What is an independent government cost estimate?
An independent government cost estimate (IGCE) is a detailed assessment of the cost to the government for services or supplies to be acquired from a contractor. This estimate is:
Generally developed by the COR or other government technical experts
An internal government estimate of the price a contractor should propose based on the specification or statement of work (SOW)
Confidential information that should not be discussed or shared with the contractor.
Government cost estimates are simple when the requirements are for products or services that are commercially available because pricing for these are based on an average of commercial prices. Cost estimates for more complex requirements or noncommercial items require a detailed breakdown. The COR should ensure that the government cost estimate:
Describes program needs (i.e., technical objectives of the acquisition)
Identifies sub-objectives for each task and the project office that will complete each task
Identifies and sequences tasks to organize the overall objectives for each sub-objective
Identifies resources needed
Identifies the length of time each task should take
Accurately reflects all available data on the project
Lists probable line items and the probable quantity, cost, and procurement milestones for each
Describes and is based on factual information that is representative of potential offers.
What are evaluation factors, and what is the COR's role in preparing them?
Some awards can be made on the basis of price alone. Other, more complex contracts will be awarded on the basis of price and other non-price factors, i.e., technical factors.
The COR should prepare a list of significant technical factors and sub-factors that are directly related to the government's technical requirements and that will be used to evaluate the contractors' offers. An example of an evaluation factor might be:
Significant technical factor: Quality of work
Subfactors: Work appearance
Thoroughness and accuracy of work Engineering competence
The particular requirements of each acquisition will determine appropriate evaluation factors. Acquisition circumstances can also determine which evaluation factors and procedures should be used. The CO may fashion suitable evaluation procedures in accordance with relevant parts of the FAR, such as:
FAR Part 13, when using simplified acquisition procedures
FAR Part 12, when contracting for commercial items
FAR Part 14, when using sealed bidding
FAR Part 15, when negotiating competitive acquisitions.
The COR should remember that all evaluation factors and subfactors are used to determine if the offeror can meet the government's needs and if the offer is the most advantageous to the government. Evaluation factors should be designed to ensure complete and impartial evaluation of all offers received.
What are the two general types of evaluation factors?
Evaluation factors can be based on price-related factors and nonprice related factors.
Price-related factors help the government realistically determine the lowest overall cost at which it can obtain commercial supplies or services. Typical price-related factors included in a solicitation, e.g., an invitation for bids (IFB) used in sealed bidding, might be:
The cost of government-furnished property
The cost of leasing needed items versus purchasing them
The cost of government-furnished property. When contractors possess government property, they are required to use that property to the maximum practical extent. At the same time, agencies are required to eliminate any competitive advantage that might arise from using such property. Accordingly, solicitations that provide for government-furnished property will include the following:
A description of the evaluation procedures to be followed
Whether a rental equivalent evaluation factor will be used
Whether rent charges will be applied in lieu of a rental equivalent evaluation factor
Other costs or savings to be evaluated
A requirement that the offeror disclose:
- All government property the offeror proposes to use
- Whether property offered in the solicitation is already in its possession
- Any other information regarding the government property.
Options. An option indicates a unilateral right in a contract by which, for a specified time, the government may:
Elect to purchase additional supplies or services called for by the contract
Elect to extend the term of the contract. Solicitations containing option provisions:
State whether the option will be included in the evaluation. (Options should be evaluated if the government reasonably intends to exercise them.)
Inform offerors at the time of award of the government's plan to exercise the option.
Allow option quantities to be offered with no price limitation.
Allow offerors to submit varying prices for options.
Require, in limited situations, that option prices be no higher than prices for the initial requirement.
Lease versus purchase. Generally, the government's decision to either lease or purchase needed items is a matter of economics. Purchasing is preferred if long-range leasing costs will exceed the purchase price. Leasing is appropriate in circumstances when doing so will benefit the government. Additionally, agency policy, acquisition histories, or market research may affect the decision to buy or lease supplies.
Typical reasons for soliciting for purchase only include:
The requirement does not lend itself to leasing (e.g., when services, perishables, weapons, or spare parts are needed).
Property will be provided to other contractors as government-furnished property.
The product has a long expected life and will not need upgrading (e.g., desks, chairs).
The product has a short shelf life.
The products will be used in a secure area (unless security can be ensured under a lease).
Typical reasons for soliciting a lease only or a lease with option to buy include:
One-time use of the item or items and no future need for them
The products are needed only on a limited, intermittent basis (e.g., cranes)
The particular goods needed are available from the market only through a lease
Maintenance by the original equipment manufacturer is offered only when the equipment is leased
Prices are expected to decline rapidly or technology is expected to improve rapidly during the period of need
Continued need for the goods is not known beyond the period of performance.
However, when the relative economic advantages of lease versus purchase are unknown or minimal, and when market research discloses that the industry offers both options, prices for both lease and purchase should be solicited. The solicitation will advise offerors that the government's award decision will be based upon the most advantageous offer received, considering:
Prices for a new purchase
Cumulative lease prices for the estimated period of use
Net overall prices in leases with options to purchase or own
Transportation and installation costs.
Transportation costs. The COR must inform the CO if he or she wants offerors to submit offers that address shipping requirements for the products to be delivered. Shipping options include:
Free on board (F.O.B.) at origin, with the cost of shipping and risk of loss borne by the buyer (the government)
F.O.B. destination, with the cost of shipping and risk of loss borne by the seller (the contractor)
Both basesprospective contractors may quote both F.O.B. origin and F.O.B. destination costs.
Generally, F.O.B. at origin offers may be more advantageous to the government when lower freight rates are available to the government for shipment to final destinations. When offers on both bases are permitted, the solicitation will advise the offerors that the two F.O.B. offers will be evaluated on the basis of the lowest overall cost to the government.
Other costs. Other price-related factors that may be applicable to some procurements include:
Energy conservation and efficiency criteria
Estimated quantities of goods needed (for indefinite delivery contracts)
Life cycle costs (or modified life cycle costs)
Select life cycle costs for equipment with an expected life greater than one year if there are sufficient data (derived from market research) to develop and apply the life cycle cost formula
Cost factors to consider when additional supplies and services are needed to support the purchase, such as:
- Warranty protection or repair
- Technical manuals
- Spare parts
- Supplemental supplies.
When preparing a list of factors that can be used in evaluating government requirements, the COR needs to consider non-price-related factors and a methodology for applying them. Such factors may include:
The contractor's past performance
The contractor's understanding of the government's requirements
The contractor's technical approach to performing the work
The contractor's experience in performing similar work
The qualifications of engineering personnel or other technical personnel
The quality of the facilities to be used for performing the work
The contractor's quality assurance programs and plans
The contractor's management capabilities to perform the proposed work
The contractor's scheduling and delivery-related controls
The contractor's subcontracting and make-or-buy plans
The contractor's environmental objectives, including its consideration of environmentally preferred products
The contractor's cost realism and other relevant factors.
The COR should also consider that some non-price-related factors may:
Exclude some offerors
Dilute the relative importance of the requirements
Be unnecessary, inconsistent, irrational, arbitrary, and not pertinent to the requirement
Have been overlooked or omitted
Be described in ambiguous terms
Overemphasize subfactors in evaluating the requirement, i.e., be overly restrictive by concentrating on minute details that are not actually relevant.
What two steps should the COR take before submitting the work package to the CO?
The COR must:
1. Ensure that the work package is current, accurate, and complete. The work package should:
- Be sufficient to proceed with contract action; it should contain all required documents, information, and approvals from the program office.
- Be written in terms that accurately reflect the market's capabilities (lead-times, production, delivery, and cost) and procurement lead-times.
- Be designed to obtain maximum competition.
- Ensure that quality assurance requirements are met.
- Satisfy the government's needs in the most effective, economical, and timely manner.
- Include past performance data as an evaluation factor. (Note: Section 1091 of the Federal Acquisition Streamlining Act states: "Past contract performance of an offeror is one of the relevant factors that a contracting official of an executive agency should consider in awarding a contract.")
- Encourage or require offerors to supply and use materials or, to the extent that commercial items are not suitable, other non-developmental items to the maximum extent practicable.
2. Secure all necessary authorizations. To prevent delays in the procurement cycle, the COR should obtain concurrence and approval for documents in the work package as specified by agency policies. The approvals are necessary to ensure that:
- Funding requirements have been made and certified
- Justifications for restrictive requirements have been included
- A source list considering small businesses, 8(a) firms, and other socioeconomic programs has been included with the purchase request package.
The following officials or offices may be required to provide concurrence or approval of the work package:
Agency head or higher authority
CO or head of the contracting activity
Competition advocate, acting also as the commercial items advocate
Designated officials from requirements/user organizations
Accounting, budgeting, or finance office
Small business/minority business officer.