Documenting Negotiations In Accordance With FAR 15.406-3

If you are an individual contractor working for Government officials of the U.S. Government you've almost likely dealt with FAR or the Federal Acquisition Regulation. This hefty legal document defines the rules of regulations and guidelines that Government officials and prime contractors must follow when working with each other.

In this article we'll detail a particular section which focuses on a key element in any negotiations between Government and prime contractor: the documentation of the negotiations.

Since the responsibility for proper spending of Government funds is on the prime contractor and the contractor's responsibility, it's essential to be accurate and thorough when capturing negotiations.

Uncertainties could be uncovered in a Contractor Purchase System Review, or a CPSR. The process for reviewing the contractor ensures the principal contractor is using taxpayer funds efficiently.

Utilizing this article, you'll have the ability to make a full documentation of negotiation in accordance with FAR 15.406-3, which is particularly relevant for contracting officers, who are responsible for gathering and submitting the required information to the contract file.

What will each price negotiation memorandum be?
The document that is 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 part is quite simple and simply defines the reason for the negotiation. Negotiation's purpose can be varied in the case of negotiation of the creation of a new contract with only a single source basis and negotiation of an equitable adjustment and more. These are determined first during the prenegotiation objective stage, which is explained in the FAR 15.406-1.

Section 2
This section must outline the acquisition in its entirety it could be comprised of things, services or 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
This section must include the name, title and organization of every person who represents an individual contractor, as well as the Government in the negotiations.

Section 4
In this part, we will discuss the state of affairs of all contractor systems that relate to negotiations. This might include accounting, buying, estimating or compensation. The section should specify how these systems impacted the negotiation and in what extent they were considered.

What section of the FAR deals with 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 the amount of work to cost i.e. a pricing proposal. If we look back to the construction example, one of the key elements in a cost proposal will be an estimate on materials and labor to complete a particular task. For this, read more the FAR includes a particular document with this particular purpose, known by the name of Certificate of Price or Cost Current Data.

In FAR 15.406-2 there is an example of the certificate , which contains the name of the firm and the lines for your name, title, signature, and date of signing. This certificate acknowledges that according to your knowledge, the information in the cost outline you have submitted 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 review the specific guidelines that govern this document:

Section 5
This section covers instances in which the certificate of current pricing or cost information is not required to establish reasonable contract pricing, even though the contract that was awarded exceeded the $2 million threshold. FAR 15.403-1 lists the circumstances when this certification isn't necessary, but a few of them include:

If the contracting official determines that the prices agreed on are based on prices set by regulation or law

When a commercial item or commercial service is purchased

When changing any contract or subcontract that deals with commercial services or products

You may refer to the FAR 15.403-1 for the full list of requirements, but in the simplest form, in the event that your contract does not need a proof of current cost or pricing information, Section 5 is required to explain the specific exemption that lets you avoid the certificate , and what basis your contract can be considered to meet that exemption.

Leave a Reply

Your email address will not be published. Required fields are marked *