CFCM Pricing and Negotiation 2 — Questions and Answers
Question 1: Under FAR 15.404-1, what is the primary purpose of price analysis?
- To verify the contractor's cost accounting system
- To determine whether the proposed price is fair and reasonable without evaluating cost elements (Correct answer)
- To audit the contractor's indirect cost rates
- To establish the contractor's profit objective
Correct answer: To determine whether the proposed price is fair and reasonable without evaluating cost elements
Price analysis evaluates the proposed price itself using techniques like market comparisons without examining individual cost elements.
Question 2: A contracting officer receives a proposal with a total price of $2.5M. Under what threshold does FAR 15.403-4 generally require certified cost or pricing data?
- $500,000
- $750,000
- $2 million (Correct answer)
- $5 million
Correct answer: $2 million
FAR 15.403-4 requires certified cost or pricing data when the contract action exceeds $2 million (the current Truth in Negotiations Act threshold).
Question 3: Which cost is specifically UNALLOWABLE under FAR 31.205-47?
- Independent research and development costs
- Costs of legal proceedings to defend against government fraud allegations when the contractor is found liable (Correct answer)
- Professional membership dues
- Travel costs for contract performance
Correct answer: Costs of legal proceedings to defend against government fraud allegations when the contractor is found liable
FAR 31.205-47 makes costs of legal proceedings unallowable when the contractor is found liable for fraud or similar misconduct against the government.
Question 4: What does the term 'should-cost review' mean in federal contracting under FAR 15.407-4?
- An audit performed by DCAA on historical costs
- A government team analysis of a contractor's operations to identify potential cost efficiencies and negotiate a better price (Correct answer)
- A post-award review of actual costs incurred
- A price reasonableness determination using market data
Correct answer: A government team analysis of a contractor's operations to identify potential cost efficiencies and negotiate a better price
A should-cost review is a government analysis of a contractor's operations and management to identify inefficiencies and negotiate a realistic, lower price.
Question 5: Under the weighted guidelines method (FAR 15.404-4), which factor is assigned the highest standard weight when determining profit/fee?
- Cost risk
- Performance risk (technical difficulty) (Correct answer)
- Contract type risk
- Working capital
Correct answer: Performance risk (technical difficulty)
Performance risk, reflecting the technical difficulty and uncertainty of the work, receives the highest standard weight in the weighted guidelines profit analysis.
Question 6: A contractor submits certified cost or pricing data that later proves to be inaccurate, incomplete, or noncurrent. What remedy does the government have under FAR 15.407-1?
- Termination for default
- Defective pricing—a price reduction equal to the overpayment plus interest (Correct answer)
- Debarment of the contractor
- Conversion to a firm-fixed-price contract
Correct answer: Defective pricing—a price reduction equal to the overpayment plus interest
Defective pricing provisions allow the government to reduce the contract price by the amount the government overpaid due to inaccurate, incomplete, or noncurrent data, plus interest.
Question 7: Which FAR part establishes the requirement for forward pricing rate agreements (FPRAs) and their use in proposal evaluation?
- FAR 31
- FAR 42 (Correct answer)
- FAR 15
- FAR 44
Correct answer: FAR 42
FAR 42.17 governs forward pricing rate agreements, which are negotiated between the contractor and ACO to establish agreed-upon rates for use in pricing proposals.
CFCM Pricing and Negotiation 2
Under FAR 15.404-1, what is the primary purpose of price analysis?