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SMG 2610.4

FDA STAFF MANUAL GUIDES, VOLUME III - GENERAL ADMINISTRATION

PROCUREMENT AND SUPPLY MANAGEMENT

PROCUREMENT

INDEPENDENT GOVERNMENT COST ESTIMATE (IGCE) REQUIREMENTS

Effective Date: 05/02/2011

[PDF Version]

 
 
 
 
 
  Attachment A - Sample 1, Simplified Independent Government Cost Estimate
  Attachment B - Sample 2, Simplified Independent Government Cost Estimate, Unburdened Labor Rates
  Attachment C - Sample 3, Independent Government Cost Estimate, Over SAT
  Attachment D - Sample 4, Independent Government Cost Estimate, Fully Loaded Labor Rate Requirements

1.  PURPOSE

This Staff Manual Guide (SMG) prescribes the Food and Drug Administration (FDA) policy and procedure for preparing an Independent Government Cost Estimate (IGCE) pursuant to SMGs 2610.1 and 2610.7. This SMG applies to each of the following types of contract actions: (1) All contract actions with an estimated value greater than or equal to the Simplified Acquisition Threshold (SAT), (2) All contract actions with an estimated value greater than $25,000 which require a Statement of Work (SOW) or Performance Work Statement (PWS), and (3) Any other contract action requiring an IGCE, as determined by the Contracting Officer.

The purpose of the IGCE is to –

  • Satisfy the government’s fiduciary responsibility to understand the cost of a requirement in determining the need to acquire it;
  • Serve as the basis for reserving funds as part of acquisition planning;
  • Serve as a basis for comparing prices proposed by offerors; and
  • Serve as an objective basis for determining price reasonableness when only one quotation is received.

2.  DEFINITIONS AND CONCEPTS

A. Acquisition Team. For purposes of this SMG, the Acquisition Team is responsible for ensuring that the planned contract meets the long-range and short-range requirements of the activity’s mission and that it is designed to produce the intended result. During the planning phase of an acquisition, the Team is normally composed of representatives from the program office, i.e., the Project Officer/ COTR, and the Contract Specialist/ Officer. The Team plays a critical roll in ensuring that the contracting process is successful. Assisting them is an integrated team of individuals based upon the complexity and nature of the acquisition.

B. Contracting Officer (CO). The CO is a Government Official with the delegated authority to bind the Government legally [or, otherwise enter into a contract] by signing a contractual instrument. The CO is also the only Government Official who has the authority to administer and/or terminate contracts, as well as make related Determinations and Findings.

C. Contracting Officer Technical Representative (COTR). The COTR does not have the delegated authority to bind the Government legally by signing a contractual instrument. The COTR is a Federal employee to whom a Contracting Officer has delegated authority in writing to act as his or her representative in monitoring specified aspects of contractor performance after the initial contract award has been made. These aspects may include, but are not limited to, ensuring that the contractor’s performance meets the standards and schedule set forth in the contract, or ensuring that the contractor performs within the price or estimated costs stated in the contract.

COTRs must comply with the training and certification requirements set forth in HHSAR 301.604 to obtain and maintain FAC-COTR certifications. HHS FAC-COTR Certification alone does not guarantee that a Contracting Officer will appoint the certified candidate to be a COTR for a given contract. A candidate becomes a COTR for a given contract only after a Contracting Officer delegates in writing to that candidate the extent and kinds of authority to manage and monitor a particular contract.

D. Contract Specialist (CS). The CS is an authorized representative of the Contracting Officer. Among other things, the CS may negotiate, draft, administer, or close-out contracts, subject to the review and approval of the Contracting Officer. The CS typically serves as the primary OAGS point of contact for the Project Officer and COTR throughout all phases of the acquisition process.

E. Direct Costs. Direct costs are those costs that can be identified with the production of a single, final item, process, or service. Typical examples of direct costs include: direct labor, equipment, materials, subcontracts, and travel.

F. Fully Loaded (Burdened) Labor Rate. Fully-burdened labor rates include all direct, indirect, general and administrative costs and profit associated with providing the required skill.

G. Incentive. An incentive offers a contractor higher profits for better performance and/or lower profits for weaker performance in prescribed areas, such as cost, delivery, or technical performance. Incentives are designed to achieve specific acquisition objectives by: (1) establishing reasonable and obtainable standards or targets that are clearly communicated to the contractor; (2) establishing a practical and fair means by which to measure progress or performance; and (3) including appropriate incentive arrangements designed to motivate contractor efforts, as well as discourage or mitigate contractor inefficiency and waste.

H. Independent Government Cost Estimate (IGCE). An IGCE is the Government’s current, independent estimate of what the private sector would bid to perform all work identified in the Statement of Work (SOW), Performance Work Statement (PWS), or other requirements document. The IGCE serves as an important basis for determining the reasonableness of an offeror’s proposed costs and understanding of a given solicitation. The IGCE is considered source selection information, and it should not be shared with anyone outside the FDA Acquisition Team, absent the express consent of the Contracting Officer.

I. Indirect Costs. Indirect costs are those costs that cannot be identified with the production of a single, final item, process, or service. Indirect costs are organized and identifiable collectively by logical groupings. Typical examples of indirect costs include: general and administrative expenses (G&A), labor overhead or fringe benefits, and materials overhead. Contractors often refer to the sum of all indirect costs as “total overhead” or “administrative fee,” which is usually expressed as a percentage of a designated base that distributes them equitably among each of the contractor’s projects.

J. Market Research. Market research is the means by which information about capabilities within the market place for a given requirement is collected and analyzed. It is conducted by the Acquisition Team on all acquisitions to support full and open competition and commercial item purchases, as well as achieve socioeconomic goals, to the greatest extent possible and/or practicable. Market research is conducted in accordance with the Federal Acquisition Regulation and HHS Policy.

Market research may include any combination of the following actions:

  • Contact knowledgeable individuals in Government and industry to obtain market capabilities
  • Review recent market research undertaken for identical or similar requirements
  • Publish formal requests for information
  • Consult the government-wide point of entry (GPE). www.fedbizopps.gov
  • Reviewing catalogs and other product literature from manufacturers, distributors, or dealers, including information that is available on-line
  • Conduct meetings or holding pre-solicitation conferences to involve potential offerors early in the acquisition process.

Market research findings are heavily relied upon when drafting the Statement of Work, developing the Independent Government Cost Estimate, and completing other source selection documents required in the Request for Contract or Requisition Package.

K. Profit/Fee. Profit/Fee is the amount realized by a contractor after the costs of performance (both direct and indirect) are deducted from the amount to be paid under the terms of a contract. In procurements by negotiation, where cost analysis is required in accordance with Federal Acquisition Regulation 15.404-4, the Government negotiates a projected amount of profit. In Cost-Reimbursement Contracts, the amount of projected profit included in the contract by negotiation in called a fee. FAR 15.404-4(c)(4) sets forth limitations on the amount of fees allowable under Cost-Plus-Fixed-Fee Contracts.

L. Project Officer (PO). The PO is a Federal employee who provides technical guidance to the Contracting Officer / Contract Specialist before award of a contract or order. POs may be delegated authority to also act as the Contracting Officer's Technical Representative after a contract has been awarded, but they must meet the Departmental training and certification requirements prior to any such appointment. POs must comply with the training requirements set forth in HHSAR 301.606.

M. Requisition Package (RP). The RP is the official request package for initiating a contract action in accordance with SMG 2610.7, Preparing requisitions for all contract actions with an estimated value less than or equal to the Simplified Acquisition Threshold. The RP contains the necessary approvals and authorizations for the proposed contract action, as well as describes the proposed administration details and commitment of funds. In addition to the properly submitted requisition, the RP requires an IGCE for all new contract actions to be negotiated with an estimated value greater than $25,000.

N. Request for Contract (RFC). The RFC is the official request package for initiating a contract action in accordance with SMG 2610.1, Preparing requisitions for all contract actions with an estimated value greater than the Simplified Acquisition Threshold. The RFC contains the necessary approvals and authorizations for the proposed contract action, as well as describes the proposed administration details and commitment of funds. In addition to the properly submitted requisition, the RFC shall include either a completed HHS Acquisition Plan (AP) or, for smaller or less complicated contract actions, a Memorandum of Need (MON). In general, an IGCE is a required component of each RFC.

O. Simplified Acquisition Threshold (SAT). The SAT is $150,000, except for acquisitions of supplies or services that, as determined by the head of the agency, are to be used to support a contingency operation or to facilitate defense against or recovery from nuclear, biological, chemical, or radiological attack. See Federal Acquisition Regulation 2.101.

3.  POLICY AND RESPONSIBILITIES

A. Project Officers (POs), Contracting Officer Technical Representatives (COTRs), and Program/Project Managers (P/PMs) [collectively and interchangeably referred to hereafter as “Program Representatives (PR)”] are required to create and submit an Independent Government Cost Estimate (IGCE) as part of a Request for Contract (RFC) or Requisition Package (RP), as prescribed by Staff Manual Guides 2610.1 or 2610.7, respectively.

B. The level of detail and effort put into an IGCE should be commensurate with the nature and complexity of the requirement whose cost/price is being estimated.

C. There is no single IGCE template or format which has universal application and can sufficiently estimate cost for every FDA requirement. For that reason, no single IGCE template or format is prescribed for any one type of FDA requirement. Regardless of the designated format, an IGCE should always address the entire scope of the respective requirement, including each individual cost element provided in the Statement of Work (SOW)/Performance Work Statement (PWS)/other requirements document. Therefore, the structure of the IGCE should ordinarily mirror the work breakdown structure or deliverables schedule of the respective SOW/PWS/other requirements document. In addition, the IGCE should either directly address, or otherwise be supplemented with the following information, as applicable:

  • Methodology or Process used to derive the estimate (e.g., subject matter expert input; published price lists or other reference materials used; previous buy or similar work performed in past, taking into consideration inflation; cost data/ forecast from precious project, etc)
  • High level, total requirement cost
  • Cost Breakdown for each task/subtask/deliverable, or other work component found in the SOW, PWS, or other requirements document
  • Sources of all key data or other significant information
  • All underlying assumptions (i.e., availability of technology)
  • Any special considerations (i.e., risk, time constraints, performance incentives, specialized training, or travel)

D. Commercial Supply Products and Services. A ‘commercial supply’ IGCE is less complicated than the IGCE for a service contract and is considered a "Price Estimate". It is a matter of determining the market value of an item and using that figure as the IGCE. This IGCE can be developed using numerous methods including:

1. General Services Administration (GSA) schedules. The schedules are prepriced and awarded to multiple firms for specific products or services. GSA schedules may be found at http://www.gsaadvantage.gov/.

2. Published price lists. This is a listing from an individual company that is published for use by the general public.

3. Catalog pricing. This is a pricing arrangement such as a vendors’ publicly available catalog.

E. Exceptions: An IGCE is ordinarily not required for proposed contract actions (i) below the simplified acquisition threshold and not requiring a SOW, (ii) contract actions of any kind below $25,000, (iii) to obligate incremental funding, (iv) to exercise contract options, or (v) to execute administrative modifications. Nonetheless, Contracting Officers reserve the right to require IGCEs from program personnel whenever they determine that it is in the best interests of the Government. Therefore, program personnel are highly encouraged to contact the Contracting Officer assigned to their specific requirement as soon as practicable for guidance and support.

F. Disclosure of information. Caution is advised when contacting vendors, as advance procurement information is perceived as sensitive. In addition, contact might be considered a commitment by the vendor. Only a contracting officer may commit the government. Any other person may be held personally liable and disciplinary action can be taken. Contracting personnel are trained in information gathering techniques and can provide valuable insight to ensure no unauthorized information is released and inadvertent commitments are avoided.

G. Although no formal IGCE template or format is prescribed for any one type of FDA requirement, this SMG provides four IGCE sample formats for use by members of the FDA acquisition community, as follows:

  • IGCE Sample Format #1 [MS Word]
    Recommended for basic requirements under the SAT using Burdened Labor Rates
  • IGCE Sample Format #2 [MS Word]
    Recommended for basic requirements under the SAT using Unburdened Labor Rates
  • IGCE Sample Format #3 [MS Excel]
    Recommended for most requirements over the SAT
  • IGCE Sample Format #4 [MS Excel]
    Recommended for complex requirements over the SAT

NOTE:  IGCE sample format instructions are generally provided in red text and enclosed in parentheses with an asterisk.

Reminder: The IGCE Sample Formats are generic. Every completed IGCE should be uniquely tailored to meet the specific needs of each requirement. In addition, each IGCE should be supplemented by, at a minimum, a list of data sources, as well as assumptions.

4.  EFFECTIVE DATE

The effective date of this guide is May 2, 2011.

5.  Document History -- SMG 2610.4, Independent Government Cost Estimate (IGCE) Requirements

STATUS (I, R, C)DATE APPROVEDLOCATION OF CHANGE HISTORYCONTACTAPPROVING OFFICIAL
Initial04/14/2011N/aOC/OA/OAGSGlenda Barfell, Director, OAGS