If you are a contractor working with the U.S. Government you've almost certainly dealt with FAR, in other words, the Federal Acquisition Regulation. The lengthy legal document regulates the rules and regulations that government agencies and prime contractors must follow when working together.
In this article, we'll detail a particular section which focuses on a key element in any negotiations between Government and prime contractor: the record of that negotiation.
The responsibility for prudent spending of Government funds falls on the prime contractor that's why it's vital to be meticulous and exact in the record of negotiations.
Uncertainties could be uncovered in a Contractor Purchase System Review, or a CPSR. The process for reviewing the contractor ensures the contractor that is the primary contractor is spending taxpayer money efficiently.
If you follow this article, then you'll be in a position to prepare a complete documentation of negotiation which is in compliance with FAR 15.406-3, which is particularly crucial for contracting officers who are responsible for gathering and submitting the required paperwork to the contract file.
What must each price negotiation memorandum contain?
The documents discussed within this piece is known as a price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM comprises eleven principal elements:
Section 1
The first part is quite straightforward, as it just specifies the objective of the negotiation. Negotiation's purpose can be varied in the case of negotiation of an agreement for a new contract with the basis of sole source or the negotiation of an equitable adjustment as well as other such. These are determined first during the prenegotiation objective stage, which is defined by FAR 15.406-1.
Section 2
The description should be of the acquisition itself, which could consist of things, services or 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, and organization of each person representing the principal contractor and the Government during the negotiation.
Section 4
In this section, describe the current state of any contractor systems which are relevant for the discussion. This could be accounting, purchasing, estimating, and/or compensation; the section should specify how these systems related to the negotiation and how they were examined.
What part of the FAR addresses contract pricing?
The two following sections are somewhat related and we'll begin by examining the document the two sections are a part of. When a prime contractor makes a bid, it must usually include an estimate of the amount of work to cost i.e. a pricing proposal. When we consider the construction example, the most fundamental elements of cost would be an estimate of the materials and labor required for a specific project. In this case it is the FAR has a specific document with this particular purpose, known by the name of Certificate of Price or Cost Current Data.
In FAR 15.406-2 you can find an example of the certificate , which contains your firm's name and lines for your names, title, signature, and date of signing. This certification acknowledges that at the very best of your knowing, the outline of costs you're submitting is true. Also, this certificate is only valid to be submitted for prime contracts of greater than the amount of $2 million and granted on or the 1st of July, 2018. Take a look at the specific guidelines here for this document:
Section 5
This section addresses instances where the certificate of actual cost or pricing information was not necessary 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:
If the contracting official determines that the prices agreed to are from prices determined by law or regulation
If a product or commercial service is acquired
If you are changing the terms of a contract or subcontract to 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.