If you're contractors working with government officials from the U.S. Government you've almost certainly dealt with FAR, or the Federal Acquisition Regulation. This hefty legal document covers the rules and regulations that government agencies and prime contractors must abide by when working with each other.

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 negotiations.

Since the responsibility for responsibly spending Government funds is the principal contractor therefore it's crucial to be accurate and thorough in the recording of negotiations.

The discrepancies could be discovered in a Contract Purchasing System Review, also known as a CPSR. This process of review ensures that the contractor that is the primary contractor is spending tax payer money efficiently.

By following this guideline, you will be able to provide a complete and complete account of negotiation in accordance with FAR 15.406-3 that is particularly important for contracting officers who are accountable for making sure that they submit the required document to be included in the contract file.

What should each price negotiation memorandum contain?
In total, the document described within this piece is referred to as a price Negotiation Memorandum, or PNM for short. According to FAR 15.406-3 the PNM is made of eleven essential elements.

Section 1
The first section is easy to comprehend, 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 or the negotiation of an equitable adjustment and more. They are first determined during the prenegotiation objectives phase, which is detailed in Federal Regulation 15.406-1.

Section 2
This section should describe the purchase itself it could be comprised of materials, services, construction, or even real estate that the Government aims to acquire. Include all numbering. "Identifying numbers" includes things like"RFP (Request for Proposal) numbers that refer to the specific proposal document that the contractor is proposing.

Section 3
The section should include the name, title as well as the organizational structure of each person representing the prime contractor and the government in the negotiation.

Section 4
In this section, discuss the status of any contractor-related systems relevant in the negotiations. This could be accounting, purchasing, estimating, and/or compensation; the section should describe in detail how these systems impacted the negotiation and the extent to which they were taken into consideration.

What portion of the FAR concerns contract pricing?
The following two sections are sort of related and we'll begin by examining the document that they refer to. When a prime contractor files bids, they must generally contain an estimate of how much the project will cost i.e. a pricing proposal. If we look back to the construction example, the basic cost elements could be an estimate for the labor and materials required for a specific job. In this regard, the FAR has a specific document for this purpose known as the Certificate of Price or Cost Current Data.

In FAR 15.406-2 there is an example of the certificate which includes the name of your company as well as lines for your name along with your title, signature and the date you signed. This certification acknowledges that according to your knowledge, the information in the cost outline that you are submitting is accurate. Furthermore, this certificate is only required when prime contracts exceed 2 million dollars that were awarded on or after July 1, 2018. Let's take a look at the specific guidelines for this document:

Section 5
This section focuses on instances where the certificate of current pricing or cost information was not required to determine acceptable contract costs even though the contract that was awarded exceeded the $2 million threshold. FAR 15.403-1 defines the scenarios when this certification isn't needed, FAR 15 however a few of them are:

If the contracting office determines that the price agreed on is in accordance with prices established by law or regulation

If a commercial product or commercial service is bought

Modifying or modifying a contract or subcontract that deals with commercial products or services

You may refer to the FAR 15.403-1 for the full list of requirements, however, should your contract does not require a certificate of the current price or cost data, Section 5 should to identify the specific exception that permits you to bypass the certificate , and what basis your contract falls within that exception.