If you are contractors working with authorities from U.S. Government you've almost definitely dealt with the FAR, which is also known as Federal Acquisition Regulation. The lengthy legal document provides the rules and regulations that both Government agencies 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 during a Contractor Purchasing Systems Review, also known as a CPSR. The process of reviewing ensures the prime contractor is spending tax payer money efficiently.
By following this guideline, you'll be able to prepare a complete documentation of negotiation that's compliant with FAR 15.406-3, which is especially important for contracting officers who are accountable for gathering and submitting the required paperwork to the contract file.
What should each price negotiation memorandum have?
In total, the document discussed throughout this post is known as a price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3, the PNM comprises eleven essential elements.
Section 1
The first section is straightforward, as it just describes the goal of the negotiation. The objectives of negotiation could be diverse depending on the situation, like the negotiation of one new contract on an sole source basis as well as negotiation of an equitable adjustment or adjustment. These are determined first during the prenegotiation objectives phase, which is outlined in FAR 15.406-1.
Section 2
This section must outline the acquisition itself that could comprise of materials, services, construction or even real property that the Government plans to acquire. This should include all pertinent numbering. "Identifying numbers" includes things such as the RFP (Request for Proposal) numbers that refer directly to the particular proposal document to describe what the contractor is proposing.
Section 3
The section should include the name, title and organization of every person who represents an individual contractor, as well as the Government in negotiations.
Section 4
In this section, you website should discuss the status of any contractor systems that may be relevant in the negotiations. 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 assessed.
What portion of FAR refers to contract pricing?
The following two sections are a bit related in that we'll cover the document with regard to. If a prime contractor puts out an offer, it will generally include an estimate of the amount of work to cost i.e. a pricing proposal. If we look back to the case of construction, the most fundamental elements of cost include an estimate of materials and labor for a specific project. For this, the FAR has a specific document for this 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 as well as your signature, title, and date of signature. The certificate confirms that, at the very best of your knowledge, the cost estimate that you've provided is correct. Also, this certificate is only valid for prime contracts that exceed $2 million which were given on or the 1st of July, 2018. Let's examine the specific guidelines that apply to this document:
Section 5
This section addresses instances in which the certificate of actual pricing or cost data did not have to be used to determine reasonable contract prices even though the contract awarded exceeded the threshold of $2 million. FAR 15.403-1 lists the circumstances that this certificate is not required. Some examples are:
If the contracting office determines that the prices agreed upon are determined by regulation or law
If a commercial product or commercial service has been purchased
Modifying any contract or subcontract for commercial products or services
The the FAR 15.403-1 for the full list, however, should your contract does not require a certification of current pricing or cost information, Section 5 has to describe the specific exception which lets you skip the certificate , and what basis your contract is in compliance with that exception.