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 contractors working with or for the U.S. Government you've almost definitely dealt with the FAR,, or Federal Acquisition Regulation. This lengthy legal document covers the rules of regulations and guidelines that Government officials and prime contractors must abide by when working with each other.

In this article we'll examine a specific section that covers a key step in any negotiations between Government and the prime contractor: the record of said negotiations.

Since the responsibility for proper spending of Government funds is the contractor that is the primary contractor It is essential to be exact and thorough when capturing negotiations.

The discrepancies could be discovered by a Contractor Purchasing System Review, which is also known as a CPSR. This process of review ensures that the contractor that is the primary contractor is spending taxpayer funds in a way that is efficient.

Utilizing this article, you'll be in a position to make a full documentation of negotiation in accordance with FAR 15.406-3 that is especially important for contracting officers, who are charged with gathering and submitting the required papers to the contract file.

What is the price negotiation memorandum contain?
The document discussed throughout this post is referred to as the Price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is composed of eleven fundamental elements:

Section 1
This first section is fairly simple and simply specifies the objective of the negotiation. Purposes of negotiation can vary from the negotiation of a new contract on sole source basis as well as negotiation of an equitable adjustment and more. The purpose of negotiation is determined at the prenegotiation objectives phase, which is described by FAR 15.406-1.

Section 2
The section must describe the purchase itself that may comprise materials, services, construction or even real property that the Government aims to purchase, with all necessary identification numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers, which are referring on the precise proposal document to describe what the contractor proposes.

Section 3
This section must include the name, position and the organization of every person who represents both the prime contractor and government in the negotiation.

Section 4
In this section, describe the current state of any contractor systems that relate with the negotiation. This could be accounting, buying, estimating or compensation. The section should detail the way these systems are related to the negotiation and the extent to which they were thought of.

What section of the FAR concerns contract pricing?
The following two parts are in some way related and we'll begin by examining the document with regard to. When a prime contractor files a bid, it must generally include an estimate of what the job will cost i.e. a pricing proposal. In the example of construction the primary cost elements will be an estimate of material and labor costs for a specific project. For this it is the FAR provides a specific document that is specifically designed for this function, known by the name of Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you will find a template of the certificate which includes names of the firm and lines for your names, title, signature, as well as the date on which you signed. This certification acknowledges that as far as you can knowledge, the information in the cost outline that you've provided is accurate. Additionally, this certification is only required to be submitted for prime contracts of greater than $2 million given after July 1, 2018. Let's review the specific guidelines for this document:

Section 5
The section deals with instances click here where the certificate of actual pricing or cost data did not have to be used to determine acceptable contract prices , even if the contract awarded exceeded the $2 million threshold. FAR 15.403-1 gives examples of instances when this certification does not have to be provided, however, a handful of them include:

If the contracting office determines that the agreed-upon prices are basing on the prices set by regulation or law

In the event that a commercial product commercial service is being purchased

Modifying the terms of a contract or subcontract for commercial services or products

You can consult FAR 15.403-1 for the complete list, but in the simplest terms, when your contract does not require a certification of the current price or cost information, Section 5 has be able to provide the specific reason that lets you avoid certification and on what basis your contract meets that requirement.

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