If you are an individual contractor working for Government officials of the U.S. Government you've almost certainly dealt with FAR, which is also known as Federal Acquisition Regulation. The lengthy legal document regulates the rules and regulations that Government and prime contractors must adhere to when working with each other.
In this article we'll go over a particular section that addresses a crucial step in any negotiation between Government and the prime contractor: the record of said negotiation.
As the responsibility for responsible spending of Government funds is the contractor who is in charge It is essential to be meticulous and exact in the recording of negotiations.
Any irregularities could be discovered by a Contractor Purchasing System Review, otherwise known as a CPSR. The process of reviewing ensures the principal contractor is using taxpayer funds in a way that is efficient.
In this article you'll learn how to provide a complete and complete account of negotiation in accordance with FAR 15.406-3 this is especially important for contracting officers who are responsible for creating and submitting required documentation to an official contract file.
What are the essential elements that each price negotiations memo contain?
As a whole, the documentation discussed herein is referred to as the price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3, the PNM is composed of eleven primary elements:
Section 1
The first section is simple as it clarifies the intent of the negotiation. The goals of negotiation can differ for example, negotiation of the creation of a new contract with sole source basis and negotiation of an equitable adjustment and more. They are first determined during the prenegotiation objective stage, which is detailed in Federal Regulation 15.406-1.
Section 2
The description should be of the acquisition in its entirety that may comprise items, services, construction or even real estate that the Government plans to acquire. Include all identifiable numbers. "Identifying numbers" includes things such as RFP (Request for Proposal) numbers that refer in the target proposal document that the contractor will propose.
Section 3
The document must contain the name, position and organizational affiliation of each person who represents an individual contractor, as well as the government in the negotiation.
Section 4
In this section, you should discuss the current state of any contractor systems that may be relevant to the negotiation. This could include accounting, accounting, purchase, and/or compensation; the section should specifically describe how these systems relate to the negotiation and the extent to which they were taken into consideration.
What portion of FAR is concerned with contract pricing?
The two following parts are in some way related as well, so we'll go over the document in relation to. When a principal contractor sends bids, they must usually contain an estimate of what the job is expected to cost i.e. a pricing proposal. If we go back to the construction example, the most fundamental elements of cost are an estimate of labour and materials on a specific task. In this particular instance the FAR provides a specific document specifically for this purpose referred to by the name of Certificate of Price or Cost Current Data.
In FAR 15.406-2 in FAR 15.406-2, you can find an example of the document that contains the name of the company along with lines for your own name or title, signature and date of signing. This certificate affirms that, at the very best of your knowledge, the cost estimate that you've submitted is true. This certificate is only valid for prime contracts that exceed $2 million that were granted the 1st of July, 2018. We will look over the specific guidelines that apply to this document:
Section 5
This section covers instances where the certificate of current cost or pricing data was not necessary to determine acceptable contract prices , even if the contract signed exceeded the threshold of $2 million. FAR 15.403-1 outlines the instances in which the certificate isn't required but a few of them are:
If the contracting official determines that the prices agreed upon are based on prices set by regulation or law
If a commercial product or commercial service is being acquired
When modifying the terms of a contract or subcontract check here to commercial products or services
You can refer to the FAR 15.403-1 for the complete list, however, for those who's contract doesn't require a certificate of current cost or pricing information, Section 5 is required be able to provide the specific reason that permits you to bypass the certificate and the basis your contract can be considered to meet that exemption.