If you're contractors working with or for the U.S. Government you've almost certain dealt with FAR, or Federal Acquisition Regulation. The lengthy legal document provides 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 detail a particular section which focuses on a key element in any negotiations between Government and the prime contractor: the documentation of the negotiations.
As the responsibility for proper spending of Government funds rests with the principal contractor, it's critical to be precise and thorough in the recording of negotiations.
Uncertainties could be uncovered in a Contractor Purchase System Review, commonly referred to as a CPSR. This review process ensures that the prime contractor is spending taxpayer money effectively.
If you follow this article, then you'll be able create a complete document of negotiation that is compliant with FAR 15.406-3 which is particularly important for contracting officers, who are accountable for creating and submitting required document to be included in the contract file.
What are the essential elements that each price negotiations memorandum contain?
The documentation discussed within this piece is referred to as the 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 simple, since it simply describes the goal of the negotiation. The reasons for negotiation may differ for example, negotiation of an entirely new contract on a sole source basis or negotiation of an equity adjustment or adjustment. These are determined first during the prenegotiation objective phase which is outlined by FAR 15.406-1.
Section 2
This section should describe the acquisition itself, which could consist of items, services, construction, or even real estate that the Government is planning to procure including all appropriate identified numbers. "Identifying numbers" includes things like RFP (Request for Proposal) numbers that point towards the exact proposal document for what the contractor has to offer.
Section 3
The section should include the name, title and organizational affiliation of each person who represents an individual contractor, as well as the government in the negotiation.
Section 4
In this sectionyou will need to describe the status of any contractor systems which are relevant to the negotiation. This could be accounting, buying, estimating, and/or compensation; the section should clearly describe how these systems relate to the negotiation and how they were thought of.
What portion of FAR addresses contract pricing?
The following two sections are sort of related to each other, and so we'll start by looking at the document that they refer to. When a principal contractor sends bids, they must generally include an estimate of how much the project will cost i.e. a pricing proposal. If we look back to the construction example, the basic cost elements could be an estimate for supplies and labor needed for a particular task. In this instance the FAR has a specific document that is specifically designed for this function, known as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 You can find a template of the certification that has names of the firm as well as lines for your name, title, signature, and date of signing. The certificate confirms that, to the best of your understanding, the cost outline that you are submitting is true. In addition, this document is only required for prime contracts in excess of the amount of $2 million and granted on or the 1st of July, 2018. Let's take a look at the specific guidelines that govern this document:
Section 5
This section covers instances when the certificate of the current pricing or cost information was not required to determine acceptable contract costs even though the contract awarded exceeded the threshold of $2 million. FAR 15.403-1 defines the scenarios where this certificate is not required. Some of them are:
If the contracting official determines that the prices agreed on are from prices determined by law or regulation
If a commercial product or commercial service is being acquired
If you are changing an contract or subcontract that deals with commercial services or products
The the FAR 15.403-1 for the full list of requirements, however, when your contract does not require a certification of current cost or pricing data, Section 5 will more info need to identify the specific exception which lets you skip the certificate as well as the basis your contract is in compliance with that exception.