Documenting Negotiations In Accordance With FAR 15.406-3

If you are an contractor that works with the U.S. Government you've almost likely dealt with FAR also known as the Federal Acquisition Regulation. This hefty legal document regulates the rules and regulations that Government and prime contractors are required to adhere to when working together.

In this article we'll go over a particular section that focuses on an essential step in any negotiations between Government and the prime contractor: the record of said negotiations.

As the responsibility for accountable spending of Government funds is the responsibility of the principal contractor therefore it's crucial to be exact and thorough when documenting negotiations.

The discrepancies could be discovered in a Contract Purchasing System Review, also known as a CPSR. The process of reviewing ensures the contractor in charge is spending taxpayer money efficiently.

In this article you'll have the ability to prepare a complete documentation of negotiation in accordance with FAR 15.406-3 which is particularly important for contracting officers who are accountable for creating and submitting required papers to the contract file.

What does each price-negotiating memorandum include?
In total, the documentation discussed in this essay is known as the price Negotiation Memorandum, or PNM for short. In FAR 15.406-3 The PNM is comprised of eleven major elements:

Section 1
The first paragraph is pretty straightforward, as it just declares the main purpose of the negotiation. Purposes of negotiation can vary in the case of negotiation of an entirely new contract with only a single source basis and negotiation of an equitable adjustment and so on. They are determined in the prenegotiation objective phase which can be found in FAR 15.406-1.

Section 2
The section must describe the acquisition in its entirety and could include items, services, construction, or even real estate that the Government aims to acquire. This should include all pertinent identifiable numbers. "Identifying numbers" includes things such as RFP (Request to Proposal) numbers that relate on the precise proposal document for what the contractor proposes.

Section 3
The document must contain the name, title and organizational affiliation of each person representing the principal contractor and the Government in the negotiations.

Section 4
In this sectionyou will need to describe the current state of any contractor systems that may be relevant to the negotiation. This could include accounting, buying, estimating, and/or compensation; the section should clearly describe how these systems related to the negotiation and in what extent they were thought of.

What portion of the FAR is concerned with contract pricing?
The following two sections are sort of related which is why we'll first look at the document that they refer to. When a contractor is asked to submit an offer, it will usually include an estimate of how much the task will cost i.e. a pricing proposal. When we consider the example of construction, the primary cost elements are an estimate of supplies and labor needed for a specific project. In this particular instance it is the FAR has a special document for this purpose known by the name of Certificate of Price or Cost Current Data.

In FAR 15.406-2 you will find a template of the certificate that includes the name of your company and the lines for your name, title, signature, and the date you signed. The certificate confirms that, in your best information, the price outline that you've provided is true. In addition, this document is only valid for prime contracts exceeding $2 million that were given on or following July 1, 2018. Let's examine the specific more info guidelines that govern this document:

Section 5
This section focuses on instances when the certificate of the actual pricing or cost data wasn't required to determine acceptable contract costs even though the contract granted exceeded the threshold of $2 million. FAR 15.403-1 provides examples of situations in which the certificate isn't required but a few of them are:

If the contracting office determines that the price agreed on is from prices determined by regulation or law

When a commercial service or commercial service is acquired

When changing or modifying a contract or subcontract to commercial services or products

You may refer to the FAR 15.403-1 for the complete list of requirements, however, should your contract doesn't require a certified copy of current pricing or cost data, Section 5 must to define the specific exception that permits you to bypass the certificate , and what basis your contract fits that exception.