Adequacy of Regulations Governing the Negotiation of Noncompetitive Contracts over $100,000 Based on Catalog or Market Prices

PSAD-78-51: Published: Dec 12, 1977. Publicly Released: Dec 12, 1977.

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Federal Procurement Regulations state that contracting officers shall, with some exceptions, obtain contractors' cost or pricing data in support of proposed prices for noncompetitive contracts. A review of the pricing of 204 noncompetitive fixed-price contracts and modifications with federal agencies showed that there was no assurance that the prices negotiated for 201 of the contracts were reasonable.

Where cost or pricing data is required, a cost analysis or review and evaluation of the contractor's data and judgmental factors applied in estimating the cost of performing the contract are to be performed. One exception to the requirement is where the contracting officer determines that the proposed price for an item is based on an established catalog or market price for a commercial item sold by the contractor in substantial quantities to the general public. Because of the lack of specific criteria in the Federal Procurement Regulations, contractors were granted exemptions from furnishing cost or pricing date for 201 of 204 contracts without adequate assurance that the exemptions were justified. In many cases, procurement personnel granted the exemptions without obtaining contractors' price lists or other pricing documents and, in most cases, sales data were not obtained. An analysis of sales data from contractors for selected items procured under 70 of the contracts indicated that the granting of an exemption for many items was not warranted.

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