Documenting Negotiations In Accordance With FAR 15.406-3

If you're a contractor who works for government officials from the U.S. Government you've almost certain dealt with FAR also known as the Federal Acquisition Regulation. The lengthy legal document provides the rules and regulations that both Government agencies and prime contractors must follow when working together.

In this article we'll look at a specific sub-section which focuses on a key element in any negotiation between Government and the prime contractor: the record of the negotiations.

Because the burden of responsibly spending Government funds is the contractor who is in charge It is essential that they are thorough and precise when documenting negotiations.

Uncertainties could be uncovered in a Contract Purchasing System Review, which is also known as a CPSR. This process of review ensures that the principal contractor spends taxpayer funds efficiently.

If you follow this article, then you'll be able make a complete record of negotiation in accordance with FAR 15.406-3, which is especially important for contracting officers, who are accountable for taking and submitting all required information to the contract file.

What should each price negotiation memorandum be?
In total, the document that is discussed herein is referred to as the price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3, the PNM is composed of 11 essential elements.

Section 1
The first part is quite straightforward, as it just declares the main purpose of the negotiation. Negotiation's purpose can be varied for example, negotiation of the new contract with an sole source basis as well as negotiation of an equitable adjustment or adjustment. They are determined in the objective phase prior to negotiation which is explained in Federal Regulation 15.406-1.

Section 2
This section must outline the acquisition in its entirety it could be comprised of things, services or construction or even real estate which the government is seeking to acquire. This should include all pertinent specific numbers. "Identifying numbers" includes things such as"RFP" (Request to Proposal) numbers, which are referring specifically to the proposal document that the contractor proposes.

Section 3
The section should include the name, title and organization of every person who represents the principal contractor and the Government during the negotiation.

Section 4
In this sectionyou will need to describe the status of any contractor-related systems relevant with the negotiation. This might include accounting, purchasing, estimating, and/or compensation; the section should specify how these systems were related to negotiation and in what extent they were thought of.

What section of FAR covers contract pricing?
The following two parts are in some way related in that we'll cover the document that they pertain to. If a prime contractor puts out an offer, it will generally include an estimate of what the job is expected to cost i.e. a pricing proposal. When we consider the construction example, the main cost elements will be an estimate of the materials and labor required for a particular task. In this particular instance the FAR includes a particular document with this particular purpose, known by the name of Certificate of Price or Cost Current Data.

In FAR 15.406-2 you will find an example of the certificate that includes names of the firm and lines for your personal name along with your title, signature and date of signing. This certification acknowledges that to the best of your understanding, the cost outline you're submitting is true. Additionally, this certification is only required for prime contracts with a value of more than $2 million granted on or the 1st of July, 2018. Let's look at the specific guidelines that apply to this document:

Section 5
The section deals with instances in which the certificate of actual pricing or cost data was not needed to establish reasonable contract pricing, even though the contract award was over the threshold of $2 million. FAR FAR 15 15.403-1 lists the circumstances where this certificate isn't required but a few of them are:

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

If a product or commercial service is being acquired

When modifying an contract or subcontract that deals with commercial products or services

You can consult FAR 15.403-1 for the complete list of requirements, but in a nutshell for those who's contract doesn't require a certificate of the current price or cost information, Section 5 is required to specify the particular exception which permits you to avoid the certificate as well as the basis your contract will be able to benefit from that exception.

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