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 a contractor working with an agency of U.S. Government you've almost certain dealt with FAR in other words, the Federal Acquisition Regulation. This hefty legal document defines the rules of regulations and guidelines that Government officials and prime contractors are required to adhere to when working with each other.

In this article, we'll break down a specific subsection that addresses a crucial step in any negotiation between Government and the prime contractor: the record of that negotiation.

Since the burden of the responsible use of Government funds rests with the contractor who is in charge It is essential to be exact and thorough when capturing negotiations.

Any discrepancies might be caught by a Contractor Purchasing System Review, otherwise known as a CPSR. This review process ensures that the principal contractor spends taxpayer money effectively.

If you follow this article, then you'll learn how to create a complete document of negotiation that's compliant with FAR 15.406-3 that is crucial for contracting officers, who are charged with creating and submitting required documentation to an official contract file.

What are the essential elements that each price negotiations memorandum have?
The documents discussed in this essay is referred to as a price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3, the PNM is comprised of eleven fundamental elements:

Section 1
This first section is fairly easy, as it clarifies the intent of the negotiation. The objectives of negotiation could be diverse from the negotiation of one new contract on a sole source basis or the negotiation of an equitable adjustment or equitable adjustment, etc. They are first determined during the prenegotiation objective stage, which is defined in the FAR 15.406-1.

Section 2
The section must describe the acquisition itself that may comprise products, services, construction, or even real estate which the government is seeking to acquire. Include all identified numbers. "Identifying numbers" includes things like"RFP" (Request to Proposal) numbers that point directly to the particular proposal document to describe what the contractor proposes.

Section 3
The section should include the name, position, and organization of each person representing the prime contractor and the government in the negotiation.

Section 4
In this section, you should discuss the current state of contractor-related systems relevant during the process of negotiation. This might include accounting, purchasing, estimation and/or compensation. The section should clearly describe how these systems were related to negotiation and the extent to which they were examined.

What portion of the FAR covers contract pricing?
The two following sections are a bit related, so we'll first cover the document that they refer to. When a principal contractor sends an offer, it should typically contain an estimate on how much the project will cost i.e. a pricing proposal. In the construction industry, the main cost elements could be an estimate for materials and labor for a specific project. click here In this particular instance the FAR has 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 in FAR 15.406-2, you can find an example of the certification that has your firm's name and the lines for your name the title, signature and date of signature. This certificate acknowledges that as far as you can knowledge, the cost outline which you've prepared is accurate. Furthermore, this certificate is only valid for prime contracts exceeding 2 million dollars that were granted on or the 1st of July, 2018. Let's review the specific guidelines for this document:

Section 5
This section focuses on instances in which the certificate of actual cost or pricing information was not needed to establish acceptable contract prices even though the contract signed exceeded the threshold of $2 million. FAR 15.403-1 lists the circumstances where this certificate isn't required but a few of them include:

When the contracting officer determines that the prices agreed to are based on prices set by law or regulation

If a product or commercial service is purchased

When modifying a contract or subcontract for commercial services or products

It is possible to refer to the FAR 15.403-1 for the full list of requirements, but in a nutshell If your contract does not require certification of current pricing or cost data, Section 5 should to describe the specific exception which allows you to not need certification and on what basis your contract falls within that exception.

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