DOCUMENTING NEGOTIATIONS IN ACCORDANCE WITH FAR 15.406-3

Documenting Negotiations In Accordance With FAR 15.406-3

Documenting Negotiations In Accordance With FAR 15.406-3

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If you're an employee of an agency of U.S. Government you've almost certainly dealt with FAR, that is the Federal Acquisition Regulation. This hefty legal document defines the rules of regulations and guidelines that Government officials and prime contractors have to follow when working together.

In this article we'll break down a specific subsection that focuses on an essential step in any negotiation between Government and prime contractor: the documentation of the negotiations.

Since the responsibility of proper spending of Government funds is on the prime contractor and the contractor's responsibility, it's essential to be accurate and thorough in the documentation of negotiations.

Any discrepancies might be caught in a Contract Purchasing System Review, which is also known as a CPSR. This review process ensures that the contractor in charge is spending taxpayer money in a responsible manner.

If you follow this article, then you'll be able prepare a complete documentation of negotiation in accordance with FAR 15.406-3 This is particularly crucial for contracting officers who are charged with making sure that they submit the required papers to the contract file.

What must each price negotiation memorandum contain?
As a whole, the documents that are discussed throughout this post is referred to 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 as it specifies the objective of the negotiation. The goals of negotiation can differ depending on the situation, like the negotiation of one new contract with a sole source basis or negotiation of an equity adjustment or adjustment. They are first determined during the prenegotiation objective phase which is explained in FAR 15.406-1.

Section 2
This section should outline the purchase itself and could include things, services or construction, or even real estate that the Government aims to purchase, with all necessary identifying numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers that are linked directly to the particular proposal document to describe what the contractor is proposing.

Section 3
The section should include the name, title and organization of every person representing either the contractor who is the prime contractor or the Government in the negotiations.

Section 4
In this section, describe the status of any contractor-related systems that are pertinent with the negotiation. This could be accounting, purchasing, estimation, and/or compensation; the section should specifically describe how these systems impacted the negotiation and how they were assessed.

What section of FAR refers to contract pricing?
The next two sections are a bit related 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 how FAR 15 much the project will cost i.e. a pricing proposal. When we think back to the case of construction, the most fundamental elements of cost will be an estimate of the materials and labor required for a specific job. In this particular instance the FAR has a distinct document intended for this use, which is known by the name of Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you can locate an example of the certificate , which contains the name of your company and lines for your names and signature. and date of signing. This certificate certifies that, at the very best of your knowing, the outline of costs you're submitting is correct. This certificate is only required for prime contracts in excess of $2 million given on or on or after July 1, 2018. Let's examine the specific guidelines that apply to this document:

Section 5
This section covers instances where the certification of current cost or pricing data was not required to determine acceptable contract pricing, even though the contract was awarded in excess of 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 include:

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

When a commercial service or commercial service is being acquired

Modifying an contract or subcontract that deals with commercial services or products

You can refer to FAR 15.403-1 for the full list of requirements, but in a nutshell if your contract does not require a certificate of current cost or pricing data, Section 5 must to explain the specific exemption which permits you to avoid the certificate as well as the basis your contract meets that requirement.

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