If you're a contractor working with Government officials of the U.S. Government you've almost likely dealt with FAR or the Federal Acquisition Regulation. This hefty legal document covers the rules of regulations and guidelines that Government officials and prime contractors have to follow 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 documentation of that negotiations.
Since the responsibility of responsible spending of Government funds is on the contractor who is in charge therefore it's crucial to be thorough and accurate in the record of negotiations.
Any irregularities could be discovered in a Contract Purchasing System Review, commonly referred to as a CPSR. The review process is designed to ensure that the contractor that is the primary contractor is spending taxpayer funds in a way that is efficient.
In this article you'll learn how to prepare a complete documentation of negotiations that is in compliance 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 will each price negotiation memorandum have?
As a whole, the document described in the article can be known as a Price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is composed of eleven principal elements:
Section 1
This section is relatively simple, since it simply clarifies the intent of the negotiation. The reasons for negotiation may differ depending on the situation, like the negotiation of the new contract on sole source basis, negotiation of an equitable adjustment and so on. This is first decided during the objective phase of negotiation, which is defined by FAR 15.406-1.
Section 2
This section should outline the acquisition in its entirety comprising materials, services, construction or even real estate which the government plans to acquire. It should include all appropriate identifiable numbers. "Identifying numbers" includes things like"RFP" (Request for Proposal) numbers that relate on the precise proposal document for what the contractor has to offer.
Section 3
The section should include the name, title and affiliation of each person who represents an individual contractor, as well as the Government in negotiations.
Section 4
In this section, cover the current state of contractor-related systems that are pertinent during the process of negotiation. This could include accounting, accounting, purchase and/or compensation. The section should detail the way they relate to the negotiation and how they were evaluated.
What section of FAR covers contract pricing?
The next two sections are kind of connected in that we'll cover the document with regard to. When a principal contractor sends a bid, it must typically include an estimate of the amount of work to cost i.e. a pricing proposal. If we look back to the construction example, the fundamental cost elements will be an estimate on labour and materials on a specific task. In this regard it is the FAR contains a specific document that is specifically designed for this function, known by the name of Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 in FAR 15.406-2, you can find a template for the certificate. It includes the name of the business and lines for your name the 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 true. In addition, this certificate is only required for prime contracts in excess of $2 million granted following July 1, 2018. Take a look at the specific guidelines for this document:
Section 5
The section deals with instances when the certificate of the click here actual pricing or cost data did not have to be used to determine reasonable contract pricing, even though the contract awarded exceeded the threshold of $2 million. FAR 15.403-1 gives examples of instances that this certificate isn't necessary, but a few of them are:
If the contracting office determines that the prices agreed upon are determined by regulation or law
When a commercial item 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 of requirements, however, should your contract does not require a certification of the current price or cost data, Section 5 should to identify the specific exception which permits you to avoid the certificate and on what basis your contract can be considered to meet that exemption.