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 authorities from U.S. Government you've almost definitely dealt with the FAR, that is the Federal Acquisition Regulation. The lengthy legal document regulates the rules and regulations that both Government agencies and prime contractors must abide by when working with each other.

In this article, we'll dissect a particular subsection which covers an important step in any negotiations between Government and the prime contractor: the documentation of said negotiation.

Because the burden of the responsible use of Government funds falls on the contractor that is the primary contractor so it is crucial that they are thorough and precise when documenting negotiations.

Any irregularities could be discovered in a Contractor Purchase System Review, also known as a CPSR. This review process makes sure that the principal contractor is spending taxpayer funds in a way that is efficient.

Using this article, you'll be able to create a complete document of negotiation that's in line with FAR 15.406-3 This is especially important for contracting officers who are charged with collating and submitting the required papers to the contract file.

What are the essential elements that each price negotiations memorandum include?
The documents that are discussed within this piece is known as the Price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM is made of eleven primary elements:

Section 1
The first part is quite easy, as it describes the goal of the negotiation. Purposes of negotiation can vary from the negotiation of one new contract with the basis of sole source as well as negotiation of an equitable adjustment as well as other such. They are first determined during the objective phase prior to negotiation which can be found as part of FAR 15.406-1.

Section 2
This section should describe the acquisition itself, which could consist of materials, services, construction or even real property which the government plans to acquire. It should include all appropriate identified numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that point specifically to the proposal document that the contractor is proposing.

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

Section 4
In this section, you should discuss the current state of contractor systems that relate to negotiations. This might include accounting, accounting, purchase and/or compensation. The section should clearly describe how these systems were related to negotiation and in what extent they were considered.

What section of the FAR deals with contract pricing?
The following two sections are sort of linked, so we'll first cover the document in relation to. When a prime contractor files bids, they should usually contain an estimate of how much the task will cost i.e. a pricing proposal. In the example of construction the main cost elements are an estimate of material and labor costs for a particular task. In this context the FAR has a specific document with this particular purpose, known as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 you can find a template of the certificate that includes the name of your company and the lines for your name along with your title, signature and date of signing. This certificate acknowledges that to the best of your information, the price outline you're submitting is true. Additionally, this certification is only required for prime contracts in excess of $2 million granted the 1st of July, 2018. Let's examine the specific guidelines that apply to this document:

Section 5
This section addresses instances in which the certificate of actual pricing or cost data is not required to establish reasonable contract prices even though the contract signed exceeded the $2 million threshold. FAR 15.403-1 provides examples of situations where this certificate isn't required but a few of them include:

If the contracting official determines that the prices agreed to are from prices determined by law or regulation

If a product or commercial service is acquired

If you are changing the terms of a contract or subcontract to commercial services or products

You can refer FAR 15.403-1 for the complete list, but in the simplest form, for more info those who's contract does not require a certificate of the current price or cost data, Section 5 needs to explain the specific exemption that permits you to bypass the certificate , and what basis your contract falls within that exception.

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