If you're contractors working with or for the U.S. Government you've almost definitely dealt with the FAR, which is also known as Federal Acquisition Regulation. This dense legal document covers the rules and regulations that Government as well as prime contractors must adhere to when working together.

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

The responsibility for accountable spending of Government funds is the responsibility of the contractor in charge, it's critical to be exact and thorough when documenting negotiations.

There is a chance that discrepancies will be found in a Contractor Purchasing System Review, also known as a CPSR. This review process makes sure that the principal contractor spends taxpayer money effectively.

By following this guideline, you'll be able make a complete record of negotiation that's in line with FAR 15.406-3 and is particularly important for contracting officers who are responsible for gathering and submitting the required documents to the official contract file.

What will each price negotiation memorandum be?
As a whole, the document that is discussed herein is known as a Price Negotiation Memorandum, or PNM for short. In FAR 15.406-3, the PNM is comprised of eleven major elements:

Section 1
The initial section is easy to comprehend, as it specifies the objective of the negotiation. The reasons for negotiation may differ depending on the situation, like the negotiation of the new contract on sole source basis or negotiation of an equity adjustment as well as other such. These are determined first during the prenegotiation objective stage, which is defined by FAR 15.406-1.

Section 2
The description should be of the acquisition itself it could be comprised of the construction, goods, or services, or even real estate that the Government is planning to purchase, with all necessary identifying numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that refer on the precise proposal document to describe what the contractor has to offer.

Section 3
The document must contain the name, title and the organization of every person representing the contractor as the primary contractor and also the Government during the negotiation.

Section 4
In this section, discuss the current status of any contractor-related systems relevant in the negotiations. This could include accounting, purchasing, estimation and/or compensation. The section should detail the way 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 and we'll begin by examining the document which they relate to. When a contractor is asked to submit an offer, it should generally include an estimate of how much the job will cost i.e. a pricing proposal. When we consider the instance of construction, the most fundamental elements of cost would be an estimate of supplies and labor needed for a particular task. In this particular instance, the FAR contains a specific document to be used for this purpose, referred to as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 You can find a check here template of the certification that has names of the firm and lines for your name and signature. and date of signing. The certificate confirms that, according to your understanding, the cost outline you have submitted is true. Also, this certificate is only required for prime contracts in excess of $2 million , which were given the 1st of July, 2018. Let's look at the specific guidelines for this document:

Section 5
This section covers instances where the certificate of current pricing or cost information wasn't required to determine acceptable contract pricing, even though the contract award was over the $2 million threshold. FAR 15.403-1 gives examples of instances where this certificate isn't needed, however a few examples are:

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

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

If you want to modify the terms of a contract or subcontract for commercial products or services

It is possible to refer to the FAR 15.403-1 for the full list of requirements, but , in essence, in the event that your contract doesn't require a certified copy of current pricing or cost data, Section 5 needs be able to provide the specific reason that lets you avoid the certificate as well as the basis your contract is in compliance with that exception.