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New DoD Requirement to Perform its own Price Reasonableness Determination

On March 13th of this year, the Office of the Under Secretary of Defense for Acquisition Technology and Logistics issued a memorandum directing contracting officers to comply with a deviation from the Federal Acquisition Regulation (“FAR”) 8.404(d). The class deviation is applicable to Department of Defense (“DoD”) entities buying off Schedule contracts and remains in effect until the language is incorporated into the Defense Federal Acquisition Regulation Supplement.

This deviation provides that “GSA has determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, to be fair and reasonable for the purpose of establishing the schedule contract.” But then it states that GSA’s determination does not relieve the contracting officer from the responsibility of making a determination of fair and reasonable pricing for individual orders, Blanket Purchase Acquisitions (“BPAs”), and orders under BPAs, using the proposal analysis techniques at FAR 15.404-1. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.

DoD contracting officers will now be required to do more work when issuing orders or blanket purchase agreements to Schedule contractors. The direction to use proposal analysis techniques at FAR 15.404-1 means that DoD contracting officers will have a great deal of leeway to determine if the price is fair and reasonable even though it has already been determined by the government to be fair and reasonable. One of the methods they may use is data other than certified cost or pricing data.

Because “data other than certified cost or pricing data” is defined at FAR 2.101 as “pricing data, cost data, and judgmental information” and can include “the identical types of data as certified cost or pricing data [required pursuant to the Truth in Negotiations Act]…but without the certification,” it is possible that Schedule contractors will need to disclose their cost information in order to perform work for DoD. This adds complexity and risk to Schedule contract performance and moves Schedule buys even further from the intent that the Schedule program mirror commercial buying practices.

It remains to be seen how DoD implements this new requirement to perform its own price reasonableness determination. It is likely that Schedule buys will become more burdensome for both DoD and contractors selling to DoD customers, and could drive procurement efforts to other multiple-award vehicles.

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