Documenting Negotiations In Accordance With FAR 15.406-3

If you are an employee of or for the U.S. Government you've almost certain dealt with FAR which is also known as Federal Acquisition Regulation. This hefty legal document governs the rules, rules, and regulations that government agencies and prime contractors must abide by when working together.

In this article, we'll examine a specific section that addresses a crucial step in any negotiations between Government and the prime contractor: the documentation of the negotiation.

Since the responsibility for the responsible use of Government funds falls on the contractor in charge that's why it's vital to be accurate and thorough when documenting negotiations.

Any discrepancies may be discovered in a Contract Purchasing System Review, or a CPSR. The process for reviewing the contractor ensures the principal contractor is using tax payer money efficiently.

Using this article, you will be able to write a comprehensive documentation of negotiation that's compliant with FAR 15.406-3, which is essential for contracting officers, who are responsible for gathering and submitting the required papers to the contract file.

What is the price negotiation memorandum be?
As a whole, the documents that are discussed herein is known as the price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3, the PNM is comprised of eleven major elements:

Section 1
The first part is quite simple and simply describes the goal of the negotiation. The goals of negotiation can differ for example, negotiation of an agreement for a new contract with an sole source basis or negotiation of an equity adjustment as well as other such. This is first decided during the prenegotiation objective stage, which is outlined in Federal Regulation 15.406-1.

Section 2
The description should be of the acquisition itself, which could consist of materials, services, construction or even real property which the government plans to purchase, with all necessary identified numbers. "Identifying numbers" includes things such as the RFP (Request for Proposal) numbers, which are referring on the precise proposal document that the contractor proposes.

Section 3
The section should include the name, position and the organization of every person who represents the principal contractor and the Government in the negotiations.

Section 4
In this section, discuss the current state of contractor systems that relate to the negotiation. This could be accounting, buying, estimating and/or compensation. The section should clearly describe how these systems related to the negotiation and the extent to which they were assessed.

What section of FAR covers contract pricing?
The two following sections are a bit related, so we'll first cover the document that they refer to. If a prime contractor puts out an offer, it should usually include an estimate of what the job will cost i.e. a pricing proposal. If we refer back to the case of construction, the basic cost elements include an estimate of material and labor costs on a specific task. In this context, the FAR provides a specific document for this purpose known by the name of Certificate of Price or Cost Current Data.

In website FAR 15.406-2 there is an example of the document that contains the name of your company along with lines for your own name and signature. as well as the date on which you signed. The certificate confirms that, from your knowledge, the information in the cost outline that you are submitting is correct. Furthermore, this certificate is only valid when prime contracts exceed $2 million that were issued on or after July 1, 2018. We will look over the specific guidelines that govern this document:

Section 5
The section deals with instances in which the certificate of current pricing or cost information is not required to establish reasonable contract prices even though the contract granted exceeded the threshold of $2 million. FAR 15.403-1 gives examples of instances when this certification isn't needed, however a few of them include:

When the contracting officer is able to determine that the prices agreed to are from prices determined by regulation or law

When a commercial service or commercial service is acquired

If you are changing a contract or subcontract for commercial products or services

You can refer the FAR 15.403-1 for the full list, but , in essence, for those who's contract doesn't require a certificate of the current price or cost information, Section 5 is required to define the specific exception that lets you avoid the certificate and the basis your contract can be considered to meet that exemption.