Documenting Negotiations In Accordance With FAR 15.406-3

If you are contractors working with authorities from U.S. Government you've almost definitely dealt with the FAR, that is the Federal Acquisition Regulation. The lengthy legal document provides the rules and regulations that the Government as well as prime contractors must adhere to when working together.

In this article we'll go over a particular section that covers a critical step in any negotiation between Government and prime contractor: the record of the negotiations.

Since the responsibility for prudent spending of Government funds is the responsibility of the principal contractor that's why it's vital to be thorough and accurate when capturing negotiations.

Any discrepancies may be discovered during a Contractor Purchasing Systems Review, or a CPSR. The process for reviewing the contractor ensures the principal contractor is using taxpayer funds efficiently.

Utilizing this article, you'll have the ability to make a full documentation of negotiation in accordance with FAR 15.406-3 this is essential for contracting officers, who are charged with taking and submitting all required paperwork to the contract file.

What does each price-negotiating memo contain?
In total, the document discussed in this essay is referred to as a price Negotiation Memorandum, or PNM for short. In FAR 15.406-3, the PNM is comprised of eleven fundamental elements:

Section 1
The initial section is simple as it specifies the objective of the negotiation. The goals of negotiation can differ depending on the situation, like the negotiation of a new contract with only a single source basis or negotiation of an equity adjustment as well as other such. These are determined during the prenegotiation goal phase that is detailed by FAR 15.406-1.

Section 2
This section must outline the acquisition in its entirety that may comprise goods, services, construction or even real property that the Government is planning to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP (Request to Proposal) numbers that point specifically to the proposal document to describe what the contractor proposes.

Section 3
The document must contain the name, position, and organization of each person representing the principal contractor and the Government during the negotiation.

Section 4
In this section, describe the current state of any contractor-related systems relevant in the negotiations. This could be purchasing, estimating, accounting, and/or compensation; the section should specify how these systems were related to negotiation and in what extent they were considered.

What part of the FAR deals with contract pricing?
The next two parts are in some way related which is why we'll first look at the document that they pertain to. When a principal contractor sends bids, they usually include an estimate of the amount of work to cost i.e. a pricing proposal. If we refer back to the example of construction, the basic cost elements would be an estimate of labour and materials on a specific task. In this instance it is the FAR contains a specific document specifically for this more info purpose referred to by the name of Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you can locate an example of the document that contains the name of the firm and lines for your personal name along with your title, signature and date of signing. This certificate affirms that, at the very best of your knowledge, the cost estimate that you've submitted is accurate. Furthermore, this certificate is only valid to be submitted for prime contracts of greater than 2 million dollars that were given on or after July 1, 2018. Let's review the specific guidelines that govern this document:

Section 5
This section is referring to situations where the certification of actual cost or pricing information was not needed to establish acceptable contract prices , even if the contract award was over the $2 million threshold. FAR 15.403-1 describes the situations in which this certificate isn't needed, however a few of them are:

When the contracting officer determines that the prices agreed on are basing on the prices set by regulation or law

When a commercial service or commercial service is being acquired

In the event of modifying any contract or subcontract for commercial products or services

You can refer the FAR 15.403-1 for the complete list, but in the simplest form, for those who's contract does not require a certificate of the current price or cost data, Section 5 should to explain the specific exemption that permits you to bypass the certificate , and what basis your contract falls within that exception.