Documenting Negotiations In Accordance With FAR 15.406-3

If you're a contractor who works for an agency of U.S. Government you've almost definitely dealt with the FAR, which is also known as Federal Acquisition Regulation. This lengthy legal document covers the rules of regulations and guidelines that Government officials and prime contractors must follow 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 the prime contractor: the documentation of the negotiations.

Since the responsibility of prudent spending of Government funds is the contractor of the first resort that's why it's vital to be meticulous and exact in the recording of negotiations.

Uncertainties could be uncovered in a Contractor Purchase System Review, also known as a CPSR. This process of review ensures that the principal contractor spends tax payer money efficiently.

In this article you'll have the ability to make a full documentation of negotiation in accordance with FAR 15.406-3 This is crucial for contracting officers who are responsible for collating and submitting the required documentation to an official contract file.

What is the price negotiation memorandum be?
In total, the document described throughout this post is known as a Price Negotiation Memorandum, or PNM for short. In FAR 15.406-3 The PNM is composed of eleven main elements:

Section 1
The first section is easy to comprehend, as it clarifies the intent of the negotiation. Negotiation's purpose can be varied from the negotiation of the creation of a new contract with a sole source basis and negotiation of an equitable adjustment or equitable adjustment, etc. The purpose of negotiation is determined at the objective phase of negotiation, which is described as part of FAR 15.406-1.

Section 2
This section must outline the purchase itself comprising items, services, construction or even real property which the government plans to procure including all appropriate identifiable numbers. "Identifying numbers" includes things like"RFP" (Request for Proposal) numbers that refer directly to the particular proposal document for what the contractor has to offer.

Section 3
The document must contain the name, position and affiliation of each person who represents either the contractor who is the prime contractor or the Government in the negotiation.

Section 4
In this part, we will discuss the current state of contractor systems which are relevant during the process of negotiation. This could be accounting, buying, estimating or compensation. The section should clearly describe how these systems related to the negotiation and the extent to which they were examined.

What portion click here of the FAR deals with contract pricing?
The following two sections are kind of connected as well, so we'll go over the document which they relate to. When a prime contractor files an offer, it will generally include an estimate of what the job is expected to cost i.e. a pricing proposal. In the case of construction, the primary cost elements will be an estimate on labour and materials to complete a particular task. In this case the FAR has a specific document to be used for this purpose, referred to by the name of Certificate of Price or Cost Current Data.

In FAR 15.406-2 there is an example of the certificate that includes the name of your company and the lines for your name the title, signature and the date you signed. This certification acknowledges that to the best of your information, the price outline that you've provided is accurate. In addition, this certificate is only required for prime contracts with a value of more than 2 million dollars that were awarded on or on or after July 1, 2018. Let's examine the specific guidelines that apply to this document:

Section 5
This section addresses instances in which the certificate of actual pricing or cost data did not have to be used to determine reasonable contract costs even though the contract was awarded in excess of the $2 million threshold. FAR 15.403-1 provides examples of situations in which this certificate isn't necessary, but a few of them are:

When the contracting officer determines that the prices agreed on are in accordance with prices established by law or regulation

If a commercial product or commercial service has been purchased

When changing or modifying a contract or subcontract to commercial services or products

It is possible to refer to FAR 15.403-1 for the full list of requirements, however, for those who's contract does not require a certification of the current price or cost information, Section 5 has to specify the particular exception that permits you to bypass the certificate as well as the basis your contract falls within that exception.