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 are an employee of an agency of U.S. Government you've almost certain dealt with FAR, or Federal Acquisition Regulation. This lengthy legal document regulates the rules and regulations that government agencies and prime contractors must follow when working with each other.

In this article, we'll detail a particular section that covers a key step in any negotiations between Government and prime contractor: the documentation of the negotiations.

Since the responsibility for accountable spending of Government funds is the responsibility of the contractor who is in charge so it is crucial to be meticulous and exact when documenting negotiations.

Uncertainties could be uncovered in a Contractor Purchasing System Review, which is also known as a CPSR. The process of reviewing ensures the principal contractor is spending taxpayer funds efficiently.

By following this guideline, you'll be in a position to write a comprehensive documentation of negotiations that is in compliance with FAR 15.406-3 this is particularly important for contracting officers, who are charged with making sure that they submit the required papers to the contract file.

What is the price negotiation memorandum have?
The documentation discussed herein is referred to as a Price Negotiation Memorandum, or PNM for short. As outlined in FAR 15.406-3 The PNM is comprised of eleven principal elements:

Section 1
The first section is easy, as it defines the reason for the negotiation. The goals of negotiation can differ depending on the situation, like the negotiation of a new contract with a sole source basis or negotiation of an equitable adjustment and so on. This is first decided during the objective phase of negotiation, which is outlined in FAR 15.406-1.

Section 2
This section should describe the purchase itself it could be comprised of materials, services, construction or even real property which the government is seeking to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers which refer in the target proposal document that the contractor has to offer.

Section 3
The section should include the name, title and affiliation of each person who represents an individual contractor, as well as the Government in negotiations.

Section 4
In this section, cover the state of affairs of all contractor-related systems that are pertinent during the process of negotiation. This could include accounting, purchasing, estimation and/or compensation. The section should clearly describe how these systems relate to the negotiation and in what extent they were evaluated.

What portion of FAR refers to contract pricing?
The two following parts are in some way related which is why we'll first look at the document the two sections are a part of. When a prime contractor submits bids, they must generally contain an estimate of click here what the job will cost i.e. a pricing proposal. When we think back to the construction industry, one of the key elements in a cost proposal could be an estimate for supplies and labor needed to complete a particular task. In this instance it is the FAR contains a specific document specifically for this purpose referred to by the name of Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 you can locate an example of the document that contains the name of the company and lines for your names as well as your signature, title, as well as the date on which you signed. This certificate certifies that, at the very best of your knowledge, the cost estimate that you've provided is correct. Also, this certificate is only valid for prime contracts that exceed $2 million which were given on or 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 cost or pricing information wasn't required to determine acceptable contract prices , even if the contract that was awarded exceeded the $2 million threshold. FAR 15.403-1 defines the scenarios where the certificate of current cost or pricing data isn't necessary, but a few examples are:

The contracting officer will determine that the price agreed on is based on prices set by law or regulation

If a product or commercial service is acquired

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

You can refer the FAR 15.403-1 for the full list of requirements, however, when your contract doesn't require a certificate of current cost or pricing data, Section 5 must be able to provide the specific reason that allows you to skip the certificate and which basis your contract will be able to benefit from that exception.

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