Slide 1: Adequacy of Proposals for Global Supply Chain
Adequacy of Proposals for Global Supply Chain 1
Slide 2: Objectives
Adequacy of Proposals Objectives This resource document covers the following: • An overview of the proposal process, including applicable FAR (Federal Acquisition Regulations) and DFARS (Department of Defense FAR Supplement) definitions and requirements for submitting certified cost or pricing data
Slide 3: Outline
Adequacy of Proposals Outline This reference document is made up of the following sections: • Background Information • Responsibilities for Adequacy • General Adequacy Requirements • Material and Subcontracts • Direct Labor Costs • Indirect Costs • Other Direct Costs • Royalties • Proposal Adequacy
Slide 4: Background Information
Adequacy of Proposals – Background Background Information We must understand the nature and purpose of proposals to assure proposal adequacy. As you navigate through the sections that follow, imagine yourself in the role of Government auditor (e.g., DCMA, DCAA) as you consider the necessity and effe
Slide 5: What is a Proposal?
Adequacy of Proposals – Background What is a Proposal? FAR 31.001 defines a proposal as any offer or other submission used as a basis for pricing a contract, contract modification, or termination settlement or for securing payments thereunder. This resource document focuses only on adequacy requirem
Slide 6: PCO and ACO Role in Cost Analysis
Adequacy of Proposals – Background PCO and ACO Role in Cost Analysis FAR 15.404-1(a)(3) requires the Government to perform a cost analysis to evaluate the reasonableness of individual cost elements included in proposals that require submission of certified cost or pricing data. Cost analysis procedu
Slide 7: Certified Cost or Pricing Data
Adequacy of Proposals – Background Certified Cost or Pricing Data FAR 2.101 defines certified cost or pricing data as “cost or pricing data” that were required to be submitted in accordance with FAR 15.403-4 and 15.403-5 and have been certified, or are required to be certified, in accordance with FA
Slide 8: Certified Cost or Pricing Data (cont'd)
Adequacy of Proposals – Background Certified Cost or Pricing Data (cont’d) Some of the most important aspects of certified cost or pricing data are: • The data must be information that could reasonably be expected to significantly affect negotiations to qualify as cost or pricing data • Certified co
Slide 9: Certified Cost or Pricing Data (cont'd)
Adequacy of Proposals – Background Certified Cost or Pricing Data (cont’d) Certified cost or pricing data also includes such factors as: • Vendor quotations • Nonrecurring costs • Changes in production methods and in production or purchasing volume • Data supporting projections of business prospects
Slide 10: Certified Cost or Pricing Data Submission Criteria
Adequacy of Proposals – Background Certified Cost or Pricing Data Submission Criteria The threshold for obtaining certified cost or pricing data is defined in FAR 15.4. Currently, this threshold is $2M, but USG prime contracts prior to July 1, 2017 may require a lower threshold. 15.403-4(a) requires
Slide 11: Exception Criteria
Adequacy of Proposals – Background Exception Criteria FAR 15.403-1(b) prohibits the PCO from requiring Offerors to submit certified cost or pricing data: • If the price is based on adequate competition • If the price is set by law or regulation • For the acquisition of a commercial item • When the h
Slide 12: Responsibilities for Adequacy
Adequacy of Proposals – Responsibility Responsibilities for Adequacy This section identifies the benefits of reviewing proposals for adequacy, responsibilities for proposal adequacy, and the actions required when there are inadequacies. 12
Slide 13: Offeror Responsibilities
Adequacy of Proposals – Responsibility Offeror Responsibilities The Offeror is solely responsible for preparing and submitting an adequate proposal and supporting its proposed costs. When the proposal is submitted, it should be complete and ready for audit. FAR 15.403-4(b) further emphasizes this re
Slide 14: Lockheed Martin Buyer Responsibilities
Adequacy of Proposals – Responsibility Lockheed Martin Buyer Responsibilities The Lockheed Martin Buyer is the decision maker in the procurement process. For proposals requiring the Offeror to furnish certified cost or pricing data, the Lockheed Martin Buyer must determine: • If the certified cost o
Slide 15: General Adequacy Requirements
Adequacy of Proposals – General Reqmts General Adequacy Requirements This section identifies the general FAR requirements for an adequate proposal. These requirements form the basis for initial assessment of proposal adequacy. 15
Slide 16: General Requirements
Adequacy of Proposals – General Reqmts General Requirements FAR 15.408, Table 15-2 requires the first page of the pricing proposal to contain the following: • The solicitation, contract and/or modification number • The name and address of the Offeror • The name and telephone number of the Offeror’s
Slide 17: General Requirements (cont'd)
Adequacy of Proposals – General Reqmts General Requirements (cont’d) • If the Offeror has submitted a CASB Disclosure Statement and if it has been determined adequate • If the Offeror has been notified they are, or may be, in noncompliance with their Disclosure Statement or cost accounting standards
Slide 18: General Requirements (cont'd)
Adequacy of Proposals – General Reqmts General Requirements (cont’d) The following statement must also be included on the first page of the proposal: This proposal is submitted in response to the solicitation, contract, modification, etc. and reflects our estimates and/or actual costs as of this dat
Slide 19: Summary Cost-Element Breakdowns
Adequacy of Proposals – General Reqmts Summary Cost-Element Breakdowns FAR 15.408, Table 15-2 requires Offerors to segregate the proposal by line item with sufficient detail to permit cost analysis. Offerors must also attach cost element breakdowns for each proposed line item and furnish supporting
Slide 20: Other Requirements
Adequacy of Proposals – General Reqmts Other Requirements For the proposal to be adequate, the Offeror must also: • Submit a copy of any agreement on use of forward pricing rates/factors reached with Government representatives and describe its nature. This is typically referred to as a Forward Prici
Slide 21: What Constitutes Submission?
Adequacy of Proposals – General Reqmts What Constitutes Submission? There is a clear distinction between submitting certified cost or pricing data and merely making available books, records, and other documents without identification. The requirement for submission of certified cost or pricing data
Slide 22: Keeping the Proposal Current
Adequacy of Proposals – General Reqmts Keeping the Proposal Current As stated above, the Offeror’s responsibility for an adequate proposal does not end when the proposal is submitted. FAR 15.408, Table 15-2 requires the Offeror to promptly submit any later information impacting the proposal as it co
Slide 23: Material and Subcontract Costs
Adequacy of Proposals – Mat’l & Subcontracts Material and Subcontract Costs In this section, the FAR submittal requirements related to material and subcontract costs are identified. 23
Slide 24: Direct Materials
Adequacy of Proposals – Mat’l & Subcontracts Direct Materials FAR 15.408, Table 15-2 requires the Offeror to provide a consolidated priced summary of individual material quantities (typically referred to as a Consolidated Bill or Material, or CBOM) included in the contract being proposed. The propos
Slide 25: Basis for Estimating Material Items
Adequacy of Proposals – Mat’l & Subcontracts Basis for Estimating Material Items The basis for a material item estimate may be a supplier quote, purchase history with or without escalation, weighted average cost, etc. Different material items and/or categories may be costed by different methods. The
Slide 26: Bill of Material Elements
Adequacy of Proposals – Mat’l & Subcontracts Bill of Material Elements A Summary CBOM or line item BOM must identify elements such as: • Part number • Nomenclature • Material type • Non-recurring costs • Quantity required • Unit of measure • Basis of cost, for example: – A = Moving average inventory
Slide 27: Subcontracts
Adequacy of Proposals – Mat’l & Subcontracts Subcontracts The requirements placed on prime Offerors also apply to subcontractors. When the Government requires the prime to submit certified cost or pricing data, its suppliers must also submit certified cost or pricing data to the prime contractor (or
Slide 28: Supplier Competition and Certified Cost or Pricing Requirements
Adequacy of Proposals – Mat’l & Subcontracts Supplier Competition and Certified Cost or Pricing Requirements For competitively priced items over the certified cost or pricing data threshold, the Offeror must provide data showing the degree of competition and the basis for establishing the source and
Slide 29: Noncompetitive Subcontracts
Adequacy of Proposals – Mat’l & Subcontracts Noncompetitive Subcontracts The requirements for noncompetitive subcontracts exceeding the certified cost or pricing data threshold are as follows: • Include in proposal the basis for establishing the reasonableness of the price (Cost/Price Analysis) • Su
Slide 30: Evaluation of Sub-Tier Prices
Adequacy of Proposals – Mat’l & Subcontracts Evaluation of Sub-Tier Prices For all sub-tier proposals over the certified cost or pricing data threshold, where the subcontractor is required to submit certified cost or pricing data, the Offeror is responsible for: • Conducting a price analysis and a c
Slide 31: Inter-organizational Transfers
Adequacy of Proposals – Mat’l & Subcontracts Inter-organizational Transfers Inter-organizational transfers are defined as materials, supplies, or services sold or transferred between any divisions, subsidiaries, or affiliates of a Offeror under a common control. • Competitive Interorganizational Tra
Slide 32: Inter-organizational Transfers (cont'd)
Adequacy of Proposals – Mat’l & Subcontracts Inter-organizational Transfers (cont’d) FAR 31.205-26(e) establishes allowability criteria for inter-organizational transfers proposed on an "other than cost" basis. Such transfers may be at price rather than cost when: • It is the established practice to
Slide 33: Sub-tier Supplier Certification
Adequacy of Proposals – Mat’l & Subcontracts Sub-tier Supplier Certification Certified cost or pricing data must be obtained from sub-tier suppliers when the: • Higher tier Offeror is required to submit certified cost or pricing data, and • Subcontract or purchase order is expected to exceed the cer
Slide 34: Direct Labor Costs
Adequacy of Proposals – Direct Labor Direct Labor Costs In this section, the FAR submission requirements related to direct labor costs are identified. 34
Slide 35: General Requirements
Adequacy of Proposals – Direct Labor General Requirements Offerors must provide a time-phased breakdown of labor hours, rates, and cost by appropriate labor category, and furnish the basis for its estimates for the entire period of performance. FAR 15.408, Table 15-2 requires the Offeror to identify
Slide 36: Basis for Labor Estimates
Adequacy of Proposals – Direct Labor Basis for Labor Estimates FAR 15.408, Table 15-2 also requires the Offeror to provide the basis for estimates of labor costs. For instance, the Offeror might indicate that: • Estimated manufacturing hours (all categories) are based on historical hours adjusted fo
Slide 37: Basis for Labor Estimates (cont'd)
Adequacy of Proposals – Direct Labor Basis for Labor Estimates (cont’d) Typically, Labor BOEs would contain, but not be limited to, the following information: • Work Breakdown Structure • Period of Performance showing start and stop dates • Labor Categories being priced, to include task descriptions
Slide 38: Indirect Costs
Adequacy of Proposals – Indirect Costs Indirect Costs For Indirect Costs included in proposals at any tier, the following apply: • The proposal shall indicate how indirect costs have been computed and applied, including time-phased cost breakdowns • For each year of the period of performance, the ra
Slide 39: Other Direct Costs (ODC)
Adequacy of Proposals – Other Direct Costs Other Direct Costs (ODC) Other Direct Costs (ODC) The term Other Direct Costs (ODC) is a loosely defined term that refers to anything charged directly to a contract not otherwise included as Direct Material or Direct Labor. Examples of items often classifie
Slide 40: General Requirements
Adequacy of Proposals – Other Direct Costs General Requirements If the Offeror proposes travel costs, it might show the basis for the proposed travel costs as follows: Lodging Total Lodging Total City/State Trips Persons Days Airfare Total Airfare Per Diem Car Rental Total Car Rental Grand Total Per
Slide 41: Basis for Pricing
Adequacy of Proposals – Other Direct Costs Basis for Pricing Cost details alone are often insufficient. FAR 15.408, Table 15-2 requires the Offeror to provide the basis for estimate. This is often satisfied by a narrative description of the costs. For example, the Offeror should: • Provide justifica
Slide 42: Royalties
Adequacy of Proposals – Royalties Royalties If royalties exceed $1,500, the Offeror must provide the following information on a separate page for each separate royalty or license fee: 1. Name and address of licensor. 2. Date of license agreement. 3. Patent numbers. 4. Patent application serial numbe
Slide 43: Proposal Adequacy Checklist (F330)
Adequacy of Proposals – Checklist Proposal Adequacy Checklist (F330) The Government expects Lockheed Martin and its Global Supply Chain to submit proposals that are compliant with the FAR and DFARS requirements for adequacy and can be relied upon as a basis for negotiating fair and reasonable prices
Slide 44: DFARS Requirement for a Proposal Adequacy Checklist at the Prime Contractor Level
Adequacy of Proposals – Checklist DFARS Requirement for a Proposal Adequacy Checklist at the Prime Contractor Level On 3/28/2013 a final rule was issued to add DFARS 215.408(6) which prescribed that when certified cost or pricing data was required, the clause at 252.215-7009 must be included in the
Slide 45: The Proposal Adequacy Checklist – Basic Rules and Utilization
Adequacy of Proposals – Checklist The Proposal Adequacy Checklist – Basic Rules and Utilization The Proposal Compliance Checklist (F330) should be used throughout the proposal preparation task to ensure that all requirements have been met. It should be considered at the earliest stage of proposal pl
Slide 46: The Proposal Adequacy Checklist – Basic Rules and Utilization (cont'd)
Adequacy of Proposals – Checklist The Proposal Adequacy Checklist – Basic Rules and Utilization (cont’d) The following are the steps to complete the proposal checklist: • In the area directly below the proposal checklist title the Offeror must provide the following information: – Offeror Name – Prop
Slide 47: The Proposal Adequacy Checklist – Basic Rules and Utilization (cont'd)
Adequacy of Proposals – Checklist The Proposal Adequacy Checklist – Basic Rules and Utilization (cont’d) • There may be occasions where even a “Yes” response will require further clarification which would be provided in the Explanation column as well. • The far right column must reflect specifically
Slide 48: Common Omissions and Findings
Adequacy of Proposals – Checklist Common Omissions and Findings • Proposals not containing an index of certified cost or pricing data or other information included or referenced in the proposal, submitted actually or by specific identification, utilized in preparing the proposal. This index should i
Slide 49: Common Omissions and Findings (cont'd)
Adequacy of Proposals – Checklist Common Omissions and Findings (cont’d) • Pricing templates are either missing or do not add to the total proposed value • Pricing summaries required by Section III of FAR 15.408, Table 15- 2 are missing • Cost breakdowns that do not provide time-phasing of hours, ra
Slide 50: How is the proposal checklist utilized by Lockheed Martin?
Adequacy of Proposals – Checklist How is the proposal checklist utilized by Lockheed Martin? Lockheed Martin must verify that the Offeror’s proposal is indeed compliant. Lockheed Martin cannot proceed with requesting any necessary audit(s), submit the proposal to the Government or proceed with negot
Slide 51: Conclusion
Adequacy of Proposals – Conclusion Conclusion Lockheed Martin expects its Global Supply Chain to provide compliant proposals at the time of initial submittal to Lockheed Martin. Rework of Offeror proposals should be the exception and not the rule. Offeror’s responsibilities for its sub-tier supplier