Documenting Negotiations In Accordance With FAR 15.406-3

If you are contractors working with an agency of U.S. Government you've almost surely dealt with FAR in other words, the Federal Acquisition Regulation. This hefty legal document covers the rules and regulations that Government as well as prime contractors must adhere to when working together.

In this article we'll go over a particular section that covers a critical step in any negotiation between Government and prime contractor: the record of that negotiation.

As the responsibility for prudent spending of Government funds rests with the contractor who is in charge and the contractor's responsibility, it's essential that they are thorough and precise in the record of negotiations.

Any discrepancies may be discovered by a Contractor Purchasing System Review, also known as a CPSR. This review process ensures that the prime contractor is spending taxpayer money efficiently.

Utilizing this article, you'll be able to prepare a complete documentation of negotiation that's compliant with FAR 15.406-3 This is essential for contracting officers who are accountable for collecting and submitting the necessary papers to the contract file.

What should each price negotiation memorandum be?
The documentation discussed within this piece is referred to as a price Negotiation Memorandum, or PNM for short. In FAR 15.406-3 the PNM is made of eleven fundamental elements:

Section 1
The initial section is simple and simply defines the reason for the negotiation. Negotiation's purpose can be varied for example, negotiation of the creation of a new contract with only a single source basis and negotiation of an equitable adjustment or adjustment. 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 current state of any contractor systems that relate with the negotiation. This could be accounting, accounting, purchase or compensation. The section should be specific about how these systems impacted the negotiation and how they were assessed.

What portion of the FAR deals with contract pricing?
The next two sections are kind of connected get more info and we'll begin by examining the document that they pertain to. When a prime contractor submits bids, they usually contain an estimate of how much the project will cost i.e. a pricing proposal. If we look back to the construction industry, the primary cost elements will be an estimate of labour and materials for a particular task. For this it is the FAR has a distinct document specifically for this purpose referred to by the name of Certificate of Price or Cost Current Data.

In FAR 15.406-2 you can locate an example of the certificate , which contains names of the firm as well as lines for your name along with your title, signature and date of signing. This certificate certifies that, at the very best of your knowledge, the cost outline you have submitted is accurate. Furthermore, this certificate is only required for prime contracts in excess of $2 million which were issued on or on or after July 1, 2018. Let's look at the specific guidelines that govern this document:

Section 5
This section refers to instances when the certificate of the actual pricing or cost data is not required to establish reasonable 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 examples are:

If the contracting official determines that the prices agreed to are an elaboration of prices set by law or regulation

When a commercial service or commercial service is being acquired

Modifying any contract or subcontract that deals with commercial services or products

You can consult FAR 15.403-1 for the complete list, however, If your contract does not require certification of current pricing or cost data, Section 5 must to define the specific exception which allows you to not need certification and on what basis your contract is in compliance with that exception.