(a) Definitions.
“Acceptable estimating system” means an estimating system that-
(1) Is maintained, reliable, and consistently applied;
(2) Produces verifiable, supportable, and documented cost estimates that are an acceptable basis for negotiation of fair and reasonable prices;
(3) Is consistent with and integrated with the Contractor’s related management systems; and
(4) Is subject to applicable financial control systems.
“Estimating system” means the Contractor's policies, procedures, and practices for generating estimates of costs and other data included in proposals submitted to customers in the expectation of receiving contract awards. Estimating system includes the Contractor's-
(1) Organizational structure;
(2) Established lines of authority, duties, and responsibilities;
(3) Internal controls and managerial reviews;
(4) Flow of work, coordination, and communication; and
(5) Estimating methods, techniques, accumulation of historical costs, and other analyses used to generate cost estimates.
(b) General. The Contractor shall establish, maintain, and comply with an acceptable estimating system.
(c) Applicability. Paragraphs (d) and (e) of this clause apply if the Contractor is a large business and either-
(1) In its fiscal year preceding award of this contract, received Department of Defense (DoD) prime contracts or subcontracts, totaling $50 million or more for which cost or pricing data were required; or
(2) In its fiscal year preceding award of this contract-
(i) Received DoD prime contracts or subcontracts totaling $10 million or more (but less than $50 million) for which cost or pricing data were required; and
(ii) Was notified in writing by the Contracting Officer that paragraphs (d) and (e) of this clause apply.
(d) System requirements.
(1) The Contractor shall disclose its estimating system to the Administrative Contracting Officer (ACO) in writing. If the Contractor wishes the Government to protect the information as privileged or confidential, the Contractor must mark the documents with the appropriate legends before submission.
(2) An estimating system disclosure is acceptable when the Contractor has provided the ACO with documentation that-
(i) Accurately describes those policies, procedures, and practices that the Contractor currently uses in preparing cost proposals; and
(ii) Provides sufficient detail for the Government to reasonably make an informed judgment regarding the acceptability of the Contractor's estimating practices.
(3) The Contractor shall-
(i) Comply with its disclosed estimating system; and
(ii) Disclose significant changes to the cost estimating system to the ACO on a timely basis.
(e) Estimating system deficiencies.
(1) The Contractor shall respond to a written report from the Government that identifies deficiencies in the Contractor's estimating system as follows:
(i) If the Contractor agrees with the report findings and recommendations, the Contractor shall-
(A) Within 30 days, state its agreement in writing; and
(B) Within 60 days, correct the deficiencies or submit a corrective action plan showing proposed milestones and actions leading to elimination of the deficiencies.
(ii) If the Contractor disagrees with the report, the Contractor shall, within 30 days, state its rationale for disagreeing.
(2) The ACO will evaluate the Contractor's response and notify the Contractor of the determination concerning remaining deficiencies and/or the adequacy of any proposed or completed corrective action.
