If you're a contractor who works for an agency of U.S. Government you've almost surely dealt with FAR, or Federal Acquisition Regulation. This hefty legal document governs the rules, rules, and regulations that Government and prime contractors have to follow when working together.
In this article we'll detail a particular section which covers an important step in any negotiations between Government and prime contractor: the record of said negotiation.
The responsibility for responsibly spending Government funds is on the contractor who is in charge that's why it's vital to be accurate and thorough when documenting negotiations.
Any discrepancies might be caught in a Contractor Purchase System Review, also known as a CPSR. The process of reviewing ensures the principal contractor is spending tax payer money efficiently.
With this article, you'll be able to make a full documentation of negotiation that's compliant with FAR 15.406-3 this is especially important for contracting officers, who are accountable for making sure that they submit the required information to the contract file.
What will each price negotiation memorandum be?
In total, the documents that are discussed in this article is referred to as the price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM is composed of 11 main elements:
Section 1
The first part is quite easy, as it describes the goal of the negotiation. Purposes of negotiation can vary from the negotiation of one new contract with the basis of sole source or the negotiation of an equitable adjustment, etc. They are determined in the prenegotiation goal phase that can be found as part of FAR 15.406-1.
Section 2
This section should describe the acquisition itself, which could consist of goods, services, construction or even real property that the Government is planning to acquire. It should include all appropriate numbering. "Identifying numbers" includes things such as RFP (Request to Proposal) numbers which refer on the precise proposal document for what the contractor proposes.
Section 3
The document must contain the name, position and affiliation of each person who represents both the prime contractor and Government in the negotiation.
Section 4
In this section, discuss the status of any contractor-related systems relevant in the negotiations. This could be purchasing, estimating, accounting, and/or compensation; the section should describe in detail how these systems impacted the negotiation and the extent to which they were taken into consideration.
What portion of the FAR is concerned with contract pricing?
The two following sections are kind of connected as well, so we'll go over the document that they refer to. When a prime contractor makes a bid, it must generally include an estimate of how much the project will cost i.e. a pricing proposal. When we think back to the case of construction, the most fundamental elements of cost will be an estimate of the materials and labor required for a specific job. For this, the FAR has a distinct document intended for this use, which is known as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 you can find a template for the certificate. It includes your firm's name and lines for your name or title, signature as well as the date on which you signed. This certificate affirms that, from your understanding, the cost outline that you've provided 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 costs even though the contract granted exceeded the $2 million threshold. FAR 15.403-1 defines the scenarios where the certificate of current cost or pricing data isn't needed, however a few of them are:
When the contracting officer determines that the agreed-upon prices are in accordance with prices established 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
The get more info the FAR 15.403-1 for the full list of requirements, but in the simplest terms, in the event that your contract doesn't require a certified copy of current pricing or cost data, Section 5 needs to identify the specific exception which permits you to avoid certification and on what basis your contract is in compliance with that exception.