Documenting Negotiations In Accordance With FAR 15.406-3

If you're a contractor working with authorities from U.S. Government you've almost certain dealt with FAR, or Federal Acquisition Regulation. This lengthy legal document governs the rules, rules, and regulations that the Government and prime contractors are required to adhere to when working with each other.

In this article, we'll dissect a particular subsection which covers an important step in any negotiations between Government and the prime contractor: the documentation of the negotiations.

Because the burden of responsibly spending Government funds falls on the contractor of the first resort so it is crucial to be accurate and thorough when capturing negotiations.

Any discrepancies might be caught in a Contractor Purchase System Review, which is also known as a CPSR. This review process ensures that the contractor in charge is spending taxpayer money in a responsible manner.

If you follow this article, then you'll be in a position to provide a complete and complete account of negotiation which is in compliance 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?
As a whole, 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 comprised of eleven fundamental elements:

Section 1
This first section is fairly simple as it defines the reason for the negotiation. Negotiation's purpose can be varied in the case of negotiation of the new contract on sole source basis or negotiation of an equitable adjustment and so on. These are determined during the prenegotiation objective stage, which is explained in the FAR 15.406-1.

Section 2
This should include the acquisition in its entirety it could be comprised of things, services or construction or even real property that the Government is planning to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers which refer in the target proposal document that the contractor has to offer.

Section 3
The section should include the name, title and organizational affiliation of each person representing either the contractor who is the prime contractor or the government in the negotiation.

Section 4
In this section, you should discuss the current state of contractor systems that may be relevant to the negotiation. This could include accounting, accounting, purchase, and/or compensation; the section should specify how these systems were related to negotiation and in what extent they were taken into consideration.

What portion of the FAR concerns contract pricing?
The following two sections are sort of linked and we'll begin by examining the document in relation to. When a prime contractor makes an offer, it will typically contain an estimate on how much the job will cost i.e. a pricing proposal. When we consider the example of construction, the basic cost elements will be an estimate on labour and materials on a specific task. For this the FAR has a distinct document with this particular purpose, known as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 there is a template of the certificate which includes the name of your company as well as lines for your name, title, signature, and the date you signed. This certification acknowledges that according to your knowledge, the information in the cost outline you have submitted is accurate. This certificate is only required when prime contracts exceed $2 million that were awarded on or after July 1, 2018. Let's take a look at the specific guidelines for this document:

Section 5
This section refers to instances where the certificate of current pricing or cost information was not required to determine acceptable contract costs even though the contract granted exceeded the $2 million threshold. FAR 15.403-1 defines the scenarios when this certification isn't needed, however a few of them 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 any contract or subcontract for commercial products or services

You can refer the 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 explain more info the specific exemption that permits you to bypass the certificate , and what basis your contract will be able to benefit from that exception.

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