Documenting Negotiations In Accordance With FAR 15.406-3

If you're an individual contractor working for or for the U.S. Government you've almost definitely dealt with the FAR, that is the Federal Acquisition Regulation. This hefty legal document regulates the rules and regulations that both Government agencies and prime contractors must adhere to when working together.

In this article, we'll look at a specific sub-section that covers a critical step in any negotiation between Government and the prime contractor: the documentation of the negotiations.

Since the responsibility for accountable spending of Government funds falls on the prime contractor that's why it's vital that they are thorough and precise in the documentation of negotiations.

There is a chance that discrepancies will be found in a Contractor Purchasing System Review, commonly referred to as a CPSR. The review process is designed to ensure that the principal contractor is spending taxpayer money efficiently.

Using this article, you'll have the ability to provide a complete and complete account of negotiation which is in compliance with FAR 15.406-3 which is particularly relevant for contracting officers, who are charged with gathering and submitting the required documents to the official contract file.

What will each price negotiation memorandum have?
As a whole, the document described in the article can be known as a Price Negotiation Memorandum, or PNM for short. In FAR 15.406-3 the PNM is composed of eleven principal elements:

Section 1
This section is relatively simple, since it simply specifies the objective of the negotiation. The goals of negotiation can 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 prenegotiation objective stage, which is explained by FAR 15.406-1.

Section 2
This section should describe the purchase itself, which could consist of items, services, construction or even real property that the Government aims to procure including all appropriate identifying numbers. "Identifying numbers" includes things such as RFP (Request to Proposal) numbers, which are referring specifically to the proposal document to describe what the contractor proposes.

Section 3
The document must contain the name, position and the organization of every person who represents the contractor as the primary contractor and also the Government during the negotiation.

Section 4
In this section, cover the status of any contractor systems that may be relevant in the negotiations. This could be purchasing, estimating, accounting, and/or compensation; the section should describe in detail how these systems related to the negotiation and the extent to which they were thought of.

What portion of FAR refers to contract pricing?
The two following sections are kind of connected in that we'll cover the document with regard to. When a prime contractor submits a bid, it must typically include an estimate of the amount of work to cost i.e. a pricing proposal. When we think back to the case of construction, the most fundamental elements of cost include an estimate of the materials and labor required for a particular job. In this particular instance the FAR has a distinct document with this particular purpose, known check here as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 there is a template of the certificate which includes the name of your company as well as lines for your name along with your title, signature and the date you signed. This certification acknowledges that according to your knowing, the outline of costs you have submitted is accurate. This certificate is only required when prime contracts exceed 2 million dollars that were given following July 1, 2018. Let's examine the specific guidelines that apply to this document:

Section 5
This section covers instances where the certification of actual cost or pricing information was not needed to establish acceptable contract costs even though the contract granted exceeded the threshold of $2 million. FAR 15.403-1 gives examples of instances that this certificate is not required. Some examples are:

If the contracting official determines that the prices agreed to are from prices determined by law or regulation

In the event that a commercial product commercial service is purchased

When changing a contract or subcontract for commercial products or services

The the FAR 15.403-1 for the full list of requirements, but in a nutshell when your contract does not need a proof of current cost or pricing data, Section 5 must to describe the specific exception which allows you to not need certification and on what basis your contract is in compliance with that exception.