If you are an contractor that works with government officials from the U.S. Government you've almost likely dealt with FAR also known as the Federal Acquisition Regulation. This hefty 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 which focuses on a key element in any negotiation between Government and prime contractor: the documentation of that negotiations.
Since the responsibility of responsible spending of Government funds rests with the contractor who is in charge therefore it's crucial to be thorough and accurate in the record of negotiations.
Any irregularities could be discovered by a Contractor Purchasing System Review, commonly referred to as a CPSR. The review process is designed to ensure that the contractor that is the primary contractor is spending taxpayer money efficiently.
Using this article, you will be able to prepare a complete documentation of negotiations that is in compliance with FAR 15.406-3 This is especially important for contracting officers who are charged with making sure that they submit the required papers to the contract file.
What are the essential elements that each price negotiations memorandum include?
The document that is discussed herein is known as the Price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is composed of eleven essential elements.
Section 1
This section is relatively simple, since it simply clarifies the intent of the negotiation. The reasons for negotiation may differ depending on the situation, like the negotiation of an entirely new contract on the sole source model or negotiation of an equitable adjustment or adjustment. These are determined during the objective phase of negotiation, which is defined in the FAR 15.406-1.
Section 2
This section must outline the acquisition in its entirety it could be comprised of things, services or construction or even real property that the Government is planning to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers that refer to the specific proposal document that the contractor is proposing.
Section 3
The document must contain the name, position as well as the organizational structure of each person representing the principal contractor and the Government in the negotiation.
Section 4
In this sectionyou will need to describe the current status of any contractor systems that are relevant with the negotiation. This might include accounting, buying, estimating or compensation. The section should detail the way these systems relate to the negotiation and how they were examined.
What part of the FAR covers contract pricing?
The following two sections are kind of connected as well, so we'll go over the document the two sections are a part of. When a contractor is asked to submit an offer, it should generally include an estimate of what the job will cost i.e. a pricing proposal. If we go back to the instance of construction, the primary cost elements are an estimate of material and labor costs for a particular task. In this case the FAR includes a particular document for this purpose known by the name of Certificate of Price or Cost Current Data.
In FAR 15.406-2 you will find an example of the document that contains the name of the firm along with lines for your own name as well as your signature, title, and date of signature. The certificate confirms that, at the very best of your knowledge, the cost estimate that you've provided is correct. Also, this certificate is only valid for prime contracts that exceed $2 million given on or the 1st of July, 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 prices even though the contract awarded exceeded the threshold of $2 million. FAR 15.403-1 lists the circumstances that this certificate isn't necessary, but a few of them are:
If the contracting office determines that the prices agreed upon are determined by regulation or law
When a commercial item or commercial service is being acquired
In the event of modifying a contract or subcontract for commercial products or services
You can refer FAR 15.403-1 for the complete list, but , in essence, if your contract doesn't require a certified copy of current pricing or cost information, Section 5 has read more be able to provide the specific reason that allows you to skip the certificate and which basis your contract meets that requirement.