If you're an employee of an agency of U.S. Government you've almost certain dealt with FAR in other words, the Federal Acquisition Regulation. The lengthy legal document defines the rules and regulations that government agencies as well as prime contractors must adhere to when working with each other.

In this article we'll break down a specific subsection which covers an important step in any negotiation between Government and the prime contractor: the record of the negotiation.

As the responsibility for accountable spending of Government funds falls on the contractor of the first resort therefore it's crucial to be thorough and accurate when documenting negotiations.

Any discrepancies may be discovered in a Contractor Purchase System Review, commonly referred to as a CPSR. This process of review ensures that the principal contractor spends taxpayer money effectively.

If you follow this article, then you'll be able prepare a complete documentation of negotiation in accordance with FAR 15.406-3, which is especially important for contracting officers who are charged with taking and submitting all required paperwork to the contract file.

What does each price-negotiating memo contain?
In total, the document discussed in this article is referred to 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 simple as it specifies the objective of the negotiation. The goals of negotiation can differ, such as the negotiation of an entirely new contract on the sole source model, negotiation of an equitable adjustment and so on. This is first decided during the objective phase of negotiation, which is described by FAR 15.406-1.

Section 2
The description should be of the actual acquisition and could include the construction, goods, or services, or even real estate that the Government plans to purchase, with all necessary identifying numbers. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers that are linked directly to the particular 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 systems that are relevant to the negotiation. This could 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 examined.

What part of the FAR covers contract pricing?
The next two sections are somewhat related in that we'll cover the document that they refer to. When a prime contractor files a bid, it must typically include an estimate of the amount of work to cost i.e. a pricing proposal. If we refer back to the construction industry, one of the key elements in a cost proposal could be an estimate for the labor and materials required for a specific project. In this instance the FAR has a distinct document for this purpose known as the Certificate of Current Cost or Pricing Data.

In FAR 15.406-2 in FAR 15.406-2, you can find a template of the document that contains the name of the firm and lines for your personal name along with your title, signature and date of signing. This certificate affirms that, at the very best of your knowledge, the cost outline that you've submitted is accurate. Furthermore, this certificate is only required for prime contracts in excess of $2 million issued on or on or after July 1, 2018. Let's take a look at the specific guidelines for this document:

Section 5
This section addresses click here instances where the certificate of actual pricing or cost data wasn't required to determine acceptable contract prices even though the contract award was over the threshold of $2 million. FAR 15.403-1 provides examples of situations in which this certificate isn't necessary, but a few examples are:

If the contracting officer decides that the agreed-upon prices are based on prices set by law or regulation

When a commercial item or commercial service is being purchased

When changing any contract or subcontract that deals with commercial services or products

You can refer the FAR 15.403-1 for the full list, however, If your contract does not require certification of the current price or cost data, Section 5 will need be able to provide the specific reason that permits you to bypass certification and on what basis your contract meets that requirement.