend a fee that:
a. Based on EPAAR 1515.970-2
(a)(2), does not include
FCCOM as part of the cost
base for the computation
of profit or fee.
b. Based on EPAAR 1515.970-2
(a)(3), is reduced by an
amount equal to the amount
of FCCOM allowed.
(2) If the contractor has not proposed
FCCOM:
i. Recommend FAR clause 52.215-31
which waives the right to claim
FCCOM be inserted in the
resulting contract/subcontract.
26
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Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
Work Paper
Reference
5.
Subcontracts
a. Review the proposed subcontract costs in
the same manner as the prime contractor.
b. Review the subcontractor's proposed fee.
Provide a copy of the weighted guidelines
form with your cost analysis report.
c. Review the proposed subcontractor's
accounting system, financial capability,
and CAS coverage.
d. Determine if the subcontractor will allow
the release of its confidential business
information to the prime contractor. If
the subcontractor objects to the release
of its confidential business information
to the prime, state this in your report.
E. ADDITIONAL DETAILED REVIEW STEPS
1. Cost Accounting Standards
a. Determine if the contract is subject to
Cost Accounting Standards under
48 CFR Chapter 99 (Appendix B,
FAR loose-leaf edition) Subpart
9903.201-1 and FAR 52.230-1.
b. If the contract is subject to
CAS, determine whether the contract
is subject to full or modified
coverage under 48 CFR Chapter 99
(Appendix B, FAR loose-leaf edition)
Subpart 9903.201-2.
(1) If the contract is subject to
full coverage, recommend that
the FAR clauses 52.230-2 "Cost
Accounting Standards" and
27
-------
Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
Work Paper
Reference
c.
52.230-5 "Administration of
Cost Accounting Standards"
be inserted in the resulting
contract/subcontract.
(2) If the contract is subject to
modified coverage, recommend that
the FAR clauses at 52.230-3
"Disclosure and Consistency of
Cost Accounting Practices" and
52.230-5 "Administration of Cost
Accounting Standards" be inserted
in the resulting contract/subcontract.
(3) Contact the cognizant audit agency
regarding the contractor's
compliance.
(4) Notify the requestor of any
noncompliance issues and their
impact on this procurement.
If the contract is not subject to CAS,
notify the requestor of this fact.
Accounting System
a. Determine if the contractor has an
acceptable accounting system for
government contracts using SF 1408
as a guideline.
b. If a determination of the adequacy of
the accounting system can not be
made, recommend an accounting system
review be performed.
Financial Capability
a. Determine if the offerer is financially
capable to perform the contract.
28
-------
Environmental Protection Agency
Cost Advisory Branch
Review Program for Cost Analysis
Work Paper
Reference
F. CONCLUDING STEPS
1. Index and cross reference work papers.
2. Draft report and cross reference the file
copy of the report to the work papers.
3. Include a Contracting Officer Response
Sheet with the report.
4. Include a copy of assist audit report(s)
with the report.
5. Include the instructions and form for
reporting the resolution of preaward audits
to the IG and EPA management with DCAA assist
audit reports.
6. For Washington staff only, complete the
Assignment Control Sheet and give it to the
secretary for input into the subcontractor
database.
7. Prepare file and submit both the file and
report to the supervisor.
29
-------
DATE:
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
February 11, 1993
SUBJECT: Cost Advisory Report on RFP xxxxxxx-xx Submitted by
Contractor A
FROM: John Doe, Auditor
Washington Cost Advisory Branch (PM-214-F)
THRU: John Smith, Chief
Washington Cost Advisory Branch (PM-214-F)
TO: Richard Jones, Contract Specialist
Administrative Contracts Procurement Section (PM-214-F)
The results of our review of the subject contractor's proposal
dated December 20, 1992 are summarized below. (See Exhibits A
through C.)
Contractor A
xxxxxxx-xx
Summary of Cost Analysis
Contractor's
Proposal
BASE PERIOD
Total Estimated Cost $1,577,554
Fixed Fee 126,200
WCAO Recommendations*
For For Non-
Acceptance Acceptance
$1,571,986 $ 5,568
Total Cost Plus Fee $1,703,754
OPTION PERIOD I
Total Estimated Cost $1,606,659
Fixed Fee 128,529
$1,600,820 $ 5,839
Total Cost Plus Fee $1,735,188
OPTION PERIOD II
Total Estimated Cost $1,636,701
Fixed Fee 130,928
$1,630,545 $ 6,156
Total Cost Plus Fee $1,767,629
30
-------
Contractor's
Proposal
SUMMARY
Total Estimated Cost $4,820,914
Fixed Fee 385,657
WCAO Recommendations*
For For Non-
Acceptance Acceptance
$4,803,351 $ 17,563
Total Cost Plus Fee $5,206,571
* We were not provided a copy of the technical evaluation report.
Therefore, our recommendations are qualified to the extent that
additional costs may be questioned as a result of the quality and
quantity of proposed costs.
We have used LOTUS 123 software for our exhibits. Although,
amounts are shown without decimals, LOTUS does remember amounts up
to several decimals and rounds accordingly. For this reason
amounts may be off by a few dollars due to rounding.
Direct Costs
The direct labor hours proposed by the prime contractor and
subcontractors were in accordance with the instructions provided by
the RFP.
The other direct costs proposed by the prime contractor and
subcontractors were in accordance with the instructions provided by
the RFP.
Comments
Subcontractor A objects to the release of their labor and indirect
rate information to the prime contractor.
Neither Contractor A nor Subcontractor A have proposed facilities
capital cost of money as an allowable element of cost. We
recommend a waiver of facilities capital cost of money as presented
in FAR 52.215-31 be inserted in the resulting contract and
subcontract .
We could not determine if Subcontractor B proposed facilities
capital cost of money as an allowable element of cost. We
recommend that the contracting officer determine whether
Subcontractor B has proposed facilities capital cost of money. If
Subcontractor B has not proposed facilities capital cost of money,
we recommend that a waiver of facilities capital cost of money be
inserted in the resulting subcontract. If Subcontractor B has
proposed facilities capital cost of money, we recommend that the
contracting officer obtain supporting documentation for the
proposed rate..
31
-------
Both Contractor A and Subcontractor A maintain an accounting system
which is considered adequate for government cost-type contracts.
We could not determine if Subcontractor B has an acceptable
accounting system. However, since this is a fixed rate
subcontract, we feel an accounting system review is unnecessary.
Both Contractor A and Subcontractor A have the necessary financial
capability to perform this contract.
Subcontractor B did not provide financial statements. Therefore,
we could not determine Subcontractor B's financial capability to
perform this subcontract. We recommend that the contracting
officer ask Subcontractor B to submit financial statements.
Contractor A is subject to full CAS coverage. We recommend FAR
clause 52.230-2 "Cost Accounting Standards11 and FAR clause 52.230-5
"Administration of Cost Accounting Standards" be inserted in the
resulting contract.
DCAA states that Subcontractor A is not subject to CAS coverage.
However, the subcontractor's SF1411 and representations and
certifications state the resulting subcontract will be subject to
CAS coverage. Therefore, we recommend that the contracting officer
discuss during negotiations whether Subcontractor A is subject to
CAS coverage.
Subcontractor B is not subject to CAS coverage. They certify as a
small business.
The results of our review of the subject proposal are based upon
rate requests provided by the cognizant DCAA offices for Contractor
A and Subcontractor A and a desk review of Subcontractor B's
information.
The amounts above reflect our best estimate of what contract
performance should cost assuming reasonable economy and efficiency.
This contract has a potential for a three year period of
performance. All of our recommendations are qualified to the
extent that we are unable to predict what impact the changing
economy will have on the estimated costs over the next three years.
If you have any questions regarding this report or if we can be of
further assistance, please contact John Doe on FTS (202) 260-xxxx.
32
-------
As required by FAR Part 15.808(b) , P&CMD Acquisition Handbook Units
3 (PAR. 6) and 4 (PAR. 4), please furnish us a copy of the Summary of
Negotiations after contract award. Please advise us if no contract
award is made. If this offerer is not awarded this contract,
please advise the section head of Washington Cost Advisory
Operations via the telephone that this offeror will not be awarded
this contract. Also, we have enclosed a contracting officer's
response sheet. Part of our performance evaluation depends on the
responses we receive from the contracting officers/specialists we
service. Please fill out this form and return it to Don Hambric
(PM-214-F).
Enclosures: Contracting Officer's Response Sheet
33
-------
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45
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Price Analysis on
Proposals Submitted by
Offerer A, Offerer B,
Offerer C, Offerer D,
Offerer E, Offerer F,
Offerer G, and Offerer H
Wxxxxxx-xx
Prepared By:
Dated:
Washington Cost Advisory Operations
April 15, 199x
46
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April 15, 199x
MEMORANDUM
SUBJECT; Price Analysis on Proposals Submitted by
Offerer A, Offerer B, Offerer C, Offeror D, Offerer E,
Offerer F, Offeror G, and Offeror H for Wxxxxxx-xx
FROM: John Doe, Auditor
Washington Cost Advisory Operations (PM-214-F)
THRU: James Doe, Chief
Washington Cost Advisory Operations (PM-214-F)
TO: Tony Doe, Contract Specialist
Administrative Contracts Procurement Section (PH-214-F)
In response to your request, dated March 23, I99x, we have
performed a price analysis of the eight price proposals in response
to the subject RFP. The offerers price proposals including amounts
contained in this report have not been subjected to cost analysis.
More specifically we express no opinion as to the accuracy of the
proposed prices. The results of bur price analysis of the subject
offerers proposals are discussed below and summarized as follows:
Contractor
Price
Proposed
Offeror A
Offeror B
Offeror C
Offeror C
Offeror D
Offeror E
Offeror F
Offeror G
Offeror H
$12,831,600
10,412,725
(Peak) 15,492,800
(Off) 11,835,600
10,155,528
11,982,000
9,022,200
8,386,963
12,876,152
WCAO
Calculation*
$14,831,600
10,412,725
17,092,800
13,435,600
10,156,328
11,982,000
9,022,200
8,388,000
12,789,860
Difference
($2,000,000)
-0-
(1,600,000)
(1,600,000)
(800)
-0-
-o-
(1,037)
86,292
( ) Indicates an upward adjustment
*The results of the government technical report were not made
available for incorporation into this report. We were unable to
reach a definitive conclusion regarding the acceptability of all
quantitative and qualitative aspects of the proposal by other
available audit procedures. Accordingly, the results of this
review are qualified to the extent that other costs may be
questioned as a result of the Government technical evaluation.
47
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Our review was limited to the following:
RFP Compliance
(a) Determining if the offerers proposals are
mathematically correct.
(b) Determining if adequate SF 1411s are provided.
(c) Determining if current financial statements are
provided.
(d) Determining if RFP specified labor hours and categories
are proposed.
(e) Determining the basis of proposed burdened labor rates.
(f) Determining if adequate support exists for base labor
rates.
(g) Determining if adequate support exists for indirect
rates.
(h) Determining if other direct costs are proposed in
accordance with the RFP.
(i) Commenting on other pertinent contract issues (i.e.
FCCOH, CAS, accounting system, etc.).
Comparative Price Analysis
(1) Comparative analysis of proposed prices and WCAO
determined prices.
(2) Comparative analysis of proposed burdened labor rates
for each RFP specified category, for the base period.
(3) Comparative analysis of proposed and average proposed
burdened labor rates for each RFP specified category,
for all periods.
Based on the above review we have identified potential problems
and prepared cost interrogatories for each offerer.
The results of our review of the individual offerers are as
follows:
l. Offerer A RFP Compliance. The difference of ($2,000,000)
between the price proposed and WCAO's calculation is due to
Offerer A's failure to propose RFP specified ODCs. No other
adjustments were made to the offerer's price proposal.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. Offerer A's price proposal is
mathematically correct.
b. Adequate SF 1411s. Offerer A has failed to provide
adequate SF 1411s or SF 1412s. It is Offerer A's contention that
they are exempt from providing detail cost data based on FAR
48
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15.804—3 Exemptions from or waiver of submission of certified
cost and pricing data.
Offerer A states they are exempt "under the following two
exceptions that appear in FAR section 15.804-3:
(1) Adequate competition; and
(2) Established catalog or market prices of commercial
items sold in substantial quantities to the general
public."
Based on WCAO's interpretation of this clause there is no
exemption for "adequate competition." Further, the offeror fails
the test for exemption from "adequate price competition," since
this procurement will not be awarded based on price competition.
Section M.4 of the RFP states, "for this solicitation, technical
quality is more important than cost or price."
Since the offeror failed to provide adequate SF 1412s we can not
determine exemption based on "established catalog or market
prices..."
Based on the above WCAO recommends the offeror be required to
submit a completed SF 1411 and supporting data, as required by
section L.16(b)(l) of the RFP.
c. Current Financial Statementa. Offeror A stated, "they do
not have audited financial statements." The RFP does not require
audited financial statements. It does, however, require "a
current financial statement, including a balance sheet and
statement of profit and loss for the last completed fiscal
period."
Based on the above WCAO recommends the offeror be required to
submit current financial statements, as required by section
L.l6(b)(1)(iii) of the RFP.
d. RFP Specified Labor Hours and Categories. Offeror A has
proposed the RFP specified labor hours and categories.
e. Burdened Labor Rates. Offeror A failed to provide the
basis of their proposed burdened labor rates. Accordingly, WCAO
is unable to determine the individual components that were used
to develop the proposed rates.
Based on the above WCAO recommends the offeror be required to
indicate the basis of their proposed burdened labor rates.
f. Base Labor Rates. Offeror A failed to provide the
detailed support for base labor rates.
49
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Offerer A has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offeror be required to
submit supporting data for their direct labor rates, as required
by section L.l6(b)(2) of the RFP.
g. Indirect Rates. Offeror A failed to provide detailed
cost data on their indirect rates.
Based on the above WCAO recommends the offeror be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. Other Direct Costs (ODCs). Offeror A has failed to
include the RFP specified ODCs in their price proposal. WCAO has
included the RFP specified amounts for ODCs in our calculation.
Based on the above WCAO recommends the offeror be required to
propose ODCs in accordance with the RFP.
i. Other Matters.
(1) Facilities Capital Cost of Money (FCCOM). The
offeror has not proposed FCCOM, as a separate line item. We can
not determine if FCCOM is included in the proposed burdened labor
rates.
Based on the above WCAO recommends the offeror state whether they
have or have not proposed FCCOM.
(2) Cost Accounting Standards. Offeror A stated they
are not performing any CAS-covered national defense contracts or
subcontracts.
Based on the above Offeror A is not a CAS-covered concern.
(3) Accountiaa System. We are unable to determine if
the offeror has an acceptable accounting system.
Based on the above WCAO recommends the offeror be requested to
provide a narrative description of their accounting system. This
narrative should fully explain the offerer's time keeping system
and job (project) cost accounting system. Further, they should
provide a listing of the ledgers and journals included in these
systems along with a brief description of each.
(4) Financial Capability, since the offeror has failed
to provide current financial statements we can not comment on
financial capability.
Based on the above WCAO recommends the offeror be required to
50
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submit current financial statements, as required by section
L.16(b)(1)(iii) of the RFP.
(5) Representations. Certifications and Other statements
of Offerer. Offerer A failed to complete Section K.23(l) and
(m), of the RFP.
Based on the above WCAO recommends the offerer be required to
complete Section K, of the RFP.
2. offerer B RFP compliance. WCAO has made no adjustments to
the offerer's price proposal.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy.
mathematically correct.
Offerer B's price proposal is
b. Adequate 8F 1411. Offerer B has provide a SF 1411 for
the total proposed contract period, for themselves and their
proposed subcontractor XYZ. Offeror B has also provided
schedules identifying cost or pricing data for each proposed
period.
c. Current Financial Statements. Offeror B has provided
financial statements for the twelve months ending September 30,
1991. The proposed subcontractor XYZ did not provide financial
statements.
Since XYZ's proposed subcontract price is over $1,000,000 WCAO
recommends they be required to submit current financial
statements, as described in section L.16(b)(1)(iii) of the RFP.
proposed the RFP specified labor hours and categories.
e. Burdened Labor Rates. Offeror B has provided detailed
support on the method used in computing their proposed burdened
labor rates. XYZ has failed to provide detailed support for
their burdened labor rate. Accordingly, WCAO is unable to
determine the individual components that were used to develop the
proposed rates.
Based on the above WCAO recommends the subcontractor be required
to indicate the basis of their proposed burdened labor rates.
f. Base Labor Rates. Offeror B has provided partial support
for their base labor rates. However, they did not provide the
detailed individual or category rate data. XYZ failed to provide
the detailed support for base labor rates.
51
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Offerer B has indicated that clerical hours are estimated to be
two percent of direct hours. Offerer B has factored $.2922 per
direct hour into their proposed rates. This rate was computed as
follows:
(800 hrs. x $14.61 - $11,688)/40,000 hrs. = $.2922 per hr
Offerer B has not specifically addressed project management in
their cost proposal..
Based on the above WCAO recommends the offerer and their proposed
subcontractor be required to submit supporting data for their
direct labor rates, as required by section L.16(b)(2) of the RFP.
g. Indirect Rates. Offerer B has provided detailed pool and
base data for their proposed indirect rates.
XYZ failed to provide.detailed indirect rate data.
Based on the above WCAO recommends the proposed subcontractor be
required to submit detailed supporting computations for their
indirect rates as required by section L.16(b)(3) of the RFP.
h. Other Direct Coats (OPCs). Offerer B has proposed ODCs
in accordance with the RFP. WCAO noted no ODCs were allocated to
the proposed subcontractor.
i. Other Matters.
(!)• Facilities Capital Cost of Money (FCCOM1. The
offeror has not proposed FCCOM.
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOM be inserted into any resultant
contract.
XYZ has not proposed FCCOM, as a separate line item. We can not
determine if FCCOM is included in the proposed burdened labor
rates.
Based on the above WCAO recommends the offeror state whether they
have or have not proposed FCCOM.
(2) Cost Accounting standards. Offeror B is a small
business concern and therefore is not CAS-covered.
XYZ is an 8(a) business concern and therefore is not CAS-covered.
(3) Accounting System. We are unable to determine if
the offeror and there proposed subcontractor have acceptable
accounting systems.
52
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Based on the above WCAO recommends the offerer and their proposed
subcontractor be requested to provide a narrative description of
their accounting systems. This narrative should fully explain
their time keeping systems and job (project) cost accounting
systems. Further, they should provide a listing of the ledgers
and journals included in these systems along with a brief
description of each.
(4) Financial Capability. WCAO performed the following
ratio analysis on the financial statements (FYE September 30,
1991) provided by Offerer B.
Potential
Financial
Ratios value Jeopardy
Current 2.69 Remote
Acid Test 2.69 Remote
Z Score 4.37 Remote
Based on the above ratios potential financial jeopardy is remote.
Offeror B's financial statements are unaudited. WCAO places less
reliance on unaudited financial statements than those prepared by
an independent Certified Public Accounting firm.
The proposed subcontractor XYZ did not provide financial
statements. Accordingly, we can not review financial capability.
Since XYZ's proposed subcontract price is over $1,000,000 WCAO
recommends they be required to submit current financial
statements, as described in section L.16(b)(l)(iii) of the RFP,
for evaluation.
(5) Representations, Certifications and Other Statements of
Offeror. Offeror B completed Sections K, as required.
XYZ failed to complete Section K of the RFP.
Based on the above WCAO recommends the proposed subcontractor be
required to complete Section K, of the RFP.
3. Offeror C RFP Compliance. Offeror C has proposed two fixed
hourly rates for each personnel classification, for each
performance period. Offeror C has proposed a "peak rate" (12/1 -
3/31) and an "off peak rate" (4/1 - 11/30). Based on a telephone
conversation with Mr. Edward J. Donahue, III, Principal, the
proposed contract value will be determined based on when the work
is planned. Accordingly, when a work order is issued Offeror C
"will develop a detailed plan, including an estimate of hours
required by category by month." Further, "based on the planned
period during which the hours are expected to be work, Offeror C
53
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will apply the billing rates related to each planned month of
effort (each month individually being considered "peak" or "off
peak.)"
WCAO has no objection to two rates being included in the
contract, since it seems to be in the Government's best interest.
However, since the RFP is silent regarding when the proposed
effort will occur WCAO can not assume when the work will be
performed. Accordingly, we have evaluated the price with all
hours at the "peak rate" and all hours at the "off peak rate."
The contract value would be somewhere between these amounts.
The difference of ($1,600,000) between the price proposed and
WCAO's calculation is due to Offerer C's failure to propose RFP
specified ODCs, for all periods. No other adjustments were made
to the offerer's price proposal. . I
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. Offeror C's price proposal is
mathematically correct with two exceptions. For Option Period 2
at the "peak rate" the offeror has proposed $,2,996,400. WCAO's
calculation for this effort is $2,996,000. Also, for Option
Period 1 at the "off peak rate" the offeror has proposed
$2,134,400. WCAO's calculation for this period is $2,135,200.
No other errors were noted in the.offerer's calculations.
b. Adequate SF 1411s. Offeror C has provided a SF 1411.
However, they failed to complete item no. 6.
c. Current Financial statements, offeror C has not provided
current financial statements. They provided financial statements
for the period ending September 30, 1990.
Based on the above WCAO recommends the offeror be required to
submit current financial statements, as required by section
L.16(b)(1)(iii) of the RFP.
d. RFP Specified Labor Hours and Categories. Offeror c has
proposed the RFP specified labor hours and categories.
e. Burdened Labor Rates. Offeror C failed to provide the
basis of their proposed burdened labor rates. Accordingly, WCAO
is unable to determine the individual components that were used
to develop the proposed rates. Further, Offeror C has stated
they "intend to engage several regional CPA firms ..., as
subcontractors in this project, to work at the locations
indicated ..." No individual support was supplied for these
subcontractors.
Based on the above WCAO recommends the offeror be required to
54
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indicate the basis of their proposed burdened labor rates,
including all proposed subcontract effort.
f. Base Labor Rates. Offerer C failed to provide the
detailed support for base labor rates.
Offerer C has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.16(b)(2) of the RFP.
g. Indirect Rates. Offeror C failed to provide detailed
cost data on their indirect rates.
Based on the above WCAO recommends the offerer be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. other Direct Costs (ODCs). Offeror C has failed to
include the RFP specified ODCs, for all periods. WCAO has
included the RFP specified amounts for ODCs in our calculation.
Based on the above WCAO recommends the offerer be required to.
propose ODCs in accordance with the RFP.
i- other Matters.
(1) Facilities Capital Cost of Money CFCCOH). The
offerer has not proposed FCCOM, as a separate line item. We can
not determine if FCCOM is included in the proposed burdened labor
rates.
Based on the above WCAO recommends the offerer state whether they
have or have not proposed FCCOM.
(2) Cost Accounting Standards. Offeror C is a small
business concern and therefore is not CAS-covered.
(3) Accounting system. We are unable to determine if
the offerer has an acceptable accounting system.
Based on the above WCAO recommends the offerer be requested to
provide a narrative description of their accounting system. This
narrative should fully explain the offerer's time keeping system
and job (project) cost accounting system. Further, they should
provide a listing of the ledgers and journals included in these
systems along with a brief description of each.
(4} Financial Capability. Offeror C has failed to
provide current financial statements. However, WCAO has
55
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performed the following ratio analysis on the statements (fiscal
year 1990) provided by Offerer C.
Potential
Financial
Ratios Value Jeopardy
Current 4.13 Remote
Acid Test 4.13 Remote
Z Score 5.28 Remote
Based on the above ratios potential financial jeopardy is remote.
Offerer C's financial statements are not current and are
unaudited. WCAO places less reliance on unaudited financial
statements than those prepared by an independent Certified Public
Accounting firm.
Based on the above WCAO recommends the offeror be required to
submit current financial statements, as required by section
L.16(b>(1)(iii) of the RFP.
(5) Representations. Certifications and Other Statements
of Offerer. Offerer C failed to complete Section K.lO of the
RFP.
Based on the above WCAO recommends the offerer be required to
complete Section K, of the RFP.
4. Offerer D RFP Compliance. WCAO has made an $800 adjustment
to the offerer's price proposal due to a math error.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. WCAO discovered an error in
Option 2 for the Senior Accountant category. The offerer's
extended amount totals $652,000. WCAO calculated this category
to be $652,800. No other errors were noted in the offerer's
calculations.
b. Adequate SF 1411s. Offerer D has provided a SF 1411 for
the base period only.
Based on the above WCAO recommends the offerer be required to
submit a completed SF 1411 as required by section L.16(b)(1) of
the RFP.
c. current Financial Statements. Offerer D has provided
financial statements for the twelve months ending Hay 31, 1991.
d. RFP Specified LaborHours andCategories. Offerer D has
56
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proposed the RFP specified labor hours and categories.
e. Burdened Labor Rates. Offerer D has provided detailed
support on the method used in computing their proposed burdened
labor rates.
f. Base Labor Rates. Offerer D failed to provide the
detailed support for base labor rates.
Offerer D has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.l6(b)(2) of the kFP.
g. Indirect Rates. Offerer D has failed to provide detailed
data for their proposed 61.2 percent indirect rate.
Based on the above WCAO recommends the offerer be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. Other Direct Costs fODCs). Offeror D has proposed ODCs
in accordance with the RFP.
i. Other Matters.
(1) Facilities Capital Cost of Moaev (FCCOM). The
offeror has not proposed FCCOH.
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOM be inserted into any resultant
contract or subcontract.
(2) Cost Recounting Standards. Offeror D stated they
are not performing any CAS-covered national defense contracts or
subcontracts.
Based on the above Offeror D is not a CAS-covered concern.
(3) Accounting System. We are unable to determine if
the offeror has an acceptable accounting system.
Based on the above WCAO recommends the offeror be requested to
provide a narrative description of their accounting system. This
narrative should fully explain the offerer's time keeping system
and job (project) cost accounting system. Further, they should
provide a listing of the ledgers and journals included in these
systems along with a brief description of each.
57
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(4) Financial Capability. WCAO performed the following
ratio analysis on the financial statements (FYE May 31, 1991)
provided by Offerer D.
Ratios
Current
Acid Test
Z Score
Value
3.11
1.29
5.92
Potential
Financial
Jeopardy
Remote
Remote
Remote
Based on the above ratios potential financial jeopardy is remote.
Offeror D's financial statements are unaudited. WCAO places less
reliance on unaudited financial statements than those prepared by
an independent Certified Public Accounting firm.
(5) Representations. Certifications and Other statements
of Offeror. Offeror D failed to complete Sections K.I and
K.23(m) of the RFP.
Based on the above WCAO recommends the offeror be required to
complete Section K, of the RFP.
5. Offeror E RFP Compliance. WCAO has made no adjustments to
the offerer's price proposal.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. Offeror E's price proposal is
mathematically correct.
b. Adequate SF 1411s. Offeror E has failed to provide
adequate SF 1411s.
Based on the above WCAO recommends the offerer be required to
submit completed SF 1411s, as required by section L.16(b)(l) of
the RFP.
c. Current Financial statements. Offeror E failed to
provide current financial statements.
Based on the above WCAO recommends the offerer be required to
submit current financial statements, as required by section
L.16(b)(1)(iii) of the RFP.
d. RFP Specified Labor Hours and categories. Offeror E has
proposed the RFP specified labor hours and categories with one
exception. Offeror E has proposed a staff accountant in the
place of the junior accountant. The description of the offerer's
58
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staff accountant is the same as the RFP description for junior
accountant.
e. Burdened Labor Rates. Offerer E has provided detailed
support on the method used in computing their proposed burdened
labor rates.
f. Base Labor Rates. Offerer E failed to provide the
detailed support for base labor rates.
Offerer E has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.16(b)(2) of the RFP.
g. Indirect Rates. Offerer E has failed to provide detailed
data for their proposed indirect rates.
Based on the above WCAO recommends the offeror be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. Other Direct Costs (ODCsl. Offerer E has proposed ODCs
in accordance with the RFP.
i. Other Matters.
(1) Facilities Capital Cost of Money fFCCOMl. The
offerer has not proposed FCCOM.
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOM be inserted into any resultant
contract or subcontract.
(2) Cost Accounting Standards. Offerer E is a small
business concern and therefore is not CAS-covered.
(3) Accounting System. We are unable to determine if
the offerer and there proposed subcontractor have acceptable
accounting systems.
Based on the above WCAO recommends the offerer and their proposed
subcontractor be requested to provide a narrative description of
their accounting systems. This narrative should fully explain
their time keeping systems and job (project) cost accounting
systems. Further, they should provide a listing of the ledgers
and journals included in these systems along with a brief
description of each.
(4) Financial Capability. Since the offerer has failed
59
-------
to provide current financial statements we can not comment on
financial capability.
Based on the above WCAO recommends the offerer be required to
submit current financial statements, as required by section
L.16(b>(1)(iii) of the RFP.
(5) Representations,
of Offerer. Offerer E failed
of the RFP.
Certifications and other Statements
to complete Section K.23(f)(1)(m),
Based on the above WCAO recommends the offerer and their proposed
subcontractor be required to complete Section K, of the RFP.
6. Offerer F. WCAO has made no adjustments to the offerer's
price proposal.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. Offerer F's price proposal is
mathematically correct.
b. Adequate SF 1411. Offerer F has provided SF 1411s for
the total proposed contract period. Offerer F has also provided
schedules identifying cost or pricing data for each proposed
period.
c. Current Financia1 8tatements, Offeror F has not provided
current financial statements. They provided financial statements
for the period ending December 31, 1990.
Based on the above WCAO recommends the offerer be required to
submit current financial statements, as required by section
L.16(b)(1)(iii) of the RFP.
e. Burdened Labor Rates. Offerer F has provided detailed
support on the method used in computing their proposed burdened
labor rates.
f. Base Labor Rates. Offerer F failed to provide the
detailed support for base labor rates.
Offerer F has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.16{b)(2) of the RFP.
g. Indirect Rates. Offerer F has failed to provide detailed
60
-------
data for their proposed indirect rates.
Based on the above WCAO recommends the offerer be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. Other Direct Coats fODCs). Offerer F has proposed ODCs
in accordance with the RFP.
i. Other Matters.
(1) Facilities Capital Cost of Money fFCCOMl. The
offeror has not proposed FCCOM.
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOM be inserted into any resultant
contract or subcontract.
(2) Cost Accounting Standards. Offeror F is a small
business concern and therefore is not CAS-covered.
(3) Accounting system. We are unable to determine if
the offeror and there proposed subcontractor have acceptable
accounting systems.
Based on the above WCAO recommends the offeror and their proposed
subcontractor be requested to provide a narrative description of
their accounting systems. This narrative should fully explain
I their time keeping systems and job (project) cost accounting
systems. Further, they should provide a listing of the ledgers
and journals included in these systems along with a brief
1 description of each.
(4) Financial Capability. Offeror F has failed to
provide current financial statements. However, WCAO has
performed the following ratio analysis on the statements (fiscal
year 1990) provided by Offeror F.
Potential
Financial
Ratios Value Jeopardy
Current 7.42 Remote
Acid Test 7.42 Remote
Z Score 8.55 Remote
Based on the above ratios potential financial jeopardy is remote.
Offeror F's financial statements are not current and are
unaudited. WCAO places less reliance on unaudited financial
statements than those prepared by an independent Certified Public
Accounting firm.
61
L
-------
Based on the above WCAO recommends the offerer be required to
submit current financial statements, as required by section
L.16(b)(1)(iii) of the RFP.
(5) Representations. Certifications and Other statements
of Offerer. Offeror F completed Sections K, as required.
i
7. offeror G RFP Compliance. WCAO has made an $1,037 adjustment
to the offerer's price proposal due to a math error.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. WCAO discovered an error in the
base period. The offerer's extended amount totals $1,584,563.
WCAO calculated this category to be $1,585,600. No other errors
were noted in the offerer's calculations.
b. Adequate SF 1411. Offeror G has provide SF 1411s for
each proposed contract period.
c. Current Financial Statements. Offeror G has provided
financial statements for the twelve months ending December 31,
1991.
e. Burdened Labor Rates. Offeror G has provided detailed
support on the method used in computing their proposed burdened
labor rates.
f. Base Labor Rates. Offeror G failed to provide the
detailed support for base labor rates.
Offeror G has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.16(b)(2) of the RFP.
g. Indirect Rates. Offeror G has failed to provide detailed
data for their proposed indirect rates.
Based on the above WCAO recommends the offerer be required to
submit detailed supporting computations for their indirect rates
as required by section L.16(b}(3) of the RFP.
h. Other Direct Costs (ODCs). Offeror G has proposed ODCs
in accordance with the RFP.
i. Other Matters.
62
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(1) Facilities Capital Coat of Money (FCCOM1.
offerer has not proposed FCCOH.
The
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOM be inserted into any resultant
contract or subcontract.
(2) Cost Accounting Standards. Offerer G is a small
business concern and therefore is not CAS-covered.
(3) Accounting Bysten. We are unable to determine if
the offeror and there proposed subcontractor have acceptable
accounting systems.
Based on the above WCAO recommends the offerer and their proposed
subcontractor be requested to provide a narrative description of
their accounting systems. This narrative should fully explain
their time keeping systems and job (project) cost accounting
systems. Further, they should provide a listing of the ledgers
and journals included in these systems along with a brief
description of each.
(4) FinancialCapability. WCAO performed the following
ratio analysis on the financial statements (FYE Hay 31, 1991)
provided by Offerer G.
Ratios
Current
Acid Test
Z Score
Value
11.39
11.39
10.48
Potential
Financial
Jeopardy
Remote
Remote
Remote
Based on the above ratios potential financial jeopardy is remote.
Offerer G's financial statements are unaudited. WCAO places less
reliance on unaudited financial statements than those prepared by
an independent Certified Public Accounting firm.
(5) Representations* Certifications and Other Statements
of Offerer. Offerer G completed Sections K, as required.
8. Offerer H RFP Compliance. WCAO has made an $86,292
adjustment to the offerer's price proposal due to a math error.
Our review of the offerer's RFP compliance is summarized as
follows:
a. Mathematical Accuracy. WCAO discovered an error in
Option Period 2. The offerer's extended amount totals
$2,640,944. WCAO calculated this period to be $2,554,652. No
63
-------
other errors were noted in the offerer's calculations.
b. Adequate SF 1411. Offerer H has provided a SF 1411 for
the base period only.
Based on the above WCAO recommends the offerer be required to
submit completed SF 1411s, as-required by section L.16(b)(l) of
the RFP.
c. 'Current Financial Statements. Offeror H has provided
financial statements for the twelve months ending December 31,
1991.
d. RFP Specified Labor Hours and Categories. Offeror H has
proposed the RFP specified labor hours and categories.
e. Burdened Labor Rates. Offeror H has provided detailed
support on the method used in computing their proposed burdened
labor rates. However, the offerer has proposed subcontract
effort. No detail is provided on how the subcontractors cost
data is included in the burdened rate.
WCAO recommends the offerer be required to show how
subcontractor cost data is factored into the proposed burdened
rates.
f. Base LaborRates. Offeror H failed to provide the
detailed support for base labor rates.
Offeror H has not specifically addressed project management or
clerical labor in their cost proposal.
Based on the above WCAO recommends the offerer be required to
submit supporting data for their direct labor rates, as required
by section L.16(b)(2) of the RFP.
g. Indirect Rates. Offeror H has failed to provide detailed
data for their proposed indirect rates.
?
Based on the above WCAO recommends the offerer be required, to
submit detailed supporting computations for their indirect rates
as required by section L.16(b)(3) of the RFP.
h. Other Direct Costs (ODCs). Offeror H has proposed ODCs
in accordance with the RFP.
i. Other Matters.
(1) Facilities Capital Cost ef Money (FCCOM). The
offerer has not proposed FCCOM.
64-
-------
Accordingly, WCAO recommends the clause in FAR 52.215-31 which
waives the right to claim FCCOH be inserted into any resultant
contract or subcontract.
(2) Coat Accounting standards. Offerer H is a small
business concern and therefore is not CAS-covered.
(3) Accounting System. We are unable to determine if
the offerer and there proposed subcontractor have acceptable
accounting systems.
Based on the above WCAO recommends the offeror and their proposed
subcontractor be requested to provide a narrative description of
their accounting systems. This narrative should fully explain
their time keeping systems and job (project) cost accounting
systems. Further, they should provide a listing of the ledgers
and journals included in these systems along with a brief
description of each.
(4) Financial Capability. WCAO performed the following
ratio analysis on the financial statements (FYE December 31,
1991) provided by Offeror H.
Ratios
Current
Acid Test
Z Score
Value
1.60
1.60
3.79
Potential
Financial
Jeopardy
Remote
Remote
Remote
Based on the above ratios potential financial jeopardy is remote.
Offeror H's financial statements are unaudited. WCAO places less
reliance on unaudited financial statements than those prepared by
an independent Certified Public Accounting firm.
(5) Representations. Certifications and Other statements
of Offeror. Offeror H and their proposed subcontractors omitted
or failed to complete many parts of Section K, of the RFP. Many
items were indicated "Not Applicable" (N/A) that should have been
completed.
Based on the above WCAO recommends the offeror and their proposed
subcontractors be required to resubmit Section K, Representations
and Certifications, completely filled out.
7- Comparative Price Analysis Exhibits. WCAO has prepared
tables and graphs comparing prices and rates in the exhibits of
this report.
No financial monitoring reviews have been performed on any of the
65
-------
proposed offerers.
As required by FAR Part 15.808(b), P&CMD Acquisition Handbook
Units 3 (PAR.6) and 4 (PAR.4), please furnish us a copy of the
Summary of Negotiations after contract award. Also, we have
attached a Contracting Officer's Response Sheet. Part of our
performance evaluation depends on the responses we receive from
the Contracting Officer/Specialists we service. Please fill out
the form and return it to Donald L. Hambric (PM-214-F).
If you have any questions or if we can be of further assistance,
please contact me on 260-xxxx.
66
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Tableof Contents
Price Analysis -
Total Price (Proposed vs. WCAO
Determined).
Price Analysis -
Comparison of Proposed Labor Rate
Partner (Base Period)
Price Analysis -
Comparison of Proposed Labor Rate
Manager/Supervisor (Base Period)
Price Analysis -
Comparison of Proposed Labor Rate
Senior Accountant (Base Period)
Price Analysis -
Comparison of Proposed Labor Rate
Junior Accountant (Base Period)
Price Analysis -
Comparison of Proposed Labor Rate
All Categories (Total Period)
Suggested Cost Interrogatories
Contracting Officer's Response
Sheet
Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Attachment 1
Attachment 2
Page
23-24
25-26
27-28
29-30
31-32
33-34
67
-------
Exhibit A
Page 1 of 2
Price Analysis-
Total Price
Proposed Price vs. WCAO Determined
Price ($)
20,000,000
15,000,000 -
10,000,000
5,000,000 -
Offerer
Proposed
Price
WCAO
Calculation
Page 23 of 34
68
-------
Exhibit A
Page 2 of 2
Price Analysis -
Total Price
Proposed Price vs. WCAO Determined
Offerer
-'_• :
• -
r
.
:: -•/'.
," - . ;
* •• '
* . •: " •
*""" . — ~-
• -- -' ^
Average
Proposed
Price
$12,831,600
10,412,725
15,492,800
11,835,600
10,156,328
11,982,000
9,022,200
8,388,000
**•
12,789,860
11,434,568
WCAO
Calculation
$14,831,600
10,412,725
17,092,800
13,435,600
10,156,328
11,982,000
9,022,200
8,388,000
12,789,860
12,012,346
Page 24 of 34
69
-------
Exhibit B
Page 1 of 2
Price Analysis-
Comparison of Proposed Labor Rate
Partner (Base Period)
Rate ($)
160
140
120
100
80
60
40
20
Average Rate
$86.01
Offerer
Partner
Page 25 of 34
70
-------
Exhibit B
Page 2 of 2
Price Analysis-
Comparison of Proposed Labor Rate
Partner (Base Period)
Offerer
- -
.
•'.--.-- - .' v
.. - r r
\
." • . - , x. . *..
>. . ', *
- • -:-.- - -:•
..'-"•-."••"•-•^-
- v -^- . r . ' -
:"-;•.::-.:_;;
Average
Partner
$120.00 r
63.78
65.28
150.00
115.00
80.00
75.00
50.00
51.00
90.00
86.01
Page 26 of 34
71
-------
Exhibit C
Page 1 of 2
Price Analysis -
Comparison of Proposed Labor Rate
Manager/Supervisor (Base Period)
Rate ($)
120
100 -
Average Rate
$61.91
Offerer
Manager/
Supervisor
Page 27 of 34
_ 7.2
-------
Exhibit C
Page 2 of 2
Price Analysis -
Comparison of Proposed Labor Rate
Manager/Supervisor (Base Period)
Offerer
:
- •* •
'
— . =^-
" - ..f' '
_._ ."'"_-•
> •-
•
. ~ ~
Average
Manager/
Supervisor
$68.00 ;
55.04
56.04
100.00
75.00
50.00
60.00
40.00
43.00
>»
72.00
61 .91
Page 28 of 34
73
-------
Exhibit D
Page 1 of 2
Price Analysis - ^
Comparison of Proposed Labor Rate
Senior Accountant (Base Period)
Rate($)
70
60
50
40
30
20
10
Average Rate
Offerer
Senior
Accountant
Page 29 of 34
74
-------
Exhibit D
Page 2 of 2
Price Analysis -
Comparison of Proposed Labor Rate
Senior Accountant (Base Period)
Offerer
• - ~ ^~ *
""
' ~ - ; ~-:; "_»* • •. • •;
*
-. - •' '-i :
•• • •.'-'-»•
<• _ -
» ~f-
•Z- • '"' ''^
> .-,,'
": ; -/ :-"~^
- " ..••.'-"-•" .
•*
Average
Senior
Accountant
$53.00
34.03
35.03
60.00
45.00
40.00
45.00
31 .00
, 28.00
48.00
41.91
Page 30 of 30
75
-------
Exhibit E
Page 1 of 2
Price Analysis -
Comparison of Proposed Labor Rate
Junior Accountant (Base Period)
Rate ($)
50
40
30
20
10
Average Rate
$28/79
Offerer
Junior
Accountant
Page 31 of 34
76
-------
Exhibit E
Page 2 of 2
Price Analysis -
Comparison of Proposed Labor Rate
Junior Accountant (Base Period)
Offerer
-
»
•'.•'•'•*•- '
.'-'-.'-
.--.
j*-
,-^---- ' -'
— •* --*
"•--^-4. --_", .
_"-. :-. --"-Al^ --•':
Average
Junior
Accountant
$45.00 ;
23.25
25.25
35.00
27.00
25.40
30.00
28.00
19.00
30.00
28.79
Page 32 of 34
77
-------
Fof«dHourtyH«te*
Contract
Exhibit F
P«fl« 1 <
Pwtwr
Option 1
Option 2
Options
Option 4
Contact Avongo
Managw/Supwvtoor
Option 1
Option 2
Option 3
Optfon4
Senior Aeooufrtmt
Option 1
Option 2
Optfon3
Option 4
$120.00
128.00 S.00%
132.00 4.78%
139.00 S.30%
146.00 5.04%
$132.00
$88.00
71.00 4.41%
79.00 5.63%
79.00 843%
83.00 5.08%
$7850
$83.00
58.00 5.88%
59.00 6.38%
62.00 5.08%
83.00 33.87%
$82.80
$63.78
66.97 S.00%
70.32 S.00%
73.84 5.01%
77.53 5.00%
$70.49
57.79 S.00%
$0.8$ S.00%
63.71 449%
66JO 541%
$85.28
88.S5 5.01%
71.97 4.99%
7SJ7 S.00%
79.3S S.00%
$72.14
5.00%
S.00%
540%
941%
$34.03
35.74 5.02%
37.92 448%
39.40 5.01%
41.37 S.00%
$37.81
61.7$
6447
68.12
$6148
$35.03
36.79
36,82
40.58
4£98
$38.72
$150.00
160.00
170.00
182.00
195.00
$171.40
$100.00
106X10
113.00
12140
12940
$113.80
6.67%
7.06%
7.14%
6.00%
6.60%
7.08%
6.61%
$118.00
123.00 6.98%
132.00 7.32%
14140 6.82%
151.00 749%
$132.40
$75.00
86.00 6.23%
9140 746%
97.00 6.59%
$80.00
60.80 1
81.80 0
82.40 0
8320 0
$81.60
842%
4.97%
5.02%
4.98%
64.00 6.67%
68.00 6JS%
73.00 745%
78.00 6.85%
$68.60
$4940
48.00 6.87%
8140 &2S%
55.00 744%
98.00 9.49%
$81,40
$50.00
50.50 1.
51.00 0.
81.50 0.
52.00 0.:
$81.00
$40.00
40.40 1.C
40.80 O.i
4140 O.J
41.60 O.S
$40.80
Opflonl
Option 2
Options
Option 4
Contact Arams*
$45.00
47.00 4.44%
49.00 4.26%
51.00 4.08%
94.00 9.88%
$49.20
$2349
24.42 943%
25J4 940%
2&26 4.98%
$25.70
26.92 9.03%
27.84 4.98%
29J3 4.99%
30.70 9.03%
$2741
$39.00
37.00 5.71%
40.00 8.11%
43.00 7.50%
48.00 6.98%
$4020
$27.00
29.00 7.41%
3140 640%
33.00 6.49%
$31.00
$25.40
25.65 0.9
25.91 1.0
26.16 0.9
28.42 0.8
$2541
Pago 33 o!34
78
-------
Pries Analysis
Fixed Hourly Rates
Contract
Period
Partner
Base
Option 1
Option 2
Options
Option 4
Contract Average
Manager/Supervisor
Base
Option 1
Option 2
Options
Option 4
Contract Average
Senior Accountant
Base
Option 1
Option 2
Option 3
Option 4
Contract Average
Junior Accountant
Option 1
Option 2
Options
Option 4
Esc.
Factor
$75.00
79.00 5.33%
83.00 5.06%
87.00 4.82%
91.00 4.60%
$83.00
$60.00
63.00 5.00%
66.00 4.76%
69.00 4.55%
72.00 4.35%
$66.00
$45.00
47.00 4.44%
49.00 4.26%
51.00 4.08%
54.00 5.88%
$49.20
$30.00
32.00 6.67%
34.00 6.25%
36.00 5.88%'
38.00 5.56%
Esc.
Factor
$50.00 $5).00
50.00 0.00% 53.00
50.00 0.00% 55.00
50.00 0.00% 57.00
50.00 0.00% 59.00
$50.00 $55.00
Esc.
Factor
3.92%
3.77%
3.64%
3.51%
$40.00
40.00 0.00%
40.00 0.00%
40.00 0.00%
40.00 0.00%
$40.00
$31.00
32.50 4.84%
34.00 4.62%
35.00 2.94%
36.00 2.86%
$33.70
$43.00
45.00 4.65%
46.00 2.22%
47.00 2.17%
48.00 2.13%
$45.80
$28.00
29.00 3.57%
30.00 3.45%
31.00 3.33%
32.00 3.23%
$30.00
Contract Average $34.00
$28.00 $19.00
29.50 5.36% 20.00 5.26%
31.00 5.08% 21.00 5.00%
32.00 3.23% 22.00 4.76%
33.00 3.13% 23.00 4.55%
930.70 $21.00
$90.00
93.60
97.34
101.23
105.28
$97.49
$72.00
74.88
77.88
81.00
84.24
$78.00
$48.00
49.92
51.92
54.00
56.16
$52:00
Exhit
Page
Esc. Average E
Factor Rate Fa
4.00%
4.00%
4.00%
4.00%
4.00%
4.01%
4.01%
4.00%
4.00%
4.01%
4.01%
4.00%
$30.00
31.20 4.00%
32.45 4.01%
33.75 4.01%
35.10 4.00%
$32.50
$66.01
90.09
94.32
98.90
103.74
$94.61
$61.91
64.70
67.63
70.81
74.03
$67.82
$41.91
43.94
45.99
48.22
52.27
$46.46
$28.79
30.23
31.78
33.31
34.95
$31.81
4.
4.
4.
4.
4.1
4.8
4.6
4.8
8.4
S.Qi
5.1-
4.7!
4.9:
Page 34 of 34
79
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
DATE: January 29, 1992
SUBJECT: Preliminary Analytical cost Evaluation Report (PACER)
on Proposals Submitted in Response to RFP XXXXXXX-XX
FROM: Jane Doe, Auditor
Washington Cost Advisory Branch, (PM-214-F)
THRU: John Smith, Chief
Washington Cost Advisory Branch, (PM-214-F)
TO: Susan Jones, Contracting Officer
Administrative Contracts Procurement Section (PM-214-F)
In response to your request, we have performed a preliminary
evaluation of the six offers received in response to the subject
RFP. The contractors' cost proposals, including the amounts
contained in this report, have not been subjected to technical
evaluation or cost analysis. Specifically, we express no opinion
on the fixed rates, other direct costs, travel, and indirect
rates proposed. To the extent possible, we have reviewed the
proposals for arithmetical accuracy and compliance with the terms
of the RFP and will provide cost advisory reports on each
proposal as requested. The prices proposed and the results of
our review are discussed in detail in Exhibits A through F of
this report and our summarized as follows:
Offerer A
Offerer B
Offerer C
Offerer D
Offerer E
Offerer F
Proposed
$8,397,500
Per
Review*
$8,397,500
7,351,500 7,352,000
6,855,533
7,149,771
8,959,110
6,971,361
6,855,533
7,219,315
8,959,110
6,971,361
Difference
$ 0
( 500)
0
( 69,544)
0
0
( ) Indicates Increase
* Cost is inclusive of all fees including the prime contractor's
fees.
For each offerer, we are including comments on the proposal (i.e.
what items are proposed in accordance with the RFP instructions).
We are also including recommended interrogatories for each
offerer. Our recommended comments and interrogatories are based
on our interpretation of the RFP. If we have incorrectly
80
-------
interpreted the RFP in any area, we will be available to meet
with you for clarification and will assist you in any required
editing of the recommended comments and interrogatories.
If you have any questions or if we can be of further assistance,
please contact Jane Doe on 260-XXXX.
We have enclosed a contracting officer's response sheet. Part of
our performance evaluation depends on the responses we receive
from the contracting officers/specialists we service. Please
fill out this form and return it to Don Hambric (PM-214-F).
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Offerer A RFP XXXXXXX-XX
Offerer A submitted a SF 1412 "Claim for Exemption From
Submission of Certified Cost or Pricing Data". Offeror A
claims exemption from the requirements for submitting certified
cost or pricing data on the basis that the prices offered are
market prices of commercial items sold in substantial quantities
to the general public. The instructions for the SF1412 state a
"Market price is a current price, established in the usual and
ordinary course of trade between buyers and sellers free to
bargain, that can be substantiated from sources independent of
the manufacturer or vendor. There must be a sufficient number of
commercial buyers so that their purchases establish an
ascertainable current market price for the item or service. The
nature of this market should be described. To justify a market-
price exemption, the item or service being purchased must be
identical to the commercial item or service or must be so similar
in material and design (for services) or in work and facilities
(for services) that any price difference or its absence can be
evaluated solely by price analysis (see FAR 15.805-2). In the
latter case, a statement must be attached identifying the
specific differences and explaining, by price analysis of the
differences, how the proposed price is derived from the market
price." Offeror A states the proposed fixed rates for each labor
category are based on the offerer's "standard rate" for that
labor category. The "standard rate" constitutes the rate for
which Offeror A to be compensated for its professional services.
The Offeror A standard rates were then adjusted to reflect the
best estimate of the rates at which services are sold in
substantial quantities to the public. These market rates were
then further adjusted downward for the proposed rates.
Offeror A did not submit their most current financial statements
as required by the RFP. In their proposal, Offeror A states as a
partnership and not a corporation they do not have audited
financial statements of the type requested in the solicitation -
i.e., a balance sheet and statement of profit and loss. Offeror
A further states they do have the financial resources to perform
the contract and are prepared to discuss financial capability
with the contracting officer.
Fixed Rates for Labor Categories
Offeror A proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. All hours were
proposed in accordance with the RFP.
Section B, Clause B.I of the RFP states the fixed rates should
cover all expenses, including report preparation, salaries,
overhead, general and administrative expenses, and profit.
Offeror A did not provide a detailed breakdown of how the
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proposed fully burdened fixed rates were developed. In the
proposal, Offerer A states their accounting system does not
provide the full detail of costs such as direct labor, fringe
expenses, overhead, other direct costs, and general and
administrative expenses in precisely the format required for
federal cost-type contracts and the Cost Accounting Standards
Board.
Travel and Other Direct Costs
Offeror A proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror A did not apply a
G&A rate to the proposed travel and other direct costs.
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Offerer A
RFP XXXXXXX-XX
We recommend the following interrogatories be addressed to
Offeror A:
1. You claimed exemption from the requirements for submitting
certified cost or pricing data on the basis that the prices
offered are market prices of commercial items sold in substantial
quantities to the general public. The instructions for a SF1412
state a "Market price is a current price, established in the
usual and ordinary course of trade between buyers and sellers
free to bargain, that can be substantiated from sources
independent of the manufacturer or vendor. There must be a
sufficient number of commercial buyers so that their purchases
establish an ascertainable current market price for the item or
service. The nature of this market should be described. To
•justify a market-price exemption, the item or service being
purchased must be identical to the commercial item or service or
must be so similar in material and design (for services) or in
work and facilities ffor services) that any price difference or
its absence can be evaluated solely bv price analysis (see FAR
15.805-2). In the latter case, a statement must be attached
identifying the specific differences and explaining, by price
analysis of the differences, how the proposed price is derived
from the market price." Please provide this information to
support your claimed exemption from the requirements for
submitting certified cost or pricing data on the basis that the
prices offered are market prices of commercial items sold in
substantial quantities to the general public.
2. In your proposal, you state as a partnership and not a
corporation you do not have audited financial statements of the
type requested in the solicitation - i.e., a balance sheet and
statement of profit and loss. Please provide audited or
unaudited financial statements appropriate for a partnership.
3. You did not provide a detailed breakdown of how the proposed
fully burdened fixed rates were developed. In the proposal, you
state your accounting system does not provide the full detail of
costs such as direct labor, fringe expenses, overhead, other
direct costs, and general and administrative expenses in
precisely the format required for federal cost-type contracts and
the Cost Accounting Standards Board. You further state the
proposed fixed rates for each labor category are based on your
"standard rate" for that labor category. The "standard rate"
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constitutes the rate for which you seek to be compensated for the
professional services. Your standard rates were then adjusted to
reflect your best estimate of the rates at which your services
are sold in substantial quantities to the public. These market
rates were then further adjusted downward for the proposed rates.
Please provide a detailed breakdown showing how your proposed
rates were developed from your standard rates. Also provide the
detailed basis of your standard rates.
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Offerer B RFP XXXXXXX-XX
Offerer B did not correctly fjill out the SF 1411. Offerer B did
not include the prices for thje services and the travel and the
other direct costs on the SF 1411.
Offeror B submitted their 1990 financial statements.
Offeror B proposed twelve subcontractors. Please see Note 5
under Section A of their business proposal for a list of proposed
subcontractors. However, Offeror B did not segregate the
subcontractor costs from the prime costs. The subcontractors
also did not submit completed SF1411s, representations and
certifications, and current financial statements as required by
the RFP.
Fixed Rates for Labor Categories
Offeror B proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. All hours were
proposed in accordance with the RFP.
Please note that Offeror B made a math error in the computation
of the total price for the labor categories in Option Period II.
Offeror B proposed $1,773,000. However, the correct price should
be $1,773,500.
Section B, Clause B.I of the RFP states the fixed rates should
cover all expenses, including report preparation, salaries,
overhead, general and administrative expenses, and profit.
Offeror B did not provide a detailed breakdown of how the
proposed fully burdened fixed rates were developed.
Travel & Other Direct Costs
Offeror B proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror B did not apply a
6&A rate to the proposed travel and other direct costs.
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Offerer B
RFP XXXXXXX-XX
We recommend the following interrogatories be addressed to
Offerer B: !
1. You did not correctly fill out the SF1411. You did not
include the prices for the labor categories and the travel and
other direct costs on the SF1411. Please include these costs on
your SF1411. !
2. You submitted your 1990 financial statements. However, the
RFP requests that you submit your most current financial
statements. Please provide your audited or unaudited 1991
financial statements if they are available.
3. You proposed twelve subcontractors. However, you failed to
segregate your subcontractor costs from your costs. Please
provide detailed information on your subcontractor costs.
Your subcontractors also did not submit completed SF1411s,
representations and certifications, and their most current
financial statements as required by the RFP. Please have your
subcontractors provide this information.
4. You made a math error in the computation of the total price
for the labor categories in Option Period II. You proposed
$1,773,000. However, the correct price should be $1,773,500.
Please correct this error.
5. You did not provide a detailed breakdown of how the proposed
fully burdened fixed rates were developed. Please provide.
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Offerer C
RFP XXXXXXX-XX
Offerer C submitted completed SF1411s, representations and
certifications, and current financial statements as required by
the RFP.
Offerer C proposed Subcontractor A as a subcontractor. The
subcontractor did not submit completed SFl4lls as required by the
RFP.
Fixed Rates for Labor Categories
Offerer C proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. All hours were
proposed in accordance with the RFP.
Please note Offerer C did provide a detailed breakdown of how the
proposed fully burdened fixed rates were developed.
Travel & Other Direct Costs
Offeror C proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror C did not apply a
G&A rate to the proposed travel and other direct costs.
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Offerer C
RFP XXXXXXX-XX
We recommend the following interrogatory be addressed to Offeror
C:
1. Your subcontractor A did not submit completed SF1411s as
required in the RFP. Please have your subcontractor provide this
information.
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Offerer D
RFP XXXXXXX-XX
Offerer D submitted completed SF1411S, representations and
certifications, and current financial statements as required by
the RFP.
Offerer D proposed two subcontractors, Sub A and Sub B. The
subcontractors did not submit completed SF1411s, representations
and certifications, and their most current financial statements
as required in the RFP.
Fixed Rates for Labor Categories
Offerer D proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. In Option Period
II, the offerer did not propose 262 hours of the RFP-specified
hours for the partner labor category. This error caused a
$69,543 understatement of their price. All other hours were
proposed in accordance with the RFP.
Section B, Clause B.I of the RFP states the fixed rates should
cover all expenses, including report preparation, salaries,
overhead, general and administrative expenses, and profit. The
two subcontractors did not provide a detailed breakdown of how
their proposed fully burdened fixed rates were developed.
Travel & Other Direct Costs
Offerer D proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror D applied a 12.49%
G&A rate to the proposed travel and other direct costs.
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Offerer D RFP XXXXXXX-XX
We recommend the following interrogatories be addressed to
Offerer D:
1. You proposed two subcontractors, Sub A and Sub B. Your
subcontractors did not submit completed SF1411s, representations
and certifications, and their most current financial statements
as required in the RFP. Please have your subcontractors provide
this information.
2. In Option Period II, you did not propose 262 hours of the
RFP-specified hours for the partner labor category. This error
caused a $69,543 understatement of your price. Please correct
this error.
3. Section B, Clause B.I of the RFP states the fixed rates
should cover all expenses, including report preparation,
salaries, overhead, general and administrative expenses, and
profit. Your two subcontractors did not provide a detailed
breakdown of how their proposed fully burdened fixed rates were
developed. Please have your subcontractors provide this
information.
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Offerer E
RFP XXXXXXX-XX
Offerer E did not submit financial statements as requested in the
RFP. In the proposal, Offeror E states as a private partnership
they do not publicly disclose financial data or results of
operations. They further state they are a U.S. partnership with
approximately 1,500 partners with partnership equity in excess of
$400,000,000 and annual sales of approximately $1 billion. They
also state that they have the financial capability to perform
this contract.
Fixed Rates for Labor Categories
Offeror E proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. All hours were
proposed in accordance with the RFP.
Section B, Clause B.I of the RFP states the fixed rates should
cover all expenses, including report preparation, salaries,
overhead, general and administrative expenses, and profit.
Offeror E did not provide a detailed breakdown of how the
proposed fully burdened fixed rates were developed,
Travel & other Direct Costs
Offeror E proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror E applied a 10.14%
6&A rate to the proposed travel and other direct costs.
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Offerer E
RFP XXXXXXX-XX
We recommend the following interrogatories be addressed to
Offerer E:
1. In your proposal, you state that as a private partnership
you do not publicly disclose financial data or results of
operations. Therefore, you did not submit financial statements
as requested in the RFP. You also state in your proposal that
you have the financial capability to perform this contract.
However, you provided no supporting documentation to substantiate
this claim. Please provide the following information for your
most recent fiscal year:
Current Assets
Current Liabilities
Total Assets
Partner's Equity
Earnings Before Interest & Taxes
Current Debt
Long-term Debt
Sales
Cash
Accounts Receivable
Short-term Investments
Also provide the supporting documentation for these amounts.
2. Section B, Clause B.I of the RFP states 'the fixed rates
should cover all expenses,.including report preparation,
salaries, overhead, general and administrative expenses, and
profit. You did not provide a detailed breakdown of how the
proposed fully burdened fixed rates were developed. Please
provide this information.
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Offerer F
RFP XXXXXXX-XX
Offerer F submitted completed SF1411S, representations and
certifications, and current financial statements as required by
the RFP.
Offeror F proposed Subcontractor C as a subcontractor. The
subcontractor did not submit financial statements as requested in
the RFP. In the proposal, Subcontractor C states as a private
partnership they do not publish their financial statements.
However, they state that they will make a copy of their financial
statements available to the contracting officer on a confidential
basis at the time of negotiations. ,
Fixed Rates for Labor Categories
Offeror F proposed fixed rates for all the labor categories
specified in Section B, Clause B.I of the RFP. All hours were
proposed in accordance with the RFP.
Please note Offeror F did provide a detailed breakdown of how the
proposed fully burdened fixed rates were developed.
Travel & Other Direct Costs
Offeror F proposed travel and other direct costs in accordance
with the RFP Section B, Clause B.3. Offeror F did not apply a
G&A rate to the proposed travel and other direct costs.
Offeror F proposed Consultant A as a consultant. Consultant A
proposed the following positions:
Project Manager
Senior Analyst
Software Specialist
Programmer
Technical Writer/Editor
In addition, Consultant A expects to incur travel and other
direct costs. Consultant A's cost is $788,125 for the entire
period of performance. Please note that Consultant A's proposed
costs are considered part of the $2,400,000 RFP-specified amount
for travel and other direct costs.
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Offerer F
RFP XXXXXXX-XX
We recommend the following interrogatories be addressed to
Offerer F:
1. , Your subcontractor, Subcontractor C, did not submit
financial statements as requested in the RFP. However,
Subcontractor C states they will make a copy of their financial
statements available to the contracting officer on a confidential
basis. Please have your subcontractor make a copy of their
financial statements available to the contracting officer.
2. You proposed Consultant A as a consultant. Based on our
review of your proposal, we believe that Consultant A should be
proposed as a subcontractor. Please have Consultant A provide
completed SFl4lls, representations and certifications, and their
most current financial statements as required in the RFP. Also
have Consultant A provide detailed supporting computations for
their proposed indirect rate unless the proposed rate has
recently been accepted by a contracting agency of the
Government.
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Preliminary Review of RFP No. W002846A3
Telecommunications Services for EPA's
National Data Processing Division
Prepared By: Washington Cost Advisory Operations
Date: November 14, 1990
Office of Administration
froeurtmtnt and Contracts Managtmtnt Division
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
I-A7E:
SUBJECT
FROM:
THRU:
TO:
November L4, 1990
Comments on RFP W002846A3
Telecomunications Services for EPA's
National Data Processing Division
Bonnie C. Kane-Sharp. Auditor*..'., ', ' -.-. - /
Washington Cost Advisory Operations (PM-214-F^
Martha B. Cook, Actina Chief
Washington Cost Advisory Operations (PM-214-Fi
Bonnie Brandon. Contract Specialist
ADP Procurement Section (PM-214-F)
In response to your request, we have performed a review of
the subject RFP. Our comments are as follows:
1) Section B.I (a) states " ---- The Government will order
32,000 direct labor hours." Unless we are certain that we will
order the hours, we strongly suggest the word will be changed to
may order or estimates it will order.
2) Section H-14 states in the last sentence of the first
paragraph "...The Government's level of effort is ae..." Unless
we are certain we will order the specified level of effort, we
strongly suggest the sentence be changed to read: The
Government's estimated level of effort is as .....
3) Section J.I provides a list of the attachments to the
RFP. Our comments on the following cost related attachments are
as follows:
Attachment L-4 - Staffing Model.
under Notea 4, 5, 6 and 11 below.
Refer to our comments on
Attachment L-5 - Salary Model. No comment.
Attachment L-6 - Cost Proposal Model,. Refer to our
under Notes 7 and 8 below which could possibly require the o
to modify the pricing model.
Attachment L-7 - LOTUS 1-2-3 Requirements, Refer to our
comments under Notes 7 and 8 below which could possibly require
the offerer to modify the pricing model.
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4) Section L.19.5.2 Direct Labor comment on Column 11*
(page 113) states "...(Note: This salary figure should be the
same as that-in Column 8)". Is this a correct statement? Is it
the government's intention to allow 0% escalation on labor for
Option Period 1? If this is EPA's intention, no change is
necessary. If this is not our intention, then the statement
should be modified accordingly.
5) Section L.19.5.2 - Direct Labor - Page 112. The
instructions refer to.Attachment L-4 and our comment is concerning
the FTE's used in Columns 9 and 12 of the attachment. We feel the
government should consider using total labor hours or rounding the
FTE requirements out two or three decimal places to have a more
precise measurement (for example, the base period S10 Pro.iect
Manager is shown as .2 versus .167). Refer also to our comments
under Notes 6 and 11 concerning Attachment L-4 and consistency of
treatment.
* 6) Section L.19.5.2(a) - page 113. The last sentence is as
follows: "(Note: The Salary Model assumes a 2000 hour FTE work
year for all positions. Offerer must not deviate from this
amount)". WCAO assumes the 2000 hour FTE work year referenced in
the RFP means hours available for productive work on the contract.
Since different EPA contractors have varied policies which deter-
mine their productive man year, comparison problems can result in
competitive pricing. Therefore the above EPA requirement, that
offerers not deviate from a 2000 hour FTE work year, could also
result in the offerers over or under estimating their proposed
costs and cause them to be in violation of CAS 401.
Generally, the Government specifies a man year/work year when
requiring dedicated full-time personnel for a procurement, other-
wise they specify required LOB hours. He asked the requestor if
this procurement would require dedicated personnel and the
response was:
"The only dedicated personnel would be those listed in the
Key Personnel Clause. However, man-years va labor hours
were used to discourage vendors from staffing the procure-
ment with several part-time employees and to encourage
them to provide EPA with a staff of full-time employees."
It appears that EPA would like to have a etaff of dedicated
personnel, however unless it is a specific requirement of the RFP.
there is no way to prevent offerers from proposing or using part-
time employees and/or making changes to personnel during contract
performance. Therefore, we recommend that if it is EPA'a desire
to have dedicated personnel on this procurement, then state it in
the RFP. Additionally, we recommend where a dedicated full-time
employee is desired, the RFP not specify direct labor houra
(example a 2000 hour FTE work year). The RFP should require the
responding offerora to propose man years based on their company
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policy and provide a detailed explanation of how the man year is
derived, along with the detailed explanation/computation of their
proposed individual salary column amounts. We have also attached
a copy of the May 1990 issue of The Washington Cost Advisor which
provides an article entitled "RFP Specified Hours vs Specified
Man-years" provides detail examples of what can occur when the
Government specifies a specific productive man vear for vendors.
Further, if this RFP do.es not require offerers to provide full-
time dedicated personnel, we recommend the RFP be modified to
specify required/estimated LOE hours instead of FTE work years.
7) Section L.19.5.3 - Indirect Costs (Overhead and General
and Administrative Expense) - Page 113. The RFP should contain
this or a similar comment: If an offerer has indirect expense
pools which differ from those listed, please propose in accordance
with vour normal accounting practice, modify the EPA pricing model
accordingly and provided an explanation of vour indirect expense
pools in your cost proposal.
8) Section .L.19.5.4 Other Direct Costs (ODCs) - page 114.
The RFP states: "If an offeror proposes "Other Direct Costs" that
are not listed below, these coats will not be evaluated." Has EPA
given any consideration to contractors whose normal accounting
practice is to propose and book other ODC elements besides those
specified below direct to contracts? We recommend you include a
comment in the RFP such as this: If it is your normal accounting
practice is to propose and book other ODC elements boaidea those
specified below by EPA direct to contracts, please indicate this
in your proposal and modify the EPA attachments accordingly. We
also recommend you include an additional comment in the RFP such
as this: If it is your normal practice to recover such ODC items
in your indirect coat pool, please indicate this in your proposal
and modify the EPA attachments accordingly. The government ahould
not cause any offeror to change their normal accounting practices
to aimply accommodate thia RFP because it could reeult in higher
coata on other contracta.
9) Section L.19.5.4 Other Direct Costs (ODCs) - page 114.
Directly below paragraph no. 2 ie the following:
Baae Period
HOURS
Option Period 1*
DOLLARS
The word houra above ahould be corrected to read dollara.
10) Sectipn L.19.5.4.(d) Other Direct Coata (ODCs)
Facilitiea - Page 116. EPA states: "Offerora are encouraged to
propose on the basis of assuming existing building leaaee at RTP
and WIC. Because the Government must pay termination coata of
approximately $. if these leases are not continued,..."
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Do we provide the offerers with the necessarv data to allow them
to propose at existing lease prices? Is this information provided
elsewhere in the RFP? If yes, then we should make reference to
the information here. If no. then how will an offeror know what
to propose and who the existing lease holders are? Are we being
bias to the incumbent contractor?
11) Section L 19.6 Additional Services - OPTIONS - Page 117.
Under (b) Option for the Government to Order Incremental
Quantities, the RFP makes reference to the number of equivalent
hours and states the "Cost figures for options hours on Attachment
L-4 should be calculated as..." Are we going to provide the
offerers with another Attachment L-4 to be completed for the
Additional Services - OPTIONS or is each offeror responsible for
creating their own? Have we already provided the offerers with an
allocation of hours per labor category for the additional services
options or is it left UP to the offerers to decide? Note also
that the current Attachment L-4 is using a FTE work year to compute
the labor costs and here we are using total labor hours. It is
our opinion that EPA should be consistent and use the FTE man year
or the total estimated labor hours and our preference is the labor
hours because it will be a more precise measurement (Refer also to
our comments under Notes 5 and 6 concerning Attachment L-4.). We
also note that on the bottom of page 117 is the following: "OPTION
HOURS*", however there is no further explanation detailing the need
for the "*". Perhaps it was EPA's intention to give the offerers
information on converting the hours to FTE man years and if ao this
should be clarified.
12) Section L.19.5 - Cost or Pricing Instructions -
Beginning on page 111. In order to ascertain the offerers have
proposed all RFP LOS and specified ODCs, any offeror who proposes
subcontractor effort should be required to provide a supplemental
schedule summarizing the labor hours or FTE work years and ODC's
allocation proposed by the offeror and each subcontractor. The
offeror should also be required to state the basis of the hours or
FTE work years and ODC's allocation to each subcontractor.
We have no other comments.
If we can be of further assistance, please contact Bonnie C.
Kane-Sharp at (202) 362-3227.
Attachment
4
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THE WASHINGTON COST ADVISOR
Vol. 1 No. 1
April 1990
UnconDensated Overtime
An
Aroach
Often contractors salaried personnel are "exempt" and do np£ receive
payment for hours worked beyond eight hours per day or forty hours per
week. "Diese employees simply charge eight hours per day and no
accounting is made of those excess hours. Seme contractors require
"exempt" personnel to charge all hours worked to various projects for
accounting purposes and distribute those hours to various cost
objectives, this method distributes the employees regular salary into
various projects based on hours shown on the time card.
In performing cost analysis reviews we are to determine what the
offerer's practice is and if labor costs are charged to the proper cost
center on an equitable basis. Since labor costs or hours are often the
basis for allocating indirect costs, it is particularly important that
labor costs are properly charged. We also review the offerer's policies
and procedures to determine managements position on labor charging.
government contractors where the Defense Contract Audit Agency is
cognizant record all hours worked, since it is DCAA's position this is
the most equitable basis for distribution of labor costs.
One three most acceptable methods of accounting for uncompensated
overtime are as follows:
Computing a different rate each pay period
based on the salary divided by the actual
hours worked.
A pro rata distribution for the period,
i.e. 50/50, 60/40, etc. based on what
projects the employee will be working on.
Computing a rate based on the hours an
employee will work, any variance is
charged/credited to overhead.
In evaluating competitive proposals care should be taken to ensure that
offerers are compared fairly. Diere is an incentive for contractors to
dilute their rate by increasing the work-hour basis.
An example of this problem is illustrated below. Here a salaried
employee earning $40,000 a year is proposed for 1860 hours.
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Qfferor's Salary @ $40.000 fqr 1860 hours
Total Time Basis
Forty Hour Basis (Assuming 50 hours & week)
Work-hour Basis 2080 2600
Direct Labor Rate $19.23 $15.38
Contract Cost $35,769 $28,615
It is easy to see the total time company has a competitive advantage in
price.
The objective of a cost analysis review is to compute a realistic price.
This means the cost estimate should be attainable. Accordingly, we must
make a determination the proposed rate is a realistic rate.
EPA does not currently have a specific policy on the treatment or
evaluation of uncompensated overtime. However, we do have personnel
experienced in making a determination on the acceptability or
non-acceptability of such practices. Should uncompensated overtime be
proposed please highlight this in the request for cost analysis in order
that we can perform an adequate evaluation.
CSAP Publishes Newsletter
The Cost Review and Policy Branch is publishing a monthly newsletter
designed to cover current cost and price analysis issues in federal
government contracting.
We encourage the readers to submit suggestions for topics for upcoming
issues. We also welcome comments and expertise on issues covered in the
newsletter.
Except as noted our opinions should not be considered the policy of the
Procurement and Contract Management Division. ^
Washington Cost Advisorv Operations
Washington Cost Advisory operation is a section under the Cost Review and
Policy Branch of PCM). WCAO is currently staffed by fourteen auditors
with an average of twelve years of cost and pricing experience. Our
major functions are to conduct cost and price analysis, assist in the
contract award and management process and to provide audit and accounting
assistance to the various contracting functions.
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In the cost and price analysis function we perform cost analysis on
contract proposals, coordinate audit services with various government .
agencies, and perform price analysis on ADP procurements, life cycle
costing schedules, and emergency response proposals.
«CAO reviews request-for-proposals, attends discussions and negotiations,
• participates as team leaders and members on Contractor Purchasing System
Reviews, evaluates post award cost data which affects various contracts
and also assists in financial monitoring reviews.
On a daily basis we provide advice on various cost and procurement
issues. We have also performed special projects for EPA officials as
requested.
Wfe maintain a staff of highly trained and experienced personnel. If our
services are needed please complete a request for cost analysis where
applicable or call Steve Leahy for special assistance.
Personnel Notes
Dennis Buck and his wife Nanci had a baby girl (Amanda Nicole) on
March 26. Amanda weighed in at 6 Ibs. 14 ozs. and was 21 inches long.
Tammy Thomas and her husband Andre had a baby boy (Antione Charles) on
April 11. Antione weighed 4 Ibs. 7 ozs. and was 17 3/4 inches long.
Managing Editor: Donald Hambric
Editor: Irving Anderson
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