Cost Comparison
The purpose of this step is to compare the contract/ISSA offer with the in-house
offer prepared by the CA team and make a tentative selection decision. The comparison
is managed by the Contracting Officer and conducted in two stages. The first stage
is reviewing the government and contractor technical proposals. The second stage
is the review of the government and contractor cost proposals.
With the selection of the contractor, the Contracting Officer submits to the Source
Selection Authority (SSA) the government’s Technical Performance Plan, which must
comply with the technical proposal requirements of the solicitation. The SSA evaluates
the Technical Performance Plan, but not the IN-House Cost Estimate, and assesses
whether the same level of performance and performance quality as the contractor
proposal will be achieved.
If the SSA determines that the government’s Technical Performance Plan does not
offer the same level of performance as the contractor offer, the Technical Performance
Plan is returned to the CA team to be revised. The SSA will not direct the In-House
Management Development Team to make adjustments to the in-house offer based upon
a specific contract/ISSA methodology for performing the work. The SSA may point
out informational deficiencies in the In-house TPP. The CA team makes all changes
necessary to meet the performance standards accepted by the SSA. If necessary, the
MEO and the In-House Cost Estimate are recalculated based on this revision and resubmitted
to the IRO for acceptance. This will ensure that when the IHCE is compared to the
cost of the contractor offer, the cost comparison is based on the same scope of
work and performance levels.
After the Technical Performance Plan has been accepted by the SSA, the Contracting
Officer then opens the government and contractor cost proposals and completes the
cost comparison form (CCF). A tentative decision is made based on the results of
the cost comparison. The final selection between in-house offer and the selected
private sector offer must be based upon lowest cost. If the contractor’s cost proposal
is lower than the government’s proposal (taking into consideration the minimum cost
differential requirement), the contractor is tentatively selected to perform the
commercial activity. The minimum differential is the lesser of 10 percent of the
personnel costs in the government IHCE or $10 million over the performance period.
The purpose of the minimum cost differential is to avoid the disruption of converting
performance of the commercial activity based on a minimal cost savings. If the contractor’s
cost proposal is not 10 percent lower than the IHCE (or $10 million over the performance
period, whichever is lower), then the MEO is selected to perform the commercial
activity.
The Contracting Officer notifies the Commanding Officer of the tentative decision
and makes any other notifications prescribed by service directives before the announcement
of the tentative decision.
What happens at the bid opening the day the cost comparison is accomplished?
The In-House Cost Estimate is compared with the offerors (Contractors/ISSA) bids.
The actual comparison is done through the electronic Cost Comparison Form (CCF)
produced by win.COMPARE2. Contract price is entered into win.COMPARE2 to produce
the tentative decision on the CCF.
How is the cost comparison accomplished when there are sealed bids?
When sealed bid procedures are used (note: sealed bid procedures can be used in
any acquisition), the Government submits to the Contracting Officer a sealed envelope
that includes the Government Management Plan minus the Technical Performance Plan
(TPP). A TPP is not required when using sealed bid procedures. At the public bid
opening, the Contracting Officer unseals the in-house offer once the apparent low
bidder is announced from the industry offers. The government bid is read out loud.
This concludes the public bid opening. Another option is to use email to immediately
conduct the cost comparison and announce the A-76 tentative decision. Of course,
once the public bid opening is over, the apparent low bidder's bid is reviewed in
detail by the Contracting Officer and the cost comparison decision undergoes a review
from the Independent Review Officer (IRO).
How is the cost comparison accomplished in a"two-step" sealed bid procedure
acquisition?
This answer was updated by OSD's Commercial Services Management Office, Mrs. Annie Andrews,
on 26 March, 2003. The previous answer that was posted (below but crossed out) was
not reviewed by Mrs. Andrews and provided an incorrect response.
CORRECTED RESPONSE: In and certified are due Two-step sealed bid procedures
follow the same process as the sealed bid process, except that the MEO does not
participate in step 1 (Step 1 is the negotiation with the contractors/ISSA on the
technical proposals only). The MEO is involved in the second step by submitting
the In-House Cost Estimate in a sealed envelope to the Contracting Officer before
any industry offers are unsealed."
When a two-step sealed bid acquisition is used, all private sector technical proposals
AND the entire in-house bid, which consists of the Government Management Plan is
submitted in a sealed envelope to the contracting officer on the solicitation closing
date. The Government Management Plan that is submitted in the sealed envelop must
include the in-house cost estimate that includes the cost comparison form (CCF)
with the appropriate signatures by the MEO Certifying Official and Independent Review
Official that certify the government's offer. No Technical Proposal Plan is to be
prepared for sealed bid acquisitions. In Step One (of a two-step sealed bid acquisition),
the contracting officer determines which private sector offers are technically acceptable
in order to proceed to Step Two, which is to submit their cost proposal. In Step
Two (of a two-step sealed bid acquisition), only these contractor cost proposals
and the in-house bid are opened, the contracting officer determines the apparent
lowest priced private sector bid and this cost is entered on CCF Line 7 in order
to complete the CCF, which determines the tentative cost comparison decision. The
SSA and contracting officer are not permitted to evaluate the Government Management
Plan in a sealed bid acquisition. The in-house bid is determined to be technically
acceptable when it is certified by two separate government officials when they sign
the certification statement on the CCF that states the in-house bid meets the requirements
of the solicitation. It is essential that the contracting officer be in receipt
of the entire in-house bid (as stated above) in order to open or view any private
sector offers in step one. To do otherwise, gives the appearance that the government
may be adjusting the in-house bid after receipt/review of contract bids.
The following question and answer was provided by OSD's Commercial Services Management
Office, Mrs. Annie Andrews, on 26 March, 2003.
How is the cost comparison accomplished in a"best-value" acquisition?
First and foremost (according to the FAR),"best value" is the goal of every acquisition
in the government. That said, the common usage of the term"best value", which is
inconsistent with the FAR, implies negotiated acquisitions using tradeoff source
selection techniques allows the government to accept higher standards at a higher
cost. The government must determine in these tradeoff source selections if they
need these higher standards, and if so, is the cost of the higher standards within
budgetary constraints. Sealed bidding and other types of source selection processes
such as low-priced technically acceptable, do not use"tradeoff" source selection
techniques; therefore, they are not"best value" approaches (based on the common
usage of the best value term). Therefore, every government acquisition, even in
best value acquisitions, cost is always a consideration. The following provides
a summary of how a"best value" acquisition should be performed for cost comparison.
When a cost comparison is performed and the solicitation identifies that it will
be a negotiated procurement using tradeoff source selection techniques (inviting
private sector offerors to submit proposals with higher performance standards than
required by the solicitation), the in-house offer must submit a Government Management
Plan that meets the performance standards in the solicitation (they are not allowed
to submit an offer with higher performance standards). On the solicitation closing
date, the certified Government Management Plan is submitted in two separate sealed
envelopes to the contracting officer on the solicitation closing date. One envelope
contains the Government Management Plan with a Technical Proposal Plan but excludes
the in-house cost estimate. The second sealed envelope contains the in-house cost
estimate and supporting documentation. After the solicitation closing date, the
SSA evaluates private sector offers using tradeoff source selection techniques to
determine if any of the private sector offers exceed the minimum performance standards
in the solicitation, and proceeds as follows.
- Step 1: Higher Standards Are Submitted:
When offers include higher performance standards, the SSA must make two separate
determinations:
- Need: The SSA must first make a determination with the assistance of the requiring activity, if the requiring activity has a need for the higher standard.
- No: If the determination is that the activity does not need the higher standard, then the SSA cannot accept the higher performance standards. (Proceed to Step 3)
- Yes: If the determination is that the activity does have a need for the higher standard, the SSA may accept the higher performance standard only if it can be funded by the requiring activity.
- Cost: The SSA must then determine if the higher standard can be funded within existing funding constraints and budgetary limitations.
- No: If sufficient funding is unavailable or cannot be provided (due to other higher priority funding requirements), the SSA cannot accept a higher performance standard. (Proceed to Step 3)
- Yes: If sufficient funding is available, the SSA may accept a higher performance standard but acceptance is based on both NEED & COST. (Proceed to Step 2)
- Standards Accepted:
If the SSA accepts performance standards that are higher than the minimum standards stated in the PWS and selects the private sector offer based upon these higher performance standards, then the SSA evaluates the in-house offer. The SSA must then perform this evaluation in the following sequential order:
- First, the SSA makes changes to the PWS (not via a formal amendment to the PWS) to reflect the higher performance standards accepted by the SSA when selecting the private sector offer (these changes cannot reflect any private sector proprietary information).
- Second, the SSA provides the changed PWS to the MEO Certifying Official and allows the in-house offer to be modified to reflect ONLY these higher performance standards (any changes must be auditable to the original in-house offer). The in-house offer submitted on the solicitation closing date remains under the control of the contracting officer and a second in-house offer is submitted in two separate envelopes (see above).
- After recertification of the in-house offer by the MEO Certifying Official and IRO, the contracting officer provides the SSA with the envelope containing the Government Management Plan excluding the in-house cost estimate (the contracting officer retains the second envelope containing the in-house cost estimate).
- The SSA evaluates the in-house offer (typically the Technical Proposal Plan but any other parts of the Government Management Plan except the in-house cost estimate may be used in this evaluation) against the changed PWS (not the private sector offer) to determine only if the higher performance standards have been met by the in-house offer.
- When the SSA is satisfied with the in-house offer (using written exchanges with the MEO Certifying Official if necessary), the cost comparison is performed as described in Step 3.
- Step 3: Higher Standards Not Submitted or Accepted: When private sector offers do not include higher performance standards than stated in the solicitation, or if the SSA does not accept any of the higher performance standards submitted by the private sector, the following sequential actions are required:
- The SSA evaluates private sector offers (based on meeting the minimum requirements stated in the solicitation) to select the lowest priced technically acceptable private sector offer that will be compared against the in-house offer.
- No SSA or contracting officer evaluation of the in-house offer is permitted. Remember both the private sector offer and the in-house offer meet the minimum requirements under Step 3. Since the PWS remains unchanged, the in-house offer remains unchanged. The in-house offer is certified by two separate government officials as meeting the requirements of the solicitation and the SSA determined that the private sector offer meets the requirements of the solicitation.
- The contracting officer opens the envelopes and the CCF is completed by entering the contract price on Line 7 to determine the tentative cost comparison decision.
How is the cost comparison accomplished when there is negotiated acquisition?
The negotiation process requires a decision on approach: whether to use Low Price
Technical Acceptable (LPTA) procedures or Cost Technical/Tradeoff (CTT) procedures.
When LPTA procedures are selected, the Government does not write a Technical Performance
Plan (TPP). However, when CTT procedures are used, the in-house offer must include
a TPP in addition to the other sections required for the Government Management Plan.
The following applies only to CTT procedures. Once the Source Selection Authority
(SSA) has selected the industry offer, the SSA reviews the TPP. The SSA's review
is conducted to ensure that the MEO can perform to the stated work requirements,
including any changed requirements resulting from the selection process. The SSA
is allowed to issue deficiency or evaluation notices and clarification notices as
if he or she was dealing with an industry offer. The key objective is to ensure
that the cost comparison is based on both parties meeting the solicitation requirements.
Once the SSA has agreed that the MEO is performing to the level of the solicitation
requirements, an independent review is necessary if any costs were changed. Upon
completion of the independent review, if required, the cost comparison is conducted.
Resources:
Policy
Guides and Recommended Readings