Overview
This section prescribes the mandatory procedures for establishing negotiation goals, certifying the accuracy of cost or pricing data, and documenting the final price agreement to ensure a transparent and "audit-ready" record of how a fair and reasonable price was determined.
Key Rules
- Prenegotiation Objectives: Contracting officers (COs) must establish formal negotiation positions before meetings begin, basing them on available analyses (IGCEs, audits, and technical reports). The depth of this analysis must be proportional to the contract's value and complexity.
- Certificate of Current Cost or Pricing Data: When certified data is required, the contractor must sign a certificate stating that the data provided is accurate, complete, and current as of the date of price agreement.
- Fact vs. Judgment: The certification applies strictly to the factual data underlying a proposal (e.g., actual labor rates), not to the contractor’s judgment regarding future estimates or projections.
- Requirement for a PNM: The CO must document every negotiation in a Price Negotiation Memorandum (PNM). This document must detail 11 specific elements, including the summary of the proposal, the reliance on certified data, and the basis for the negotiated profit or fee.
- Price vs. Cost Analysis Documentation: If price analysis is used, the PNM must identify the source and type of data; if cost analysis is used, the PNM must address every major cost element.
Practical Implications
- The "Sweep" Process: Because the certificate covers data current up to the date of price agreement, contractors often perform a "data sweep" at the end of negotiations to ensure any new invoices or quotes received during the process are disclosed to avoid "defective pricing" claims.
- Administrative Accountability: The PNM serves as the primary evidence for Government auditors (such as the DGAO or IG) to verify that the CO exercised due diligence; if a rationale for a price is not in the PNM, it is legally difficult for the Government to defend the award's reasonableness later.