If you're a contractor working with an agency of U.S. Government you've almost certain dealt with FAR or the Federal Acquisition Regulation. This dense legal document regulates the rules as well as regulations that both the government and prime contractors have to follow when working with each other.
In this article, we'll go over a particular section which focuses on a key element in any negotiation between Government and the prime contractor: the record of said negotiations.
As the responsibility for responsible spending of Government funds is the contractor that is the primary contractor so it is crucial to be meticulous and exact in the recording of negotiations.
Uncertainties could be uncovered in a Contractor Purchase System Review, or a CPSR. The process for reviewing the contractor ensures the principal contractor is using taxpayer funds efficiently.
Utilizing this article, you'll be in a position to write a comprehensive documentation of negotiation that's in line with FAR 15.406-3 This is particularly relevant for contracting officers, who are responsible for collecting and submitting the necessary papers to the contract file.
What will each price negotiation memorandum be?
The document that is discussed herein is known as the Price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is made of eleven primary elements:
Section 1
The first paragraph is pretty easy, as it describes the goal of the negotiation. Purposes of negotiation can vary from the negotiation of the creation of a new contract on the sole source model or negotiation of an equitable adjustment or adjustment. These are determined during the prenegotiation objective stage, which is defined in the FAR 15.406-1.
Section 2
This section must outline the acquisition in its entirety comprising materials, services, construction or even real estate which the government plans to acquire. It should include all appropriate identifiable numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that refer in the target proposal document for what the contractor will propose.
Section 3
This section must include the name, position and organizational affiliation of each person who represents the contractor as the more info primary contractor and also the government in the negotiation.
Section 4
In this section, cover the current status of any contractor-related systems relevant during the process of negotiation. This might include accounting, purchasing, estimation, and/or compensation; the section should be specific about how they relate to the negotiation and how they were evaluated.
What section of FAR addresses contract pricing?
The next two sections are somewhat related as well, so we'll go over the document the two sections are a part of. When a prime contractor submits an offer, it should typically include an estimate of how much the project will cost i.e. a pricing proposal. If we look back to the construction example, the fundamental cost elements include an estimate of the materials and labor required for a specific project. For this, the FAR has a distinct document that is specifically designed for this function, known by the name of Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 You can find an example of the document that contains the name of the company and lines for your names as well as your signature, title, and date of signature. The certificate confirms that, at the very best of your knowledge, the cost outline that you've submitted is correct. Also, this certificate is only valid for prime contracts exceeding $2 million , which were issued on or on or after July 1, 2018. Let's review the specific guidelines that govern this document:
Section 5
This section is referring to situations where the certification of current cost or pricing data was not needed to establish acceptable contract prices , even if the contract that was awarded exceeded the $2 million threshold. FAR 15.403-1 outlines the instances where the certificate of current cost or pricing data isn't necessary, but a few examples are:
If the contracting office determines that the agreed-upon prices are based on prices set by law or regulation
If a product or commercial service is acquired
If you are changing a contract or subcontract for commercial products or services
You may refer to the FAR 15.403-1 for the full list of requirements, but , in essence, if your contract does not require a certificate of the current price or cost data, Section 5 will need to describe the specific exception that allows you to skip the certificate and the basis your contract will be able to benefit from that exception.