FCC Cost Realism & Price Analysis 3 — Questions and Answers
Question 1: A proposal for a cost-plus-fixed-fee contract includes labor rates significantly below industry standards. What is the MOST appropriate government response?
- Accept the rates as proposed since the contractor bears no cost risk
- Perform a cost realism analysis and adjust rates to realistic levels for evaluation purposes (Correct answer)
- Reject the proposal as non-responsive
- Accept the rates and reduce the fixed fee to compensate
Correct answer: Perform a cost realism analysis and adjust rates to realistic levels for evaluation purposes
Unrealistically low labor rates on a CPFF contract signal a potential misunderstanding of requirements, warranting cost realism adjustment to establish most probable cost for evaluation.
Question 2: Which FAR part governs the price analysis technique of 'comparison with competitive published price lists'?
- FAR 13.106
- FAR 15.404-1(b)(2)(ii) (Correct answer)
- FAR 16.203
- FAR 31.205
Correct answer: FAR 15.404-1(b)(2)(ii)
FAR 15.404-1(b)(2)(ii) identifies comparison with competitive published price lists as an acceptable price analysis technique for determining price reasonableness.
Question 3: What is the primary purpose of an Independent Government Cost Estimate (IGCE) in source selection?
- To set a firm ceiling that no offeror may exceed
- To provide a baseline for evaluating the reasonableness of offered prices (Correct answer)
- To replace the need for certified cost or pricing data
- To establish the contract's target cost under incentive fee arrangements
Correct answer: To provide a baseline for evaluating the reasonableness of offered prices
The IGCE gives the contracting officer a government-developed benchmark for assessing whether proposed prices are reasonable before and during negotiations.
Question 4: When evaluating unbalanced pricing in a proposal, the contracting officer is MOST concerned about which risk?
- The risk that the offeror will submit a late proposal
- The risk of overpayment on front-loaded line items or performance risk on understated quantities (Correct answer)
- The risk that the offeror lacks adequate facilities
- The risk that the offeror's accounting system is inadequate
Correct answer: The risk of overpayment on front-loaded line items or performance risk on understated quantities
Unbalanced pricing creates overpayment risk when prices are front-loaded and performance risk when prices are understated on items likely to increase in quantity.
Question 5: Under the Truth in Negotiations Act (TINA), what is the threshold above which certified cost or pricing data is generally required for negotiated contracts?
- $250,000
- $750,000 (Correct answer)
- $2,000,000
- $10,000,000
Correct answer: $750,000
As of recent FAR updates, the TINA threshold is $2 million; however, the $750,000 threshold was the longstanding figure — always verify current FAR 15.403-4 for the operative threshold.
Question 6: Which of the following best describes 'price analysis' as distinguished from 'cost analysis'?
- Price analysis examines individual cost elements; cost analysis examines total price
- Price analysis evaluates the total price without examining the underlying cost elements; cost analysis evaluates individual cost elements (Correct answer)
- Price analysis is used only for sole-source awards; cost analysis is used for competitive awards
- Price analysis requires certified cost or pricing data; cost analysis does not
Correct answer: Price analysis evaluates the total price without examining the underlying cost elements; cost analysis evaluates individual cost elements
Price analysis judges the reasonableness of the proposed price as a whole without breaking it into components, while cost analysis examines individual cost elements and profit.
Question 7: A contracting officer discovers that an offeror's proposed indirect rates are significantly lower than its historical actuals. In a cost realism analysis, how should the CO treat this discrepancy?
- Accept the proposed rates because forward pricing is inherently speculative
- Adjust the proposed rates upward to reflect probable costs based on historical actuals or industry data (Correct answer)
- Reject the proposal for misrepresentation
- Request a DCAA audit before proceeding
Correct answer: Adjust the proposed rates upward to reflect probable costs based on historical actuals or industry data
When proposed indirect rates are unrealistically low relative to historical actuals, the CO should adjust them to reflect the most probable cost for evaluation purposes.
FCC Cost Realism & Price Analysis 3
A proposal for a cost-plus-fixed-fee contract includes labor rates significantly below industry standards.
What is the MOST appropriate government response?