If you are an contractor that works with or for the U.S. Government you've almost certain dealt with FAR that is the Federal Acquisition Regulation. This dense legal document contains the rules as well as regulations that both the government as well as prime contractors must adhere to when working with each other.
In this article we'll dissect a particular subsection which focuses on a key element in any negotiation between Government and the prime contractor: the record of that negotiations.
Since the burden of proper spending of Government funds rests with the contractor of the first resort It is essential to be thorough and accurate when capturing negotiations.
Any discrepancies might be caught through a contractor Purchasing System Review, also known as a CPSR. This review process ensures that the principal contractor is spending taxpayer money in a responsible manner.
Using this article, you'll be able make a full documentation of negotiation in accordance with FAR 15.406-3 that is particularly crucial for contracting officers who are responsible for creating and submitting required document to be included in the contract file.
What does each price-negotiating memorandum contain?
As a whole, the document that is discussed in this article is known as the price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 the PNM is made of eleven essential elements.
Section 1
The first section is easy, as it specifies the objective of the negotiation. Negotiation's purpose can be varied and include negotiation of the creation of a new contract on the basis of sole source as well as negotiation of an equitable adjustment or adjustment. These are determined first during the prenegotiation objective stage, which is defined within FAR 15.406-1.
Section 2
The section must describe the acquisition in its entirety that may comprise the construction, goods, or services or even real estate which the government plans to acquire, including all relevant specific numbers. "Identifying numbers" includes things such as the RFP (Request for Proposal) numbers that refer to the specific proposal document that the contractor is proposing.
Section 3
The section should include the name, position as well as the organizational structure 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 present state of any contractor-related systems that are pertinent in the negotiations. This might include accounting, purchasing, estimation and/or compensation. The section should detail the way click here these systems were related to negotiation and how they were examined.
What section of the FAR covers contract pricing?
The two following sections are somewhat related in that we'll cover the document that they pertain to. If a prime contractor puts out an offer, it should typically include an estimate of how much the job will cost i.e. a pricing proposal. If we refer back to the construction industry, the main cost elements are an estimate of the materials and labor required for a specific project. In this case, the FAR has a special document with this particular purpose, known as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 you can locate a template of the certificate which includes the name of the business along with lines for your own name, title, signature, as well as the date on which you signed. The certificate confirms that, in your best understanding, the cost outline that you've submitted is true. In addition, this document is only valid for prime contracts that exceed $2 million , which were issued on or on or after July 1, 2018. Let's take a look at the specific guidelines for this document:
Section 5
This section focuses on instances where the certification of current pricing or cost information was not needed to establish acceptable contract prices even though the contract signed exceeded the threshold of $2 million. FAR 15.403-1 outlines the instances in which the certificate is not required. Some of them include:
If the contracting office determines that the prices agreed on are based on prices set by regulation or law
If a commercial product or commercial service is bought
If you want to modify any contract or subcontract for commercial services or products
You can refer the FAR 15.403-1 for the full list of requirements, but in the simplest terms, should your contract does not require certification of current pricing or cost data, Section 5 should to explain the specific exemption that lets you avoid the certificate and on what basis your contract meets that requirement.