If you are an employee of the U.S. Government you've almost surely dealt with FAR, or Federal Acquisition Regulation. This hefty legal document covers the rules and regulations that government agencies and prime contractors must adhere to when working together.
In this article we'll break down a specific subsection that focuses on an essential step in any negotiation between Government and prime contractor: the record of that negotiations.
Because the burden of the responsible use of Government funds is the responsibility of the contractor who is in charge and the contractor's responsibility, it's essential to be meticulous and exact when capturing negotiations.
Any discrepancies may be discovered during a Contractor Purchasing Systems Review, also known as a CPSR. The process of reviewing ensures the prime contractor is spending taxpayer money in a responsible manner.
Utilizing this article, you'll be in a position to provide a complete and complete account of negotiation that's compliant with FAR 15.406-3 and is particularly relevant for contracting officers who are charged with making sure that they submit the required papers to the contract file.
What should each price negotiation memo contain?
In total, the documents that are discussed in the article can be known as a price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM comprises eleven essential elements.
Section 1
The initial section is easy to comprehend, as it describes the goal of the negotiation. The reasons for negotiation may differ, such as the negotiation of an agreement for a new contract on the sole source model as well as negotiation of an equitable adjustment and more. These are determined first during the prenegotiation goal phase that is described within FAR 15.406-1.
Section 2
This section should outline the actual acquisition it could be comprised of goods, services, construction or even real property that the Government is planning to acquire. Include all identified numbers. "Identifying numbers" includes things like the RFP (Request for Proposal) numbers that relate towards the exact proposal document to describe what the contractor is proposing.
Section 3
This section must include the name, position, and organization of each person representing either the contractor FAR 15 who is the prime contractor or the Government in the negotiation.
Section 4
In this section, discuss the state of affairs of all contractor systems which are relevant in the negotiations. This might include purchasing, estimating, accounting or compensation. The section should specify how these systems relate to the negotiation and the extent to which they were evaluated.
What portion of the FAR covers contract pricing?
The following two parts are in some way related as well, so we'll go over the document in relation to. If a prime contractor puts out an offer, it should typically include an estimate of what the job will cost i.e. a pricing proposal. When we consider the construction example, the primary cost elements could be an estimate for materials and labor for a specific job. For this, the FAR has a specific document intended for this use, which is known as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 there is an example of the certificate , which contains the name of the company 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 which you've prepared is correct. In addition, this document is only required when prime contracts exceed $2 million that were given the 1st of July, 2018. We will look over the specific guidelines that apply to this document:
Section 5
This section covers instances in which the certificate of current pricing or cost information is not required to establish reasonable contract price, even though contract was awarded in excess of the $2 million threshold. FAR 15.403-1 gives examples of instances in which this certificate isn't necessary, but a few of them include:
When the contracting officer determines that the agreed-upon prices are an elaboration of prices set by law or regulation
When a commercial item or commercial service is being purchased
Modifying a contract or subcontract that deals with commercial products or services
You can refer to FAR 15.403-1 for the full list of requirements, but , in essence, when your contract does not need a proof of current cost or pricing data, Section 5 will need to define the specific exception that permits you to bypass the certificate and the basis your contract is in compliance with that exception.