If you're a contractor who works for the U.S. Government you've almost certainly dealt with FAR, in other words, the Federal Acquisition Regulation. This lengthy legal document governs the rules, rules, as well as regulations that both the government and prime contractors must adhere to when working together.
In this article, we'll detail a particular section that covers a key step in any negotiations between Government and prime contractor: the documentation of the negotiations.
Since the responsibility for responsibly spending Government funds falls on the contractor of the first resort so it is crucial to be meticulous and exact in the recording of negotiations.
Any discrepancies may be discovered during a Contractor Purchasing Systems Review, also known as a CPSR. The process of reviewing ensures the principal contractor spends taxpayer money effectively.
By following this guideline, you will be able to provide a complete and complete account of negotiation in accordance with FAR 15.406-3 that is crucial for contracting officers who are responsible for gathering and submitting the required information to the contract file.
What does each price-negotiating memorandum comprise?
As a whole, the documentation discussed throughout this post is referred to as a Price Negotiation Memorandum, or PNM for short. In FAR 15.406-3, the PNM is composed of eleven principal elements:
Section 1
This section is relatively simple, since it simply clarifies the intent of the negotiation. The reasons for negotiation may differ depending on the situation, like the negotiation of the new contract on sole source basis, negotiation of an equitable adjustment or equitable adjustment, etc. The purpose of negotiation is determined at the prenegotiation objective phase which is outlined within FAR 15.406-1.
Section 2
The description should be of the actual acquisition and could include the construction, goods, or services, or even real estate that the Government plans to purchase, with all necessary identification numbers. "Identifying numbers" includes things such as the RFP (Request to Proposal) numbers that point directly to the particular proposal document to describe what the contractor proposes.
Section 3
This section must include the name, position and the organization of every person representing the prime contractor and the Government in negotiations.
Section 4
In this sectionyou will need to describe the current state of contractor systems that relate with 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 considered.
What section of the FAR deals with contract pricing?
The following two parts are in some way related, so we'll first cover the document which they relate to. When a prime contractor files bids, they should usually contain an estimate of how much the task will cost i.e. a pricing proposal. In the example of construction the main cost elements are an estimate of material and labor costs for a specific project. For this, the FAR has a distinct document intended for this use, which is known as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 in FAR 15.406-2, you can find a template for the certificate. It includes your firm's name and lines for your name the title, signature as well as the date on which you signed. This certificate affirms that, from your understanding, the cost outline which you've prepared is true. In addition, this certificate is only valid for prime contracts that exceed $2 million which were given on or 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 certification of actual cost or pricing information wasn't required to more info determine acceptable contract price, even though contract award was over the $2 million threshold. FAR 15.403-1 describes the situations in which this certificate isn't required but a few of them include:
When the contracting officer is able to determine that prices agreed upon are an elaboration of prices set by law or regulation
In the event that a commercial product commercial service is purchased
When changing a contract or subcontract to commercial services or products
You can refer FAR 15.403-1 for the full list of requirements, but in a nutshell If your contract does not need a proof of current pricing or cost information, Section 5 has to specify the particular exception that permits you to bypass the certificate , and what basis your contract falls within that exception.