Documenting Negotiations In Accordance With FAR 15.406-3

If you are contractors working with authorities from U.S. Government you've almost certain dealt with FAR, or Federal Acquisition Regulation. This hefty legal document contains the rules and regulations that government agencies and prime contractors must adhere to when working together.

In this article we'll go over a particular section that focuses on an essential step in any negotiations between Government and prime contractor: the record of that negotiations.

Because the burden of prudent spending of Government funds is on the contractor that is the primary contractor It is essential to be meticulous and exact when capturing negotiations.

Any discrepancies may be discovered in a Contractor Purchase System Review, also known as a CPSR. The review process is designed to ensure that the principal contractor is using taxpayer money efficiently.

Utilizing this article, you will be able to make a full documentation of negotiation that is compliant with FAR 15.406-3 and is essential for contracting officers, who are accountable for making sure that they submit the required documents to the official contract file.

What should each price negotiation memorandum contain?
The document that is discussed within this piece is known as a price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3, the PNM is comprised of eleven principal elements:

Section 1
The initial section is easy to comprehend, as it clarifies the intent of the negotiation. Negotiation's purpose can be varied in the case of negotiation of the new contract on an sole source basis, negotiation of an equitable adjustment or equitable adjustment, etc. This is first decided during the objective phase prior to negotiation which is described within FAR 15.406-1.

Section 2
This should include the acquisition in its entirety that could comprise of things, services or construction or even real property that the Government plans to acquire. It should include all appropriate specific numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that relate to the specific proposal document that the contractor is proposing.

Section 3
The section should include the name, position and affiliation of each person representing both the prime more info contractor and Government in negotiations.

Section 4
In this section, you should discuss the status of any contractor systems which are relevant with the negotiation. This could be accounting, accounting, purchase, and/or compensation; the section should describe in detail how these systems related to the negotiation and how they were evaluated.

What portion of FAR refers to contract pricing?
The following two sections are kind of connected to each other, and so we'll start by looking at the document which they relate to. When a contractor is asked to submit bids, they should typically contain an estimate on what the job will cost i.e. a pricing proposal. If we look back to the instance of construction, one of the key elements in a cost proposal include an estimate of the materials and labor required to complete a particular task. In this regard, the FAR has a special document intended for this use, which is known as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 in FAR 15.406-2, you can find an example of the certificate that includes names of the firm as well as lines for your name and signature. and date of signature. The certificate confirms that, to the best of your knowledge, the cost estimate that you are submitting is accurate. In addition, this certificate is only required when prime contracts exceed $2 million granted after July 1, 2018. Let's review the specific guidelines for this document:

Section 5
This section is referring to situations when the certificate of the actual cost or pricing information was not required to determine acceptable contract price, even though contract awarded exceeded the $2 million threshold. FAR 15.403-1 lists the circumstances in which the certificate is not required. Some examples are:

When the contracting officer determines that the prices agreed on are basing on the prices set by regulation or law

When a commercial service or commercial service is being acquired

In the event of modifying a contract or subcontract for commercial products or services

You can refer FAR 15.403-1 for the complete list, but in the simplest form, for those who's contract does not require a certificate of the current price or cost data, Section 5 needs to specify the particular exception which lets you skip the certificate and the basis your contract will be able to benefit from that exception.