If you are a contractor working with Government officials of the U.S. Government you've almost certainly dealt with FAR,, or Federal Acquisition Regulation. This dense legal document defines the rules and regulations that Government and prime contractors must abide by when working with each other.
In this article, we'll look at a specific sub-section that focuses on an essential step in any negotiations between Government and the prime contractor: the record of that negotiations.
As the responsibility for responsible spending of Government funds rests with the contractor who is in charge therefore it's crucial to be precise and thorough in the record of negotiations.
Any irregularities could be discovered in a Contract Purchasing System Review, commonly referred to as a CPSR. The review process is designed to ensure that the contractor in charge is spending taxpayer funds in a way that is efficient.
In this article you'll be in a position to make a full documentation of negotiation that's compliant with FAR 15.406-3 and is especially important for contracting officers, who are charged with gathering and submitting the required document to be included in the contract file.
What will each price negotiation memorandum be?
As a whole, the documents that are discussed in the article can be referred to as a Price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is made of eleven essential elements.
Section 1
This first section is fairly easy to comprehend, as it declares the main purpose of the negotiation. The goals of negotiation can differ depending on the situation, like the negotiation of an entirely new contract with sole source basis and negotiation of an equitable adjustment or equitable adjustment, etc. They are first determined during the prenegotiation objective stage, which is defined in the FAR 15.406-1.
Section 2
The description should be of the acquisition in its entirety it could be comprised of the construction, goods, or services or even real property which the government is seeking to acquire. Include all numbering. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that point directly to the particular proposal document to describe what the contractor is proposing.
Section 3
The document must contain the name, position and organizational affiliation of each person representing either the contractor who is the prime contractor or the Government during the negotiation.
Section 4
In this part, we will discuss the current state of any contractor systems that relate for the discussion. This could include accounting, buying, estimating and/or compensation. The section should specify how these systems are related to the negotiation and in what extent they were considered.
What portion of FAR covers contract pricing?
The next two sections are somewhat related as well, so we'll go over here the document which they relate to. When a prime contractor makes bids, they typically contain an estimate on what the job is expected to cost i.e. a pricing proposal. In the instance of construction, the main cost elements could be an estimate for material and labor costs for a particular task. In this particular instance, the FAR has a specific document to be used for this purpose, referred to as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 you will find a template of the certificate that includes your firm's name and the lines for your name or title, signature and date of signature. This certification acknowledges that to the best of your knowledge, the cost outline that you are submitting is correct. In addition, this document is only required for prime contracts that exceed $2 million , which were granted on or after July 1, 2018. Take a look at the specific guidelines that govern this document:
Section 5
This section focuses on instances in which the certificate of current cost or pricing data did not have to be used to determine reasonable contract prices even though the contract granted exceeded the $2 million threshold. FAR 15.403-1 lists the circumstances where this certificate is not required. Some of them are:
If the contracting official determines that the prices agreed upon are from prices determined by law or regulation
When a commercial service or commercial service is being purchased
Modifying a contract or subcontract for commercial services or products
You can consult FAR 15.403-1 for the complete list, but , in essence, in the event that your contract doesn't require a certificate of the current price or cost information, Section 5 has to describe the specific exception which permits you to avoid the certificate and on what basis your contract will be able to benefit from that exception.