SECTION VI - PRE-NEGOTIATION ANALYSIS.

[The business clearance should be a stand-alone document which explains the offer(s) and the Government's evaluation of the offer(s). An understanding of the development of each position is important to be adequately prepared for negotiations, to determine a competitive range, or to decide to award without negotiations. This section should be tailored to the specific solicitation's procedures for evaluation of cost/price and other non-cost factors included in the solicitation.]

Document the methodology used by the offeror(s) in developing the proposal(s) both from cost and non-cost stand-points and the methodology used by the Government in developing its negotiation position(s). Include discussion of recommendations from field pricing/technical/audit reviews, which recommendations were or were not used and why the recommendations used were considered appropriate for use in developing the Government's independent pre-negotiation position(s).

Address each factor used for evaluation as follows:

A.  Technical Evaluation (FAR 15.305(a)(3)). For each subfactor under the technical factor, give the adjectival ratings or raw scores for each offeror. Show the weighting or other means of determining the overall score for the factor (15.305). Discuss any clarifications obtained in the process of the evaluation or other communications with offerors before establishment of the competitive range (FAR 15.306). Summarize the technical weaknesses and deficiencies of each offeror.

B.  Past Performance Evaluation (FAR 15.305(a)(2)). For each subfactor under the past performance factor, give the adjectival ratings or raw score for each offeror. Show the weighting or other means of determining the overall score for the factor. Discuss any clarifications obtained in the process of the evaluation or instances where an offeror was given access to adverse past performance information to which the offeror had not previously had an opportunity to respond (FAR 15.306). Summarize weaknesses or deficiencies of each offeror. This factor should include evaluation of past performance under subcontracting plans if required by DFARS 215.305(a)(2).

C.  Other Non-Cost Factor Evaluation. For each subfactor under any non-cost evaluation factor, give the adjectival or raw score for each offeror. Show the weighting or other means of determining an overall score for the factor. Discuss any clarifications obtained in the process of the evaluation or other communications with offerors before establishment of the competitive range (FAR 15.306). Summarize the weaknesses and deficiencies of each offeror.

D.  Cost/Price and Profit/Fee Analysis (FAR 15.305(a)(1)). [Evaluation of proposals may be done through cost analysis, price analysis, or a combination of the two techniques. The necessity for a separate profit/fee analysis is dependent on the extent of price analysis (FAR 15.404(c)(1) and DFARS 215.404(c)(1)).]

1.  Price analysis (FAR 15.404-1(b)).

a.  Provide a summary comparison by line item or cost element, as appropriate to the solicitation, for all offerors and the Government's position or IGE.

b.  Document how the price was determined to be fair and reasonable. If determining price reasonableness based on adequate price competition, the clearance should address the criteria of FAR 15.403-1(c)(1). If prices are set by law or regulation, specify the basis for the price cited (FAR 15.403-1(c)(2). Price reasonableness determinations based on comparison to historical prices, catalogue prices, market prices, or other such benchmarks should establish comparability of the supplies/services. The prices being compared should be specified in the clearance or an attachment. If catalogue prices are used for comparison, availability of such prices to the public should be addressed.

2.  Cost evaluation (FAR 15.404-1(c)).

a.  Provide a summary comparison for each offeror in columnar format of (i) the offeror's proposal, (ii) the audit recommendations (FAR 15.404-2(c)), if requested, (iii) the field pricing recommendations (FAR 15.404-2(a)), if requested, and, (iv) the pre-negotiation position by elements of cost. [Elements of cost may vary. The following is a notional format.]

b.  Provide a narrative addressing the individual elements of cost . Identify factors under major cost elements to show how the pre-negotiation position was developed. Identify and detail areas of nonconcurrence with audit or field recommendations and provide justification for the nonconcurrence. Detail can be included as an attachment where necessary. If the clearance is for definitization of a Letter Contract or existing commitment, specifics on actual costs incurred should be included

(i).  Material.

(a).  Summary of source and contractor's estimates - firm purchase orders, quotes, competition, catalog items, estimates, prior history.

(b).  Attrition/Scrap/Variance factors applied to the net bill of material.

(c).  Make/Buy plans.

(d).  Summary of field sampling technique. Dollar percentage of items reviewed to total dollar value of bill of material.

(e).  Historical negotiation reduction factor prime contractor experiences when converting vendor quotes to firm purchase orders.

(f).  For high dollar value items, review prime contractor negotiator's analysis. Discuss use of actual cost data to develop negotiation positions. Utilize most recent historical actual cost for analysis. Compare unit prices with historical prices.

(g).  Discuss findings of assist audits and explain if any audit recommendations were not incorporated into the Government position.

(h).  Identify the quantity and value of recurring and nonrecurring material.

(i).  Discuss offeror's efforts to combine common parts for this effort and other programs in-house. Identify the percent of material under subject acquisition which is being bought under corporate pricing agreements.

(ii).  Material Overhead.

(a).  Summary of proposed rates and basis for rates per year. If negotiated forward pricing rate agreement (FPRA) exists, identify period covered by the agreement.

(b).  If no negotiated agreement exists, state field recommended rates by year and reasons for variances from proposed rates.

(c).  Discuss historical rate actuals. Discuss whether actuals are tracking to the negotiated FPRAs. If actuals are not tracking, discuss coordinated action with ACO.

(d).  Identify material base to which the rate applies.

(e).  Summarize negotiator's analysis in determining rates for the development of the pre-position.

(iii).  Direct Labor. [If appropriate, use separate sections for types of labor such as engineering and manufacturing.]

(a).  Summary of offeror's approach and basis for estimate by individual labor category.

(b).  Discuss whether the offeror's proposal will comply with any wage determinations required.

(c).  Provide historical actual hours per each labor category.

(d).  Identify recurring and non-recurring hours.

(e).  Identify hours which are quantity related and which are time related.

(f).  Provide manloading charts, if applicable.

(g).  Summarize negotiator's approach to developing pre-position.

●  Learning curve with provide actual points, midpoints, slope of regression and coefficient of determination (R 2) of regression.

●  Level of effort over period of performance (constant or variable).

●  Recurring and nonrecurring hours.

●  Time/quantity related nature of work for manufacturing support.

●  Conversion factors for staffing level (head count) to hours.

(iv).  Labor Rates.

(a).  Summarize offeror's proposed rates per year and basis for development. Compare to any applicable wage determination if required by the Service Contract Act or Davis-Bacon Act. If negotiated forward pricing agreement (FAR 15.407-3) exists, identify period covered by the agreement. Discuss effect of union agreement(s) or wage determination(s), if applicable, on forward pricing rate established. Identify when Cost of Living Adjustments (COLAS) or wage determination updates are scheduled.

(b).  Address rates of increase for executive compensation, salaries, wages and employee benefits as it applies to the planned aggregate of all types of labor (both direct and indirect) increases (e.g., Cost of Living Allowances, in-grade increases, merit increases and performance bonuses) as well as to employee fringe benefits (e.g., lower deductible for employee's share of medical and dental insurance premiums, changes in employer's share of salaried savings plans, increased vacation/sick leave/holiday). Excluded are new hires, promotions and normal attrition.

(c).  If no negotiated forward pricing agreement exists, discuss field recommended rates by year and reasons for any variance from proposed rates.

(d).  Discuss historical actuals. If a negotiated forward pricing agreement is in effect, discuss whether the actuals are tracking to the negotiated rates. If actuals are not tracking to the negotiated rates, input on use of negotiated rates should be obtained from the ACO.

(e).  Summarize the negotiator's analysis for determining rates used to develop the pre-negotiation position.

(v).  Overhead Rates.

(a).  Summarize offeror's proposed rates per year and basis for estimate. If negotiated forward pricing agreement exists, identify period covered by the agreement.

(b).  If no negotiated agreement exists, discuss field recommended rates by year and reasons for variances from contractor proposed rates.

(c).  Discuss historical actuals using correlative analysis of the base to experience rate. If a negotiated forward pricing agreement is in effect, discuss whether the actuals are tracking to the negotiated rates. If actuals are not tracking to the negotiated rates, input on use of negotiated rates should be obtained from the ACO.

(d).  Summarize the negotiator's analysis for determining composite rates used to develop the pre-negotiation position.

(e).  Discuss any ceilings on rates.

(f).  Identify and discuss wage escalation included in rates.

(g).  If the Service Contract Act and/or Davis-Bacon Act is applicable, discuss whether any portion of forward pricing rate agreement amounts or other wage escalation included in overhead rates duplicates the "accompanying costs" adjustment under the Acts.

(vi).  Subcontracts.

(a)  Summarize subcontracts included in the proposal [unless included under earlier sections on material or labor].

(b)  Provide negotiator's analysis of subcontracts including information obtained from audit or field pricing.

(vii)  Other Direct Charges.

(a).  Summarize offeror's proposed expenses and basis for estimate.

(b).  Summarize field recommendations.

(c).  Negotiator's analysis supported by actuals and historical data.

(vii).  G&A.

(a).  Summarize offeror's proposed rates per year and basis for estimate. If negotiated forward pricing agreement exists, identify period covered by the agreement.

(b).  If no negotiated agreement exists, discuss field recommended rates by year and reasons for variances from contractor proposed rates.

(c).  Discuss historical actuals using correlative analysis of the base to experience rate. If a negotiated forward pricing agreement is in effect, discuss whether the actuals are tracking to the negotiated rates. If actuals are not tracking to the negotiated rates, input on use of negotiated rates should be obtained from the ACO.

(d).  Summarize the negotiator's analysis for determining composite rates used to develop the pre-negotiation position.

(e).  Discuss any ceilings on rates.

(f).  Identify and discuss wage escalation included in rates.

(g).  If the Service Contract Act and/or Davis-Bacon Act is applicable, discuss whether any portion of forward pricing rate agreement amounts or other wage escalation included in G&A rates duplicates the "accompanying costs" adjustment under the Acts.

(ix).  Cost of Money.

(a).  Summarize offeror's proposed facts ear and basis for estimate. If negotiated forward pricing agreement exists, identify period covered by the agreement.

(b).  If no negotiated agreement exists, discuss field recommendation and reasons for any variances from contractor proposed rates.

(c).  Discuss historical actuals. If a negotiated forward pricing agreement is in effect, discuss whether the actuals are tracking to the negotiated factors. If actuals are not tracking to the negotiated rates, input on use of negotiated rates should be obtained from the ACO.

(d).  Summarize the negotiator's analysis for determining composite rates used to develop the pre-negotiation position.

(e).  Discuss any ceilings on rates.

(f).  Attach DD Form 1861 for each offeror in the competitive range.

3.  Pre-Negotiation Profit/Fee Analysis.

a.  Discuss each contractor's proposed profit/fee rate.

b.  Support pre-negotiation profit/fee rate with completed DD Form 1547 (DFARS 215.404-4(b)(1)) and discuss use of each assigned weight, or discuss applicable exemption.

c.  Incentive/Award Fee Structure.

(i).  Share ratio under/over target and rationale.

(ii).  Min/max fee structure and rationale.

(iii).  Point of Total Assumption (PTA) analysis.

(iv).  Ceiling.

(v).  Range of cost incentive effectiveness (RIE) for CPIF.