If you're an employee of an agency of U.S. Government you've almost definitely dealt with the FAR, also known as the Federal Acquisition Regulation. This hefty legal document contains the rules as well as regulations that both the government as well as prime contractors must adhere to when working with each other.
In this article, we'll dissect a particular subsection which focuses on a key element in any negotiations between Government and the prime contractor: the record of said negotiation.
Because the burden of accountable spending of Government funds falls on the prime contractor and the contractor's responsibility, it's essential to be precise and thorough when capturing negotiations.
Any irregularities could be discovered by a Contractor Purchasing System Review, commonly referred to as a CPSR. This process of review ensures that the contractor that is the primary contractor is spending taxpayer money efficiently.
Using this article, you will be able to create a complete document of negotiations that is in compliance with FAR 15.406-3, which is especially important for contracting officers who are charged with collating and submitting the required papers to the contract file.
What does each price-negotiating memorandum include?
The documents that are 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 is made of eleven principal elements:
Section 1
The first part is quite simple as it clarifies the intent of the negotiation. The objectives of negotiation could be diverse in the case of negotiation of the new contract with sole source basis as well as negotiation of an equitable adjustment and so on. These are determined during the prenegotiation objective phase which is detailed by FAR 15.406-1.
Section 2
The description should be of the purchase itself it could be comprised of the construction, goods, or services or even real property which the government plans to acquire. Include all identified numbers. "Identifying numbers" includes things such as"RFP (Request for Proposal) numbers that relate to the specific proposal document to describe what the contractor will propose.
Section 3
The document must contain the name, position and affiliation of each person representing an individual contractor, as well as the government in the negotiation.
Section 4
In this section, you should discuss the status of any contractor systems that relate to negotiations. This could include accounting, purchasing, estimation or compensation. The section should specify how these systems were related to negotiation and how they were considered.
What portion of the FAR refers to contract pricing?
The next two parts are in some way related, so we'll first cover the document the two sections are a part of. If a prime contractor puts out bids, they should usually contain an estimate of how much the task will cost i.e. a pricing proposal. If we go back to the example of construction one of the key elements in a cost proposal will be an estimate on supplies and labor needed to complete a particular task. In this context the FAR has a special document specifically for this purpose referred to as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 in FAR 15.406-2, you can find a template of the certification that has the name of the business and lines for your names, title, signature, and date of signing. This certificate certifies that, as far as you can knowing, the outline of costs that you are submitting is accurate. Furthermore, this certificate is only required for prime contracts with a value of more than $2 million , which were given after July 1, 2018. Let's look at the specific guidelines for this document:
Section 5
This section is referring to situations when the certificate of the current cost or pricing data wasn't required to determine reasonable contract prices even though the contract awarded exceeded the threshold of $2 million. FAR 15.403-1 gives examples of instances when this certification does not have to be provided, however, a handful of them include:
If the contracting official determines that the agreed-upon prices are in accordance with prices established by regulation or law
When a commercial item or commercial service has been purchased
Modifying or modifying a contract or click here subcontract that deals with commercial services or products
You may refer to the FAR 15.403-1 for the complete list, but in a nutshell when your contract does not require a certification of current cost or pricing data, Section 5 should be able to provide the specific reason that lets you avoid certification and on what basis your contract fits that exception.