Overview
FAR 42.1701 establishes the administrative process for creating and maintaining Forward Pricing Rate Agreements (FPRAs), which are used to pre-determine rates for use in pricing government contracts. It outlines the Administrative Contracting Officer’s (ACO) responsibility to ensure these agreements are supported by current data and are beneficial to the government's interests.
Key Rules
- Initiation and Discretion: Negotiation of an FPRA can be requested by the contractor, the CO, or the ACO; however, the ACO has the final authority to determine if an agreement is worth the administrative effort, typically reserving them for contractors with high proposal volumes.
- Data Standards: Contractors must submit cost or pricing data that are accurate, complete, and current as of the date of submission, consistent with FAR 15.4 requirements.
- Collaborative Development: The ACO is required to invite the cognizant contract auditor (e.g., DCAA) and other interested contracting offices to participate in developing the negotiation objective.
- Mandatory Documentation: Upon conclusion, the ACO must prepare a Price Negotiation Memorandum (PNM) and distribute the resulting FPRA to all affected contracting offices and auditors.
- Monitoring and Cancellation: Every FPRA must include terms for systematic monitoring, data requirements for validity checks, and a clause allowing either party to cancel the agreement.
- FPRR as an Alternative: If an FPRA is invalidated or not established, the ACO issues a Forward Pricing Rate Recommendation (FPRR) to provide buying activities with guided rate documentation.
Practical Implications
- Efficiency in Bidding: For contractors, an FPRA significantly streamlines the proposal process by eliminating the need to renegotiate indirect rates for every individual contract action, providing a "pre-approved" rate for use in pricing.
- Compliance Burden: Contractors must maintain robust internal controls to identify "significant changes" in their cost structure, as failure to disclose data changes to the ACO can lead to the invalidation of the agreement or potential defective pricing issues.