FAR 36.214—Special procedures for price negotiation in construction contracting.
Plain-English Summary
FAR 36.214 explains how agencies should negotiate prices for construction contracts and how contracting officers should evaluate proposed prices against the Government estimate. It ties construction pricing negotiations back to the general Part 15 negotiation framework, then adds construction-specific steps for reviewing certified cost or pricing data, data other than certified cost or pricing data, and the Government estimate itself. The section also addresses what to do when a proposed cost element is far from the estimate, including requesting supporting cost information for items like wage rates, fringe benefits, materials, equipment, and subcontractor costs. It gives special direction when a proposed price is much lower than the Government estimate, requiring the contracting officer to confirm that both sides understand the scope of work and to correct and document any estimate errors. Finally, it authorizes the use of additional pricing tools, such as comparisons to similar work and rough unit-cost yardsticks, to help assess reasonableness in construction pricing. In practice, this section is meant to improve price realism, reduce misunderstandings about scope, and create a better-documented negotiation record for construction acquisitions.
Key Rules
Use Part 15 procedures
Agencies must follow the policies and procedures in FAR Part 15 when negotiating construction prices. This means construction pricing negotiations are not free-form; they must be conducted within the broader negotiated acquisition framework.
Compare proposals to estimate
The contracting officer must evaluate proposals, certified cost or pricing data when required, other than certified cost or pricing data when applicable, and compare all of it to the Government estimate. The estimate is a key benchmark for identifying unusual pricing, missing scope, or potential errors.
Request support for large variances
If certified cost or pricing data is not required and a proposed cost element differs significantly from the Government estimate, the contracting officer should ask for cost information supporting that element. Examples include wage rates, fringe benefits, materials, equipment allowances, and subcontractor costs.
Check low prices for scope understanding
If the proposed price is significantly below the Government estimate, the contracting officer must ensure the offeror and the Government estimator both fully understand the scope of work. A low price may reflect a misunderstanding, omitted work, or an error in the estimate.
Correct estimate errors
If negotiations show that the Government estimate contains errors, the estimate must be corrected and the changes documented in the contract file. The file should show what was wrong, what was changed, and why.
Use additional pricing tools
When appropriate, the contracting officer may use other pricing methods, such as comparing proposed prices to current prices for similar work and adjusting for site or specification differences. The section also allows rough yardsticks like cost per cubic foot, linear foot, or cubic yard to help assess reasonableness.
Responsibilities
Agency
Follow FAR Part 15 policies and procedures when negotiating construction prices. Ensure the acquisition process supports proper price analysis and documentation.
Contracting Officer
Evaluate proposals, certified cost or pricing data, and other pricing data against the Government estimate; request supporting cost information when significant differences appear; verify scope understanding when prices are unusually low; correct estimate errors discovered in negotiations; document changes in the contract file; and use additional pricing tools when appropriate.
Offeror/Contractor
Provide proposed pricing and, when requested and applicable, submit supporting cost information for significant cost elements. The offeror should also ensure its proposal reflects a clear understanding of the scope of work.
Government Estimator
Develop and explain the Government estimate, participate in scope review when prices are significantly low, and help identify and correct any estimate errors discovered during negotiations.
Practical Implications
Construction pricing negotiations should not rely on the bottom-line price alone; individual cost elements matter, especially when they diverge from the Government estimate.
A significantly low bid is not automatically a bargain. It can signal a scope misunderstanding, an incomplete proposal, or an inaccurate Government estimate.
Contracting officers should be ready to ask for backup on specific cost elements even when certified cost or pricing data is not formally required.
If the Government estimate turns out to be wrong, the file must show the correction. Poor documentation can undermine the negotiation record and later source selection or audit review.
Comparative pricing tools and unit-cost yardsticks are useful, but they should be adjusted for site conditions and specifications so they do not create misleading comparisons.
Official Regulatory Text
(a) Agencies shall follow the policies and procedures in part 15 when negotiating prices for construction. (b) The contracting officer shall evaluate proposals and associated certified cost or pricing data and data other than certified cost or pricing data and shall compare them to the Government estimate. (1) When submission of certified cost or pricing data is not required (see 15.403-1 and 15.403-2 ), and any element of proposed cost differs significantly from the Government estimate, the contracting officer should request the offeror to submit cost information concerning that element ( e.g., wage rates or fringe benefits, significant materials, equipment allowances, and subcontractor costs). (2) When a proposed price is significantly lower than the Government estimate, the contracting officer shall make sure both the offeror and the Government estimator completely understand the scope of the work. If negotiations reveal errors in the Government estimate, the estimate shall be corrected and the changes shall be documented in the contract file. (c) When appropriate, additional pricing tools may be used. For example, proposed prices may be compared to current prices for similar types of work, adjusted for differences in the work site and the specifications. Also, rough yardsticks may be developed and used, such as cost per cubic foot for structures, cost per linear foot for utilities, and cost per cubic yard for excavation or concrete.