If you are contractors working with government officials from the U.S. Government you've almost certain dealt with FAR or the Federal Acquisition Regulation. This hefty legal document regulates the rules of regulations and guidelines that Government officials and prime contractors must follow when working together.
In this article we'll examine a specific section that addresses a crucial step in any negotiations between Government and prime contractor: the documentation of the negotiations.
Because the burden of responsibly spending Government funds is the prime contractor that's why it's vital to be precise and thorough when documenting negotiations.
Uncertainties could be uncovered by a Contractor Purchasing System Review, or a CPSR. The process for reviewing the contractor ensures the contractor that is the primary contractor is spending taxpayer money effectively.
In this article you will be able to provide a complete and complete account of negotiation that's compliant with FAR 15.406-3, which is crucial for contracting officers who are accountable for collecting and submitting the necessary paperwork to the contract file.
What are the essential elements that each price negotiations memorandum comprise?
In total, the document that is discussed in this essay 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 initial section is straightforward, as it just defines the reason for the negotiation. The goals of negotiation can differ in the case of negotiation of an agreement for a new contract with sole source basis or the negotiation of an equitable adjustment and so on. This is first decided during the prenegotiation objective stage, which is detailed in FAR 15.406-1.
Section 2
This section should outline the acquisition in its entirety comprising items, services, construction, or even real estate that the Government plans to acquire. This should include all pertinent identifiable numbers. "Identifying numbers" includes things such as"RFP" (Request for Proposal) numbers that point on the precise proposal document that the contractor will propose.
Section 3
This section must include the name, position as well as the organizational structure of each person representing the prime contractor and the government in the negotiation.
Section 4
In this sectionyou will need to describe the current state of any contractor systems that are relevant to negotiations. This could include accounting, accounting, purchase, and/or compensation; the section should be specific about how these systems relate to the negotiation and the extent to which they were thought of.
What part of the FAR deals with contract pricing?
The next two sections are somewhat related which is why we'll first look at the document the two sections are a part of. When a prime contractor submits an offer, it should usually contain an estimate of what the job is expected to cost i.e. a pricing proposal. When we think back to the instance of construction, the main cost elements would be an estimate of the materials and labor required for a specific job. In this case, the FAR contains a specific document specifically for this purpose referred to as the Certificate of Current Cost or Pricing Data.
In FAR 15.406-2 there is an example for the certificate. It includes the name of your company as well as lines for your name as well as your signature, title, and the date you signed. This certificate acknowledges that at the very best of your knowing, the outline of costs that you've submitted is true. In addition, this document is only required for prime contracts exceeding $2 million that were given on or after July 1, 2018. Take a look at the specific guidelines that apply to this document:
Section 5
This section refers to instances where the certification of current cost or pricing data wasn't required to determine acceptable contract price, even though contract was awarded in excess of the $2 million threshold. FAR 15.403-1 describes the situations where the certificate of current cost or pricing data isn't required but a few examples are:
When the contracting officer determines that the agreed-upon click here prices are basing on the prices set by regulation or law
If a commercial product or commercial service is bought
Modifying any contract or subcontract for commercial services or products
You can consult FAR 15.403-1 for the full list of requirements, but , in essence, in the event that your contract does not require a certification of current cost or pricing data, Section 5 should be able to provide the specific reason which lets you skip the certificate and the basis your contract is in compliance with that exception.