If you are contractors working with or for the U.S. Government you've almost probably dealt with FAR which is also known as 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 examine a specific section that addresses a crucial step in any negotiations between Government and the prime contractor: the record of said negotiation.
Since the burden of accountable spending of Government funds falls on the contractor in charge so it is crucial to be precise and thorough in the recording of negotiations.
Uncertainties could be uncovered in a Contract Purchasing System Review, otherwise known as a CPSR. The process for reviewing the contractor ensures the contractor in charge is spending taxpayer funds in a way that is efficient.
In this article you will be able to create a complete document of negotiation that's in line with FAR 15.406-3 This is especially important for contracting officers who are charged with gathering and submitting the required documents to the official contract file.
What must each price negotiation memorandum have?
As a whole, the document described 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 in the case of negotiation of an agreement for a new contract with a sole source basis as well as negotiation of an equitable adjustment and more. They are first determined during the prenegotiation objectives phase, which can be found in FAR 15.406-1.
Section 2
The section must describe the acquisition itself that could comprise of items, services, construction, or even real estate that the Government aims to acquire, including all relevant identifying numbers. "Identifying numbers" includes things such as RFP (Request to Proposal) numbers, which are referring specifically to the proposal document to describe what the contractor proposes.
Section 3
The document must contain the name, position as well as the organizational structure of each person representing either the contractor who is the prime contractor or the Government in negotiations.
Section 4
In this part, we will discuss the present state of any contractor systems which are relevant in the negotiations. This could include accounting, accounting, purchase and/or compensation. The section should specifically describe how these systems were related to negotiation and the extent to which they were assessed.
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 contractor is asked to submit an offer, it should 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 include an estimate of the labor and materials required for a particular job. In this particular instance 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 can find a template of the certificate that includes the name of your company as well as lines for your name along with your title, signature and the date you signed. This certification acknowledges that according to your knowledge, the information in the cost outline you're submitting is correct. Furthermore, this certificate is only required for prime contracts with read more a value of more than the amount of $2 million and granted the 1st of July, 2018. We will look over the specific guidelines that apply to this document:
Section 5
This section covers instances where the certification of current cost or pricing data was not needed to establish acceptable contract costs even though the contract granted exceeded the threshold of $2 million. FAR 15.403-1 gives examples of instances that this certificate is not required, but some examples are:
If the contracting official determines that the prices agreed to are from prices determined by law or regulation
In the event that a commercial product commercial service is purchased
When changing any contract or subcontract for commercial services or products
You can refer to FAR 15.403-1 for the complete list, but , in essence, if your contract doesn't require a certified copy of current pricing or cost information, Section 5 has be able to provide the specific reason that allows you to skip the certificate and which basis your contract meets that requirement.