Subcontract Pricing Considerations – Prime Contractors Must Demonstrate Reasonableness of Proposed Subcontract Costs

Earlier this month, we highlighted a revised audit policy from the Defense Contract Audit Agency (DCAA) concerning the evaluation of subcontract costs included in forward pricing proposals. FAR 15.404-3(3)(b) requires prime contractors to perform whatever cost/price analysis is necessary to determine the reasonableness of proposed prices. Sometimes they don’t do that so historically, DCAA has considered them unsupported and perhaps identified the omission as an estimating deficiency. That policy did nothing to advance contract negotiations nor help procurement offices to negotiate fair and reasonable prices. Under the new guidance, DCAA is to provide whatever information it has available or conduct additional analytical work (i.e. develop decrement factors) to assist in any way it can. See “Revised Audit Policy for Reviewing Subcontractor Costs” for more information on the new policy.

Source: PNWC’s Government Contracting Update: Subcontract Pricing Considerations – Prime Contractors Must Demonstrate Reasonableness of Proposed Subcontract Costs