If you are contractors working with an agency of U.S. Government you've almost definitely dealt with the FAR, which is also known as Federal Acquisition Regulation. This dense legal document covers the rules and regulations that government agencies and prime contractors are required to adhere to when working together.
In this article, we'll dissect a particular subsection which focuses on a key element in any negotiations between Government and prime contractor: the record of said negotiation.
The responsibility for the responsible use of Government funds is on the contractor in charge, it's critical to be exact and thorough in the record of negotiations.
The discrepancies could be discovered through a contractor Purchasing System Review, which is also known as a CPSR. This review process ensures that the prime contractor is spending taxpayer funds efficiently.
By following this guideline, you'll have the ability to create a complete document of negotiations that is in compliance with FAR 15.406-3 that is crucial for contracting officers, who are accountable for collecting and submitting the necessary information to the contract file.
What must each price negotiation memorandum include?
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 composed of 11 main elements:
Section 1
The first paragraph is pretty simple as it states the purpose of the negotiation. Negotiation's purpose can be varied and include negotiation of a new contract with sole source basis and negotiation of an equitable adjustment, etc. These are determined during the prenegotiation objectives phase, which is defined as part of FAR 15.406-1.
Section 2
This section must outline the acquisition itself that may comprise the construction, goods, or services or even real property that the government aims to purchase, with all necessary identifying numbers. "Identifying numbers" includes things such as the RFP (Request to Proposal) numbers, which are referring on the precise proposal document that the contractor is proposing.
Section 3
The section should include the name, position and organizational affiliation of each person representing both the prime contractor and Government in the negotiation.
Section 4
In this section, discuss the state of affairs of all contractor systems that relate for the discussion. This could include accounting, accounting, purchase or compensation. The section should detail the way they relate to the negotiation and how they were thought of.
What part of the FAR refers to contract pricing?
The next two sections are somewhat related to each other, and so we'll start by looking at the document the two sections are a part of. When a prime contractor submits bids, they must usually contain an estimate of how much the job will cost i.e. a pricing proposal. If we go back to the instance of construction, the fundamental cost elements are an estimate of supplies and labor needed for a specific project. For this the FAR provides a specific document to be used for this purpose, referred to as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 in FAR 15.406-2, you can find an example of the certificate which includes the name of the firm along with lines for your own name, title, signature, and the date you signed. This certification acknowledges that according to your information, the price outline which you've prepared is true. Also, this certificate is only valid for prime contracts exceeding $2 million that were awarded on or after July 1, 2018. Take a look at the specific guidelines that apply to this document:
Section 5
This section covers instances where the certification of current cost or pricing data was not necessary to determine reasonable contract price, even though contract award was over the $2 more info million threshold. FAR 15.403-1 gives examples of instances that this certificate is not required, but some of them include:
If the contracting official determines that the prices agreed to are from prices determined by law or regulation
When a commercial service or commercial service is being acquired
Modifying any contract or subcontract that deals with commercial products or services
It is possible to refer to 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 should to identify the specific exception that permits you to bypass the certificate and on what basis your contract falls within that exception.