An acceptable estimating system means that an estimating system complies with the system criteria in paragraph (d) of this clause, and provides for a system that:
- Is maintained, reliable, and consistently applied;
- Produces verifiable, supportable, documented, and timely cost estimates that are an acceptable basis for negotiation of fair and reasonable prices;
- Is consistent with and integrated with the Contractor's related management systems; and
- Is subject to applicable financial control systems.
“Estimating system” - the contractor's policies, procedures, and practices for budgeting and planning controls, and generating estimates of costs and other data included in proposals submitted to customers in the expectation of receiving contract awards. An estimating system includes the contractor's:
- Organizational structure;
- Established lines of authority, duties, and responsibilities;
- Internal controls and managerial reviews;
- Flow of work, coordination, and communication; and
- Budgeting, planning, estimating methods, techniques, accumulation of historical costs, and other analyses used to generate cost estimates.
An acceptable estimating system shall accomplish the following functions (17 Criteria):
- Establish clear responsibility for preparation, review, and approval of cost estimates and budgets.
- Provide a written description of the organization and duties of the personnel responsible for preparing, reviewing, and approving cost estimates and budgets.
- Ensure that relevant personnel have sufficient training, experience, and guidance to perform estimating and budgeting tasks in accordance with the Contractor’s established procedures.
- Identify and document the sources of data and the estimating methods and rationale used in developing cost estimates and budgets.
- Provide for adequate supervision throughout the estimating and budgeting process.
- Provide for consistent application of estimating and budgeting techniques.
- Provide for detection and timely correction of errors.
- Protect against cost duplication and omissions.
- Provide for the use of historical experience, including historical vendor pricing data, where appropriate.
- Require use of appropriate analytical methods.
- Integrate data and information available from other management systems.
- Require management review, including verification of compliance with the company’s estimating and budgeting policies, procedures, and practices.
- Provide for internal review of, and accountability for, the acceptability of the estimating system, including the budgetary data supporting indirect cost estimates and comparisons of projected results to actual results, and an analysis of any differences.
- Provide procedures to update cost estimates and notify the Contracting Officer in a timely manner throughout the negotiation process.
- Provide procedures that ensure subcontract prices are reasonable based on a documented review and analysis provided with the prime proposal, when practicable.
- Provide estimating and budgeting practices that consistently generate sound proposals that are compliant with the provisions of the solicitation and are adequate to serve as a basis to reach a fair and reasonable price.
- Have an adequate system description, including policies, procedures, and estimating and budgeting practices, which comply with the Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement.
DCAA guidance on complying with all criteria:
Significant Deficiency
(1) The Contracting Officer will provide an initial determination to the Contractor, in writing, of any significant deficiencies. The initial determination will describe the deficiency in sufficient detail to allow the Contractor to understand the deficiency.
(2) The Contractor shall respond within 30 days to a written initial determination from the Contracting Officer that identifies significant deficiencies in the Contractor's estimating system. If the Contractor disagrees with the initial determination, the Contractor shall state, in writing, its rationale for disagreeing.
(3) The Contracting Officer will evaluate the Contractor's response and notify the Contractor, in writing, of the Contracting Officer's final determination concerning:
- Remaining significant deficiencies;
- The adequacy of any proposed or completed corrective action; and
- System disapproval, if the Contracting Officer determines that one or more significant deficiencies remain.
- If the Contractor receives the Contracting Officer's final determination of significant deficiencies, the Contractor shall, within 45 days of receipt of the final determination, either correct the significant deficiencies or submit an acceptable corrective action plan showing milestones and actions to eliminate the significant deficiencies.
- Withholding payments. If the Contracting Officer makes a final determination to disapprove the Contractor's estimating system, and the contract includes the clause at 252.242-7005, Contractor Business Systems, the Contracting Officer will withhold payments in accordance with that clause.
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