If you are a contractor who works for government officials from the U.S. Government you've almost likely dealt with FAR or the Federal Acquisition Regulation. This dense legal document contains the rules and regulations that the Government and prime contractors are required to adhere to when working with each other.
In this article we'll look at a specific sub-section which covers an important step in any negotiations between Government and the prime contractor: the record of said negotiation.
Since the burden of the responsible use of Government funds is the contractor that is the primary contractor It is essential to be meticulous and exact in the documentation of negotiations.
Any discrepancies may be discovered in a Contractor Purchasing System Review, also known as a CPSR. The process of reviewing ensures the prime contractor is spending tax payer money efficiently.
With this article, you'll be able write a comprehensive documentation of negotiation that's compliant with FAR 15.406-3 and is particularly important for contracting officers who are responsible for gathering and submitting the required information to the contract file.
What will each price negotiation memorandum be?
As a whole, 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 comprises eleven primary elements:
Section 1
The first paragraph is pretty straightforward, as it just clarifies the intent of the negotiation. The reasons for negotiation may differ depending on the situation, like the negotiation of an entirely new contract with a sole source basis as well as negotiation of an equitable adjustment as well as other such. They are first determined during the objective phase prior to negotiation which is detailed as part of FAR 15.406-1.
Section 2
This section should describe the acquisition itself, which could consist of items, services, construction or even real property that the Government aims to procure including all appropriate identifying numbers. "Identifying numbers" includes things such as RFP (Request to Proposal) numbers, which are referring specifically to the proposal more info document to describe what the contractor proposes.
Section 3
The document must contain the name, position, and organization of each person representing the principal contractor and the Government during the negotiation.
Section 4
In this section, describe the current status of any contractor systems which are relevant for the discussion. This could be purchasing, estimating, accounting, and/or compensation; the section should be specific about how these systems related to the negotiation and the extent to which they were thought of.
What portion of the FAR is concerned with contract pricing?
The two following sections are sort of related to each other, and so we'll start by looking at the document with regard to. When a principal contractor sends a bid, it must typically include an estimate of the amount of work to cost i.e. a pricing proposal. If we look back to the construction example, the most fundamental elements of cost include an estimate of the materials and labor required for a specific job. For this, the FAR has a distinct document with this particular purpose, known as the Certificate of Price or Cost Current Data.
In FAR 15.406-2 you will find an example of the certificate , which contains the name of the firm along with lines for your own name and signature. and date of signature. This certificate acknowledges that, as far as you can knowledge, the cost outline that you've submitted is correct. In addition, this document is only valid to be submitted for prime contracts of greater than $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 actual cost or pricing information wasn't required to determine acceptable contract price, even though contract award was over the $2 million threshold. FAR 15.403-1 describes the situations where this certificate isn't required but a few of them include:
When the contracting officer determines that the prices agreed on are basing on the prices set by regulation or law
When a commercial service or commercial service is being acquired
When changing a contract or subcontract for commercial products or services
It is possible to refer to the FAR 15.403-1 for the full list of requirements, however, when your contract doesn't require a certificate of current cost or pricing information, Section 5 is required to define the specific exception which permits you to avoid the certificate and on what basis your contract can be considered to meet that exemption.