If you are an employee of an agency of U.S. Government you've almost surely dealt with FAR, or Federal Acquisition Regulation. The lengthy legal document regulates 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 that covers a critical step in any negotiation between Government and prime contractor: the record of that negotiations.
The responsibility for accountable spending of Government funds is the responsibility of the contractor in charge, it's critical to be exact and thorough when documenting negotiations.
The discrepancies could be discovered through a contractor Purchasing System Review, otherwise known as a CPSR. This review process makes sure that the principal contractor spends taxpayer money effectively.
By following this guideline, you'll be able make a complete record of negotiation that's compliant with FAR 15.406-3 and is particularly important for contracting officers who are responsible for taking and submitting all required paperwork to the contract file.
What is the price negotiation memo contain?
The documents that are discussed 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. These are determined during the prenegotiation objective phase which is detailed by FAR 15.406-1.
Section 2
This section should outline the actual acquisition and could include the construction, goods, or services, or even real estate that the government aims to purchase, with all necessary identification numbers. "Identifying numbers" includes things such as the 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 the prime contractor and the Government during the negotiation.
Section 4
In this section, you should discuss the state of affairs of all contractor systems which are relevant to negotiations. This could be accounting, accounting, purchase, and/or compensation; the section should describe in detail how these systems related to the negotiation and the extent to which they were evaluated.
What section of the FAR concerns 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 usually include an estimate of how much the job will cost i.e. a pricing proposal. If we refer back to the example of construction, the basic cost elements would be an estimate of materials and labor 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 get more info certificate. It includes the name of the business and lines for your personal name along with your title, signature and date of signing. The certificate confirms that, in your best knowledge, the information in the cost outline that you are submitting is accurate. This certificate is only valid to be submitted for prime contracts of greater than $2 million , which were granted on or on or after July 1, 2018. Let's look at the specific guidelines that govern this document:
Section 5
This section is referring to situations where the certification of current cost or pricing data was not needed to establish acceptable contract prices , even if the contract that was awarded exceeded the $2 million threshold. FAR 15.403-1 describes the situations in which this certificate isn't required but a few of them include:
When the contracting officer is able to determine that the prices agreed to are from prices determined by law or regulation
If a product or commercial service is acquired
When modifying an contract or subcontract to commercial services or products
You can consult FAR 15.403-1 for the complete list of requirements, but in the simplest terms, If your contract does not need a proof of current cost or pricing data, Section 5 must to describe the specific exception that lets you avoid the certificate as well as the basis your contract is in compliance with that exception.