Subaward pricing is a critical element in the pricing of prime contracts and a major consideration in receiving government consent to subawards and approval for contractor purchasing systems. Subawards can sometimes represent a major portion of the total dollars spent under a prime contract. Contracting officers cannot ensure the fairness and reasonableness of prime contract prices without evaluating the prices of critical subawards. The principal investigator (PI) is required to verify that the costs are reasonable and necessary to carry out the proposed project.
In accordance with the Federal Acquisition Regulation (FAR), the contracting officer is responsible for determining price reasonableness for the prime contract. To make this determination, the contracting officer must conduct an analysis of the relevant facts and data, including subcontractor cost or pricing data. In all cases, a main consideration is to ensure that the price to be paid for these goods and services is fair and reasonable. This is essential to ensure that both university and government funds are utilized in a cost-effective manner and to conserve funding where resources are limited. To accomplish this, some form of cost or price analysis must be made and documented in connection with every procurement action.
A price analysis is an examination of the price proposed by the anticipated subcontractor and an assessment or evaluation as to whether it is fair and reasonable. A cost analysis, however, actually examines the individual cost elements that compose the total proposed estimated cost. These elements generally include such costs as labor rates, material costs, overhead or indirect rates, a cost-of-money factor, general and administrative expenses (G&A), and a profit or fee.
If requesting bids from subcontractors, please note: If a subaward exceeding $750,000 is issued under a government contract prime award, OSP must be in compliance with Public Law 87-653, the Truth in Negotiations Act (TINA). [The Public Law has been implemented in the United States Code of Federal Regulations 10 U.S.C. 2306a (Armed Forces) and 41 U.S.C. 254b (Public Contracts) and in the Federal Acquisition Regulation Part 15 and Clause No. 52.215-12.]