The document contains a report on a case where the Armed Services Board of Contract Appeals ruled that cost analysis was improperly used in rejecting a contractor's claim, based on a misreading of the Federal Acquisition Regulation. The decision also addressed the authority of a contracting officer to partially ratify an unauthorized commitment. It highlights an important aspect of legal proceedings, in that small claims prosecuted without counsel can make interesting law. The document was created by Jason Lee Bakke, and was last edited on July 3, 2023, at 11:45 AM.
37 Nash & Cibinic Rep. NL ¶ 25
Nash & Cibinic Report | April 2023
The Nash & Cibinic Report
Contractor Claims
Ralph C. Nash
¶ 25. COST ANALYSIS: When Can It Be Used?
In a nonprecedential decision of the Armed Services Board of Contract Appeals, Metal Trades, Inc. ASBCA 62966, 2021 WL (Nov. 2, 2021), the board ruled that the Contracting Officer had improperly used cost analysis in rejecting the contractor’s claim. This incorrect conclusion was based on reading a segment of Federal Acquisition Regulation 15.404-1 which states:
- The objective of proposal analysis is to ensure that the final agreed-to price is fair and reasonable.
- The contracting officer is responsible for evaluating the reasonableness of the offered The analytical techniques and procedures described in this section may be used, singly or in combination with others, to ensure that the final price is fair and reasonable. The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.
- Price analysis shall be used when certified cost or pricing data are not required (see paragraph (b) of this subsection and [FAR] 15.404-3).
- Cost analysis shall be used to evaluate the reasonableness of individual cost elements when certified cost or pricing data are Price analysis should be used to verify that the overall price offered is fair and reasonable.
- Cost analysis may also be used to evaluate data other than certified cost or pricing data to determine cost reasonableness or cost realism when a fair and reasonable price cannot be determined through price analysis alone. [Emphasis added.]
The board read the “shalls” in paragraphs (2) and (3) and concluded that they prohibited the CO from using cost analysis even though the contractor had submitted uncertified cost data. Had the board gone one step further, reading paragraph (4), it would have seen the “may” permitting the use of the data. The board’s misreading of the FAR doesn’t seem to have affected the outcome of the case because the ruling granting the contractor $16,591 plus interest, was based largely on the CO’s lack of understanding of the data.
There is another, unrelated, aspect of this small case. The order that the contractor fulfilled was given by a Government official without CO authority. However, the CO ratified the order as an unauthorized commitment under FAR Part 50—reducing the amount that the unauthorized official had agreed to. That raised the question whether the board had the power to alter the amount of the ratification. The board said yes, stating:
Notably, the Navy does not challenge our jurisdiction to consider this appeal. In any event, for today’s purposes, we agree that a contracting officer has the authority to partially ratify an unauthorized commitment so the remaining issue is can the Board “disturb” a contracting officer’s “fair and reasonable” price determination. The answer is of course we may consider the reasonableness and factual support for CO Kolpos’ decision, because a decision that is not supported by the facts is not in accordance with the regulation.
This decision demonstrates that small claims prosecuted without the use of counsel can make interesting law. But you can’t cite it to the board in a future case. RCN
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