If you are 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 covers the rules of regulations and guidelines that Government officials and prime contractors must adhere to when working together.
In this article, we'll break down a specific subsection that focuses on an essential step in any negotiation between Government and prime contractor: the record of that negotiations.
As the responsibility for responsible spending of Government funds is the responsibility of the prime contractor, it's critical to be exact and thorough when documenting negotiations.
The discrepancies could be discovered through a contractor Purchasing System Review, otherwise known as a CPSR. This process of review ensures that the principal contractor is spending taxpayer money efficiently.
Using this article, you'll be able to create a complete document of negotiations that is in compliance with FAR 15.406-3 This is especially important for contracting officers who are charged with collating and submitting the required papers to the contract file.
What does each price-negotiating memo contain?
The documents discussed in this article is referred to as the price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM is composed of 11 major elements:
Section 1
This first section is fairly easy to comprehend, as it states the purpose of the negotiation. The objectives of negotiation could be diverse, such as the negotiation of an entirely new contract on the sole source model or negotiation of an equitable adjustment and so on. This is first decided during the objective phase of negotiation, which is described within FAR 15.406-1.
Section 2
This section should outline the actual acquisition and could include the construction, goods, or services, or even real estate that the government aims to purchase, with all necessary identification numbers. "Identifying numbers" includes things such as"RFP (Request for Proposal) numbers that refer in the target proposal document that the contractor is proposing.
Section 3
This section must include the name, title and organizational affiliation of each person who represents an individual contractor, as well as the Government during the negotiation.
Section 4
In this sectionyou will need to describe the current state of contractor systems that relate to negotiations. This could include purchasing, estimating, accounting or compensation. The section should detail the way they relate to the negotiation and in what extent they were examined.
What portion of FAR refers to contract pricing?
The two following sections are somewhat related which is why we'll first look at the document that they pertain to. When a principal contractor sends a bid, it must generally include an estimate of what the job is expected to cost i.e. a pricing proposal. If we look back to the construction example, the fundamental cost elements would be an estimate of labour and materials for a particular task. For this it is the FAR contains a specific document that is specifically designed for this function, known by the name of Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 You can find an example of the certification that has the name of the company and lines for your name and signature. as well as the date on which you signed. This certification acknowledges that to the best of your knowledge, the cost outline that you are submitting is correct. In addition, this document is only required to be submitted for prime contracts of greater than the amount of $2 million and given following July 1, 2018. We will look over the specific guidelines for this document:
Section 5
This section covers instances when the certificate of the current pricing or cost information was not required to determine acceptable contract pricing, even though the contract was awarded in excess of the $2 million threshold. FAR 15.403-1 describes the situations where this certificate isn't required but a few of them include:
If the contracting official determines that the price agreed on is based on prices set by law or regulation
When a commercial product or click here commercial service is being purchased
When modifying an contract or subcontract that deals with commercial services or products
It is possible to refer to the FAR 15.403-1 for the full list of requirements, but in a nutshell when your contract doesn't require a certificate of current cost or pricing data, Section 5 will need to define the specific exception which allows you to not need the certificate and on what basis your contract can be considered to meet that exemption.