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Defective Pricing Actions

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1.What action must you take before you can require an offeror to submit cost or pricing data to support an offer priced at $95,000?

2. Calculate the amount of the final price adjustment because of defective pricing. Labor was overpriced by $15,000. Material was under-priced by $10,000. No items have been delivered. How much should the price adjustment be?

Contract As Awarded:

Material $ 80,000
Material OH 5% $ 4,000

Labor $ 40,000
Labor OH 100% $ 40,000

Total Cost Input $164,000
G & A 10% $ 16,400
Total Cost $180,400

Profit 10% $ 18,040
Total Price $198,440

6. Calculate the amount of the final price adjustment because of defective pricing based on the following:
Contractor unintentionally overpriced their material costs by $75,000 and under-priced their direct manufacturing labor costs by $50,000. Overhead rates used to price the original contract are given below:
Material OH 15%
Engineering OH 75%
Manufacturing OH 124%
Lawn Maintenance OH 1.5%
G &

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Question 1

You need to determine the eligibility of the bidder. That is if it has the financial and ...

Solution Summary

Defective pricing actions are examined.

See Also This Related BrainMass Solution

Williams Corporation: Defective pricing

Williams Corporation
Your contracting activity negotiated a $7,500,000 sole-source contract with the Williams Corporation about eight months ago. After the close of negotiations, Williams signed a Certificate of Current Cost or Pricing Data. During an audit for a follow-on contract, a Government technical expert identified an element that she suspects may be defective pricing. She has requested your assistance in determining the appropriate course of action.
Williams' proposal for 100 units of a $920 item was supported by three quotes as follows:

Holder Enterprises 100@ $1,230 $123,000 total

Minor Inc. 100@ $1,125 $112,500 total

Major Corporation 100@ $ 920 $123,000 total

After contract award, Williams sent an RFQ to two firms and received the following Quotes:

Woodson Inc. 100@ $105 $10,500 total

Greene Manufacturing 100@ $950 $95,000 total

The proposal never mentioned either Woodson Inc. or Greene Manufacturing.

Williams Corporation awarded the subcontract to Woodson Inc.

1. Is this defective Pricing?
2. What action should you take?
3. How much money is due the Government as a result of this situation?

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