Documenting Negotiations In Accordance With FAR 15.406-3

If you're an employee of Government officials of the U.S. Government you've almost surely dealt with FAR, or Federal Acquisition Regulation. This lengthy legal document governs the rules, rules, of regulations and guidelines that Government officials and prime contractors must follow when working together.

In this article, we'll detail a particular section which focuses on a key element in any negotiation between Government and prime contractor: the record of that negotiations.

The responsibility for responsible spending of Government funds is on the contractor that is the primary contractor that's why it's vital that they are thorough and precise when documenting negotiations.

Uncertainties could be uncovered through a contractor Purchasing System Review, commonly referred to as a CPSR. The process of reviewing ensures the contractor that is the primary contractor is spending taxpayer money in a responsible manner.

In this article you will be able to prepare a complete documentation of negotiations that is in compliance with FAR 15.406-3 this is essential for contracting officers who are responsible for creating and submitting required paperwork to the contract file.

What are the essential elements that each price negotiations memorandum be?
As a whole, the document described throughout this post is known as a price Negotiation Memorandum, or PNM for short. In FAR 15.406-3 The PNM comprises eleven principal elements:

Section 1
This section is relatively easy, as it describes the goal of the negotiation. The purpose of negotiations can be different from the negotiation of the creation of a new contract on an sole source basis, negotiation of an equitable adjustment or equitable adjustment, etc. These are determined first during the prenegotiation objective phase which is outlined in FAR 15.406-1.

Section 2
The section must describe the purchase itself that may comprise goods, services, construction, or even real estate that the Government is planning to procure including all appropriate identification numbers. "Identifying numbers" includes things such as the RFP (Request for Proposal) numbers that are linked towards the exact proposal document that the contractor has to offer.

Section 3
The document must contain the name, title and organization of every person who represents either the contractor who is the prime contractor or the Government in negotiations.

Section 4
In this section, cover the current state of any contractor-related systems relevant during the read more process of negotiation. This could be accounting, buying, estimating and/or compensation. The section should be specific about how these systems relate to the negotiation and in what extent they were taken into consideration.

What section of FAR is concerned with contract pricing?
The next two sections are kind of connected to each other, and so we'll start by looking at the document which they relate to. When a contractor is asked to submit a bid, it must typically contain an estimate on what the job is expected to cost i.e. a pricing proposal. If we look back to the construction industry, the primary cost elements include an estimate of materials and labor on a specific task. For this it is the FAR has a specific document that is specifically designed for this function, known as the Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you will find a template of the certification that has the name of the firm as well as lines for your name the title, signature and date of signature. This certificate acknowledges that at the very best of your knowledge, the information in the cost outline that you've provided is true. Also, this certificate is only required for prime contracts exceeding the amount of $2 million and issued on or following July 1, 2018. Let's look at the specific guidelines that apply to this document:

Section 5
This section focuses on instances in which the certificate of current cost or pricing data was not needed to establish reasonable contract prices , even if the contract was awarded in excess of the $2 million threshold. FAR 15.403-1 provides examples of situations when this certification isn't required but a few of them are:

When the contracting officer is able to determine that the agreed-upon prices are an elaboration of prices set by law or regulation

If a commercial product or commercial service has been purchased

Modifying a contract or subcontract for commercial services or products

You can consult FAR 15.403-1 for the full list of requirements, however, for those who's contract does not require certification of current cost or pricing information, Section 5 is required to specify the particular exception which allows you to not need the certificate and on what basis your contract meets that requirement.