Procurement Information Circular
PURPOSE: To provide guidance on obtaining information necessary for contracting officers to make a determination that prices agreed to are fair and reasonable.
BACKGROUND: FAR 15.403-1(b) provides that cost or pricing data is not required if the contracting officer determines that the price agreed to is based on: adequate price competition, prices set by law, purchase of commercial items, when a waiver has been granted, or when modifying a contract for commercial items. These exceptions do not relieve the contracting officer from the responsibility to determine that the prices paid for supplies or services are fair and reasonable. This is particularly important in those situations where adequate price competition was anticipated but only one offer was received and for commercial item acquisitions. As recently as September 1999, Parts 12 and 15 of the Federal Acquisition Regulation (FAR) were revised to provide clearer guidance regarding obtaining and analyzing historical pricing information necessary for completion of an adequate price analysis. Per FAR 15.403-3, the contracting officer is responsible for obtaining information adequate for evaluating price reasonableness. Contracting officers should use every means available to ascertain whether a price is fair and reasonable before requesting cost or pricing data. Contracting officers must not require unnecessarily the submission of cost or pricing data because it leads to increased proposal preparation costs, generally extends acquisition lead time, and consumes additional contractor and Government resources.
GUIDANCE: If price is not based on any of the factors described above, or price reasonableness cannot be determined independently, then contracting officers should require contractors to provide information needed for making price comparisons and analyzing pricing trends. This includes information regarding prior prices at which the item was sold, the quantities sold, and other pertinent facts. In some situations it may also be appropriate to obtain cost information to enable the contracting officer to analyze price increases not otherwise explainable from market research.
A contractor that refuses to provide necessary information may be rendered ineligible for award unless the Head of the Contracting Activity determines otherwise, in accordance with FAR 15.403-3(a)(4). As such, it is important that contractor refusals to provide requested pricing information receive the attention of management at levels higher than the contracting officer, and that contracting officers document the extent of their efforts to obtain needed information.
Price analyses must be fully documented in the contract file. If circumstances compel the Government to agree to a price that cannot be justified as fair and reasonable, those circumstances must also be fully documented so that the price will not be used as the basis for future price comparisons. These requirements are not new. They remain an essential aspect of price analyses and price reasonableness determinations, irrespective of whether the item being bought is commercial or non-commercial.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in effect until canceled or superseded.
HEADQUARTERS CONTACT: Lou Becker, Code HK, (202) 358-4593, e-mail: email@example.com.
R. Scott Thompson
Director, Contract Management Division