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CLC 059 STUDY GUIDE 2026 ACTUAL
QUESTIONS WITH SOLUTIONS GRADED A+
● Data Other Than Certified Cost or Pricing Data Pricing data, cost data, and judgmental information necessary for the contracting officer to determine a fair and reasonable price or to determine cost realism. Such data may include the identical types of data as certified cost or pricing data, but without the certification. The data may also include, for example, sales data and any information reasonably required to explain the offeror's estimating process. Answer: Direct Cost Any cost that is identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct costs of that contract. ● Facilities Capital Cost of Money FCCOM is used to compensate contractors for use of capital without regard to whether the source is owner's equity or borrowed. It is designed to help contractors achieve a return on their investment in facilities capital. It is NOT considered interest on borrowing, which is unallowable according to the FAR. Answer: Fair and Reasonable Price
A price must be considered fair to both parties. A price that a prudent and competent buyer would be willing to pay is a reasonable price. A fair and reasonable price is dependent on the market conditions, general economic conditions, promised quality, competition, alternative approaches, and timeliness of contract performance. ● Forward Pricing Rate Agreement A written agreement negotiated between a contractor and the Government to make certain rates available during a specified period for use in pricing contracts or modifications. Answer: General and Administrative Expense Any management, financial, and other expense which is incurred by or allocated to a business unit and which is for the general management and administration of the business unit as a whole. ● Indirect Cost Any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives (i.e. contracts) or with at least one intermediate cost objective. Answer: Indirect Cost Rate
the initial contract—and takes into account the total of positive and negative adjustments that may exceed $2 million. Link to example According to FAR 15.403-1, the primary prohibition on obtaining certified cost or pricing data is for acquisitions at or below the simplified acquisition threshold (SAT). This accounts for most of the contract actions in the DoD that are exempt from the certified cost or pricing data requirement. However, this prohibition is in a category all by itself and is not considered an "exception." The five "exceptions" to the requirement are: When the contracting officer determines that prices agreed upon are based on adequate price competition; When the contracting officer determines that prices agreed upon are based on prices set by law or regulation; When a commercial item is being acquired; When a waiver has been granted by the Head of the Contracting Activity; and When modifying a contract or subcontract for commercial items.
● FAR 15.403-1(c) goes into significant detail on what each of the five exceptions involves, but let's look here at the details for the first exception, adequate price competition. Adequate price competition exists when:(i) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government's expressed requirement and if— (A) Award will be made to the offeror whose proposal represents the best value where price is a substantial factor in source selection (B) There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the price is unreasonable must be supported by a statement of the facts and approved at a level above the contracting officer (ii) (Note: FAR 15.403-1(c)(1)(ii) does not apply to DoD acquisitions.) (iii) Price analysis clearly demonstrates that the proposed price is reasonable in comparison with current or recent prices Answer: The figure above demonstrates that contracting officers are prohibited from ever requiring certified cost or pricing data for acquisitions at or below the SAT. The contracting officer may require certified cost or pricing data for acquisitions above the SAT but below the TINA threshold with approval from the Head of the Contracting Activity. Finally, the contracting officer shall require certified cost or pricing data for acquisitions at or above the TINA threshold, unless one of the exceptions at FAR 15.403-1(b) applies.
Exclude contingencies ● 1. Purchase supplies and services from responsible sources at fair and reasonable prices A "fair and reasonable" price is what a prudent and competent buyer would consider fair. A price is considered fair to both parties depending on the agreed-upon market conditions, general economic conditions, promised quality, competition, alternative approaches, and timeliness of contract performance. A "fair and reasonable" price for the buyer (i.e., the Government) is (i) total allowable cost of providing the contract deliverable that would have been incurred by a well-managed, responsible firm using reasonably efficient and economical methods of performance, plus (ii) a reasonable profit. A "fair" price for the seller (i.e., the contractor) is what's realistic in terms of seller's ability to satisfy the terms and conditions of a contract. The Government uses price analysis to determine what a "fair and reasonable" price is Answer: 2. Price each contract separately and independently According to FAR 15.402(b), the contracting officer is required to price each contract separately and independently and not:
(1) Use proposed price reductions under other contracts as an evaluation factor (2) Consider losses or profits realized or anticipated under other contracts ● 3. Exclude contingencies According to FAR 15.402(c), the contracting officer shall not include in a contract price any amount for a specified contingency to the extent that the contract provides for a price adjustment based upon the occurrence of that contingency. Unlike in many commercial pricing situations, the Government has created various clauses that allow a contractor to propose a reasonable price for the work to be performed without including a contingency for these conditions. An example of such a clause is the Differing Site Conditions clause (FAR 52.236-2), which would cover a situation where asbestos is found during a building renovation or there are unforeseen subsurface conditions uncovered during excavation. A different way to mitigate risk that is permitted by the FAR is by the use of an appropriate contract type. For example, a fixed-price with economic price adjustment type contract may be used w Answer: FAR 15.402 pricing policy generally requires the contracting officer to use the following order of preference in determining the type of pricing information required:
● Cost Analysis The review and evaluation of the separate cost elements and profit in an offeror's or contractor's proposal, and the application of judgment to determine how well the proposed costs represent what the cost of the contract should be. Use when: Evaluating the reasonableness of individual cost elements when certified cost or pricing data are required. The Government may use price analysis to determine the overall price fair and reasonable in conjunction with cost analysis. Cost analysis is never performed on sealed bids. Answer: ● Technical Analysis Technical analysis is used for examining:(i) Types and quantities of material proposed and the need for the types and quantities of labor hours and the labor mix.(ii) Any other data that may be pertinent to an assessment of the offeror's ability to accomplish the technical requirements or to the cost or price analysis of the service or product being proposed should also be included in the analysis. Use when: The contracting officer wants to determine the need for and the reasonableness of the proposed resources, assuming reasonable economy and efficiency. Answer: Cost Realism Analysis
The process of independently reviewing and evaluating specific elements of each offeror's proposed cost estimate to determine whether the estimated proposed cost elements: (i) are realistic for the work to be performed; (ii) reflect a clear understanding of the requirements; and(iii) are consistent with the various elements of the offeror's technical proposal. The "probable cost" should reflect the Government's best estimate of the cost of a contract that is likely to result from the offeror's proposal. Use when: Determining the probable cost of performance for each offeror on a cost reimbursement type contract. Cost realism analysis may be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price contracts when:(i) new requirements may not be fully understood by competing offerors, (ii) there are quality concerns, or(iii) past experience indicates that contractors proposed costs have resulted in quality or service shortfalls. ● Unit Prices Unit prices must reflect the intrinsic value of an item or service and be in proportion to an item's base cost (e.g., manufacturing or acquisition costs). Any method of distributing costs to line items that distorts the unit prices shall not be used. For example, distributing costs equally among line items is not acceptable except when there is little or no variation in the base cost.
● Although contractors internally determine what types and how much of the various cost elements are required to perform a particular service or supply a certain item, we compare only the final price to some external factor. Price analysis always involves some kind of comparison. Answer: Price Analysis The methods (or bases for comparison) listed at FAR 15.404-1(b)(2) are: (i) Comparison of proposed prices received in response to the solicitation (ii) Comparison of previously proposed prices and previous Government and commercial contract prices with current proposed prices for the same or similar items (iii) Use of parametric estimating methods/application of rough yardsticks (iv) Comparison with competitive published price lists, published market prices of commodities, similar indexes, and discount or rebate arrangements (v) Comparison of proposed prices with independent Government cost estimates (vi) Comparison of proposed prices with prices obtained through market research for the same or similar items (vii) Analysis of pricing information provided by the offeror ● Price Analysis
The first two techniques at 15.404-1(b)(2) are the preferred techniques: Comparison of proposed prices received in response to the solicitation Comparison of previously proposed prices and previous Government and commercial contract prices with current proposed prices for the same or similar items Comparison of a proposed price with other proposed prices received in response to the same solicitation is generally considered one of the best bases for price analysis, as all offers were submitted to meet the same requirement during the same time period Therefore, there is comparability among prices because market conditions should be the same. Using previously proposed prices ("historical pricing") compares a current proposed price with prices related to prior purchasing activity. Answer: Cost analysis must be conducted when it is necessary to examine individual cost elements, such as estimated labor hours or material prices, to determine the reasonableness of price. Cost analysis is required on all procurement actions where cost or pricing data are required. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required ● Cost analysis is never performed on sealed bid procurements! When making an award under sealed bidding procedures, only the price and price-related factors that are included in the invitation for bids may be evaluated. Answer: Cost analysis is concerned with the reasonableness of each separate cost element
analysis. The probable cost may differ from the proposed cost and should reflect the Government's best estimate of the cost of any contract that is most likely to result from the offeror's proposal. The probable cost is used for evaluating contract proposals to determine the best value. ● Cost realism analysis may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed- price-type contracts when: new requirements may not be fully understood by competing offerors there are quality concerns past experience indicates that contractors' proposed costs have resulted in quality or service shortfalls Results of the analysis may be used in performance risk assessments and responsibility determinations. However, proposals must be evaluated using the criteria in the solicitation. The offered prices cannot be adjusted as a result of the analysis. Answer: A technical analysis may be requested by contracting officer to determine the need for and the reasonableness of proposed resources. Technicalanalysis may be used to examine and evaluate:
- Types & quantities of material
- Types & quantities of labor hours
- Labor mix• Pertinent technical aspects
- Processes
- Special tooling
- Equipment
- Real property
- Scrap and/or spoilage To perform a technical analysis, the contracting officer may ask personnel having specialized knowledge in engineering, science or management of proposed types and quantities of materials, labor, processes, special tooling, equipment, real property, scrap and spoilage, and other associated factors to determine the need for and reasonableness of the proposed resources. Individuals with the appropriate qualification may be within the buying activity. Alternatively, the contracting officer may consider requesting field pricing assistance ● Unit prices are analyzed to determine if they reflect the intrinsic value of an item or service and are in proportion to an item's base cost. Unbalanced pricing reflects whether individual contract line items are over-or understated, which can increase performance risk. If cost or price analysis indicates that an offer is unbalanced, the contracting officer is required to: consider the risks to the Government associated with the unbalanced pricing in determining the competitive range and in making the source selection decision consider whether award of the contract will result in paying unreasonably high prices for contract performance.
● The Defense Contract Audit Agency (DCAA)and Defense Contract Management Agency (DCMA) perform the majority of pricing audits and contract administration services (CAS) within DoD. FAR 15.404- 2 and DFARS PGI 15.404-2 provide additional information on field pricing assistance for the federal government in general and for DoD in particular. Answer: According to FAR 15.404-3, the prime contractor is responsible for accomplishing the following (or requiring that its subcontractor(s)): Conduct appropriate cost or price analyses to establish the reasonableness of proposed subcontract prices Include the results of these analyses in the price proposal Submit subcontractor certified cost or pricing data to the Government as part of its own certified cost or pricing data ● DFARS 215.404-4 provides policy regarding determination of profit and fee prenegotiation objectives when conducting cost analysis for DoD acquisitions. Specifically, contracting officers are required to use a "structured approach" for developing a prenegotiation profit or fee objective on any negotiated contract action when certified cost or pricing data is obtained, except for cost-plus-award-fee contracts or contracts with Federally Funded Research and Development Centers (FFRDC).There are three structured approaches: The weighted guidelines (WGL) method The modified weighted guidelines method An alternate structured approach
Follow the procedures at PGI 215.404-70 when a structured approach to profit analysis is required. Answer: You probably hear the expression "The job is not finished until the paperwork is done!" Well, in Government contract pricing, documentation is important not only at the conclusion of a contract but throughout each contract stage, to include contract pricing. For example, when a cost analysis is required, information relating to prenegotiation objectives must be carefully documented. FAR 15.406- 1 (Prenegotiation Objectives) states: "(b) The contracting officer shall establish prenegotiation objectives before the negotiation of any pricing action. The scope and depth of the analysis supporting the objectives should be directly related to the dollar value, importance, and complexity of the pricing action. When cost analysis is required, the contracting officer shall document the pertinent issues to be negotiated, the cost objectives, and a profit or fee objective." The Certificate of Current Cost or Pricing Data FAR 15.406-2 requires that the contractor certify, to the best of their knowledge and belief, that the cost or pricing data submitted is accurate, complete and current as of a specific date (which is the date when negotiations were concluded and a price agreement reached or a date as close as practicable). ● The Price Negotiation Memorandum (PNM) is used to document the principle elements of a negotiated agreement. FAR 15.406-3 details the required elements of a PNM. Go to the reference and review it carefully.
