DFARS Final Rule: Requiring Data Other Than Certified Cost or Pricing Data

(DFARS Case 2020-D008)

Effective October 28, 2022, the Department of Defense (DoD) issued a final rule amending Parts 215 and 242 of the Defense Federal Acquisition Regulation Supplement (DFARS) to provide additional requirements relating to the submission of other than cost or pricing data as implemented by the National Defense Authorization Act (NDAA) for Fiscal Year 2020.  You can find the DFARS final rule by clicking here.

SpendLogic Opinion

While an initial readthrough of the text seems to imply that this effectively renders the use of historical pricing useless in price analysis, it does nothing of the sort.  Essentially, this rule change simply further solidifies what was intended all along:  It prohibits price analysis based on price history alone. 

 For the majority of federal contractors (and all SpendLogic clients,) no change to current practices is needed.  As long as your price analysis is:

• Not based on price alone
• Not committing the “price analysis of history based on history, which was based on history…” sin
• Taking into consideration terms and conditions, passage of time (escalation), and adjusts for quantity and complexity

…then this DFARS change is essentially a non-event.  SpendLogic’s built-in compliance alerts already ensure that analysts take the above elements into consideration.

Note that this opinion is shared by the Defense Contract Management Agency (DCMA) Commercial Item Group (CIG).  In an “Industry Day” presentation, 12/1/2022, Scott Pace of the DCMA CIG commented that “Effectively, what it’s doing is noting that those historical prices are the ONLY consideration in determining fair and reasonable and other than certified [cost or pricing] data is an element that PCOs should consider when establishing fair and reasonable pricing.”  The 75+ attendees (both Industry and Government) agreed with this assessment.

The DFARS Final Rule Details

DFARS 215.403-3, Requiring data other than certified cost or pricing data, is amended by adding paragraph (a)(1) to state that contracting officers shall not determine the price of a contract or subcontract to be fair and reasonable based solely on historical prices paid by the Government.   Specific reference is made to DFARS Procedures, Guidance, and Information (PGI) 215.403-3(4), Analysis of historical prices paid by the Government, which states that the contracting officer shall consider prices by the Government and commercial customers but shall not rely solely on the prior prices paid without further analysis.   

It now appears contracting officers will need to conduct and document additional analysis in the event the only data available is prior prices paid by the government.  Pursuant to PGI 215.403-3(4)(B), contracting officers will have to analyze and make any adjustments to the price prices paid for quantity corrections, passage of time, and cost impacts of any materially different terms and conditions as well as cost impacts for similar items.  These analysis factors are included in the revision of DFARS 215.404-1(b)(ii) and (b)(v), Proposal Analysis Techniques, which specifically references FAR 15.404-1(b)(2)(ii)(B).    

Prime contractors should be aware this rule change applies to subcontracts and that the contracting officer is responsible for assessing and evaluating the Prime’s analysis of the subcontractor’s proposal to ensure the Prime considered additional data other than previous prices paid. 

Additionally, DFARS 215.403-3(a)(4) states that in lieu of the factors for consideration in FAR 15.403-3(a)(4), if an award is determined to be in the best interest of the Government by the head of the contracting activity and an offeror has not made a good faith effort to comply with the government’s reasonable requests to submit data other than certified cost or pricing data, the head of the contracting activity shall, as part of the decision making process, consider the following factors: 

(i) The effort to obtain the data.

(ii) Availability of other sources of supply of the item or service.

(iii) The urgency or criticality of the Government’s need for the item or service.

(iv) Reasonableness of the price of the contract, subcontract, or modification of the contract or subcontract based on information available to the contracting officer.

(v) Rationale or justification made by the offeror for not providing the requested data.

(vi) Risk to the Government if award is not made.

The significant differences between FAR 15.403-3(a)(4) and DFARS 215.403-3(a)(4) is the addition of the (ii), (iv), and (v) along with the qualifier of “urgency or criticality” to the Government’s “need” for an item in (iii), and the element of “risk” vs. “increased cost or significant harm” in (vi) if an award is not made.

Finally, an offeror’s refusal to provide other than certified cost or pricing data may have long-term affects with the revision to DFARS 242.1502, Contractor Performance Information, Policy.  Pursuant to this change, unless exempted by the head of the contracting activity, a contractor’s CPAR will include a notation of the contractor’s denial of multiple requests for the submission of other than certified cost or pricing data over the preceding 3-year period, but nevertheless received an award. This information will be included in an annual report and the Under Secretary of Defense for Acquisition and Sustainment will assess the sole source nature of the providers in the report and develop strategies to incentivize others in an effort to increase the number of sources of supply for the product or service. 10 U.S.C. 2306a(d)(2)(B)(ii).

There are no new solicitation provisions or contract clauses as a result of this Final Rule nor is there any impact to existing solicitation provisions or contract clauses or the applicability to contracts valued at or below the Simplified Acquisition Threshold (SAT), for commercial services, or commercial products including COTS items.

Conclusion

If you’re currently basing price analysis on historical pricing, without considering other factors, consider this to be the strongest support yet for making a change to how you currently do business. 

SpendLogic’s Price Analysis module has all the factors contracting officers are required to consider already baked in.   If you’re ready to standardize and simplify procurement documentation, automate compliance reviews, and reduce time spent on paperwork, give SpendLogic a try.  Reach out to us at [email protected].