Negotiation Template - DOC

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					              PRICE NEGOTIATION MEMORANDUM (PNM)
            TEMPLATE FOR DOCUMENTING NEGOTIATIONS

                        INSTRUCTIONS FOR USING TEMPLATE

   APPLICABILITY.        Required template for preparing a price negotiation
    memorandum (PNM) for negotiated procurements if discussions were conducted,
    including new contract awards and contract modifications.

   EXCEPTIONS. This template does not apply to orders under Volpe Center
    Indefinite-Delivery Type Contracts (see ADIP No. 85-7), orders placed under
    Federal Supply Schedules (FSS), Governmentwide Agency Contracts (GWAC)
    orders placed by the GWAC host agency, or procurements processed under
    Simplified Acquisition Procedures (SAP).

   CUSTOMIZATION. Instructions are provided under each paragraph heading
    contained in the template stipulating the information required to be addressed. If
    there is no change from the prenegotiation memorandum (PM), a cross reference
    to the PM may be cited under the applicable heading. Also, the scope and depth of
    analysis supporting the final negotiated position should be directly related to the
    dollar value, importance, and complexity of the pricing action. To facilitate
    execution of this document: Included is a copy of the template containing only the
    paragraph titles to make it easier to fill in the information.

   COLUMNAR SUMMARY FORMATS/TOP LEVEL PRICE SUMMARY. Include
    the Top Level Price Summary comparing each Offeror’s initial proposal, the
    Government’s prenegotiation objectives and the negotiated results using the format
    shown herein. This Summary is required to be included in all Price Negotiation
    Memoranda, unless inclusion of this Summary was previously excepted for the PM.

   COLUMNAR SUMMARY FORMATS/COST ELEMENT SUMMARY. Include
    the Cost Element Summary shown herein whenever cost analysis is used unless
    inclusion of this summary was previously waived for the PM. This summary can
    be applied separately to each Offeror as appropriate and should be consistent with
    the cost element structure cited in the PM.

   MARKING. Ensure all copies of this document include the heading “SOURCE
    SELECTION INFORMATION – SEE FAR 3.104” and attach a copy of DOT
    cover pages: DOT F 4220.35 and DOT F 4220.36. (NOTE: The Source Selection
    Information header will be embedded in the template).

   RELATED LINK: For information on performing price analysis or cost analysis,
    see Contract Pricing Reference Guides at
    http://www.acq.osd.mil/dpap/contractpricing/chap-index.ht m




DTS85T.3                                                                         (12/01)
     SOURCE SELECTION INFORMATION – SEE FAR 3.104


                           PRICE NEGOTIATION MEMORANDUM (PNM)

1. DESCRIPTION. Provide a b rief description of the acquisition, including appropriate identify ing
numbers (e.g., RFP No.), as necessary to ensure a clear correlation with the Prenegotiation Memorandum.

2. PURPOS E OF NEGOTIATION. Explain why negotiations were necessary. The Contracting
Officer’s primary concern is the overall price the Govern ment will actually pay. The Contracting Officer’s
objective is to negotiate a contract of a type and with a price providing the Offeror the greatest incentive for
efficient and economical performance.

3. ATTENDEES AT NEGOTIATIONS. List the name, position, and organization of each person
representing the Offeror and the Govern ment in the negotiation.

4. S UMMARY OF KEY DOCUMENTS. Identify the title and date of each key docu ment. Include, as
applicable, the following: (Cite the Tab under wh ich each of the relevant documents is filed.)

a)   Prenegotiation Memorandu m (PM).
b)   Minutes of Negotiations.
c)   Final Proposal Revision(s) submitted by Prospective Offeror(s).
d)   Amended Field Pricing Review Results, including audit and price h istory information, as applicab le.
e)   Amended Technical Evaluation Results.
f)   Other: _____________________.

5. CONTRACTOR S YS TEMS. Describe the current status of any Government approved contractor
systems (e.g., purchasing, estimating, accounting, and compensation) to the extent they affected and were
considered in the negotiation.

6. COST OR PRICING DATA. If cost or pricing data were required (see FAR 15.403-4) and submitted
after the establishment of the pre-negotiation objectives and therefore not addressed in the Prenegotiation
Memorandu m, describe the extent to which the Contracting Officer: (1) relied on the cost or pricing data
submitted and used them in negotiating the price; (2) recognized as inaccurate, inco mplete, or non-
concurrent any cost or pricing data submitted; the action taken by the Contracting Officer and the Offeror
as a result; and the effect of the defective data on the price negotiated; or (3) determined that an exception
applied after the data was submitted and, therefore, considered not to be cost or pricing data.

7. S UMMARY OF OFFEROR(S) PROPOSAL(S). Provide a summary of each Offeror’s proposal, any
field pricing assistance recommendations, including the reasons for any p ertinent variances fro m them, the
Govern ment’s negotiation objective, minutes of negotiations, and the negotiated position. This summary
can be prepared as a separate attachment for each offeror’s proposal, consistent wi th the PM.
Address the results of the technical evaluation, including weaknesses and deficiencies, as well as
administrative matters related to the Offeror’s proposal, including discussions on either of these areas with
the Offeror. Specifically address the disposition of pricing or audit reco mmendations that were
incorporated into the prenegotiation objectives. If no d iscussions were conducted or revisions received
regarding this informat ion and it is basically unchanged fro m the Prenegotiation Memorandum, simp ly
include a cross reference to the section of the Prenegotiation Memorandum where the in formation can be
found.

Unless exempt during the PM process, include a Top Level Price Su mmary Table (see Table 1) d isplaying
each offeror’s in itial proposed price, the Govern ment’s prenego tiation objectives and each offeror’s final
negotiated amount.

When determination of price reasonableness is based on price analysis (FAR 15.404-1(b)), the summary
shall include the source and type of data used to support the determination.




DTS85T.3                                                                                                (12/01)
    SOURCE SELECTION INFORMATION – SEE FAR 3.104
Where the determination of price reasonableness is based on cost analysis (see FAR 15.404 -1(c)), the
summary shall address each major cost element stipulated in the solicitation instructions. Include cost
realism analysis on cost reimbursement contracts to determine the probable cost of performance of each
Offeror (see FAR 15.404-1(d)). [Reminder: Cost realism 1 is a form o f cost analysis.] Provide a Cost
Element Su mmary co mparison in colu mnar fo rmat of the respective positions of each Offeror’s proposal
(See Table 1 for samp le format. Individual cost elements can be modified as necessary to fit the particulars
of any given procurement However, ensure the format used in the PNM is consistent with that used in the
corresponding PM.) For co mpetit ive acquisitions, a cost element breakdown is required only for those
Offerors determined to be in the co mpetitive range.

If the Offeror is identified as a small disadvantaged business concern, and the procurement falls with in the
authorized North A merican Industry Classification System (NAICS) Industry Subsectors as determined by
the Department of Co mmerce, ensure the offer is evaluated consistent with FAR 19.11 and 19.12. If the
Offeror is identified as a HUBZone small business concern, ensure the offer is evaluated cons istent with
FAR Subpart 19.13.

8. SIGNIFICANT FACTS. Describe the most significant facts or considerations controlling the
establishment of the negotiated agreement including an explanation of any significant differences between
the negotiated agreement and the position established in the prenegotiation objectives. Reminder: the
negotiation of a contract type and a price are related and should be considered together with the issues of
risk and uncertainty to the Offeror and the Govern ment.

9. HIGHER-LEVEL DIRECTION. To the extent such direction arises after issuance of the
Prenegotiation Memorandu m and has a significant effect on the action, provide a d iscussion and
quantification of the impact of direct ion given by Congress, other agencies, and higher-level officials (i.e.,
officials who would not normally exercise authority during the award and review process for the contract
action). Otherwise, simply state “Not Applicable.” It is expected this section will rarely apply.

10. NEGOTIATED PROFIT/ FEE. Describe any significant difference between the profit or fee
prenegotiation objective (if negotiations are based upon cost analysis, see TAM 1215.404 -4 for the DOT
structured approach - DOT F 4220.32, Weighted Guidelines Profit/Fee Objective) and the profit or fee
negotiated. The Govern ment’s cost objective and proposed pricing arrangement directly affect the profit or
fee objective. Because profit or fee is only one of several interrelated variables, the Contracting Officer
shall not agree on profit or fee without concurrent agreement on cost and type of contract and until all
outstanding issues are brought to closure.

11. FAIR AND REASONAB LE PRICING. Discuss how the final negotiated amount is considered fair
and reasonable 2 . A fair and reasonable price does not require that agreement be reached on every element
of cost, nor is it mandatory that the agreed price be within the Contracting Officer’s in itial negotiation
position. The Contracting Officer should not become preoccupied with any sin gle element and should
balance the contract type, cost, and profit or fee negotiated to achieve a total result - a p rice that is fair and
reasonable to both the Govern ment and the Offeror.




1
  Cost realism analysis is the process of independently reviewing and evaluating specific elements of
each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are
realistic for the work to be performed; reflect a clear understanding of the requirements; and are
consistent with the unique methods of performance and materia ls described in the offeror’s technical
proposal.
2
  Add the following if the acquisition is processed as a small-business or 8(a) set aside, or a price
evaluation adjustment for small disadvantaged concerns or HUBZone small business concerns is
applied: “and a fair market price.”




DTS85T.3                                                                                                     (12/01)
     SOURCE SELECTION INFORMATION – SEE FAR 3.104
4.   12. SOURCE S ELECTION DECIS ION. 3 Describe the co mparative assess ment of proposals
     against all source selection criteria in the solicitation performed by the Contracting Officer. Include
     the rationale for any business judgements and tradeoffs made or relied on by the Contracting Officer,
     including benefits associated with additional costs. While tradeoffs need not be quantified, it is
     essential that the record clearly indicate the benefits to the government fro m awarding a contract to a
     higher-cost offeror. Identify those aspects of an offeror’s proposal (i.e. strengths) that merit a price
     premiu m and include an exp lanation of the benefits associated with any particular strength.


13. SIGNATURES. The fo llo wing shall be inserted and completed at the end of each PNM :

The following signatures represent: (1) agreement w ith the information contained herein, including the
source selection decision 3; and (2) that the final negotiated price is fair and reasonable 4 .




Prepared by: ____________________________               Reviewed by: _______________________
                (Signature, Tit le & Date)                            (Signature, Tit le & Date, of the
                                                                      Contracting Officer if not the Preparer
                                                                      of the PNM )




Approved by5 : ____________________________
                 (Signature, Branch Chief’s Title & Date)




3
  Include this element when the Contracting Officer is the Source Selection Authority (SSA ) (usually
under $50M-See TAM Chapters 1215 & 1234. If t he SSA is other t han the contracting officer include a
reference to the Source Selection Decision Document and attach a copy.




4
  Add the following if the acquisition is processed as a small-business or 8(a) set aside, or a price
evaluation adjustment for small disadvantaged concerns or HUBZone small business concerns is
applied: “and a fair market price.”


5
 The PNM must be reviewed and approved by the Contracts Branch Chief for procurements exceeding
$500K. Delete this approval block for procurements estimated not -to-exceed $500,000 as the
Contracting Officer’s signature constitutes approval of the document.




DTS85T.3                                                                                                (12/01)
     SOURCE SELECTION INFORMATION – SEE FAR 3.104


                     TABLE 1 - COLUMNAR SUMMARY FORMATS


                                   TOP LEVEL PRICE S UMMARY

O FFERO R                 PROPOSED          PRENEGO TIATIO N           NEGO TIATED
NAME                      TO TAL PRICE      OBJECTIVES                 AMO UNT
1.    THE AB C CO.        $                 $                          $
2.    THE XYZ CO.         $                 $                          $
3.
4.
5.




                                    COST ELEMENT S UMMARY

     COST                          TH E ABC          PRENEGO TIATIO N          NEGO TIATED
     ELEMENT                                O
                                   CONTRACT R        OBJECTIVES                AMO UNT          NO TE(S)
1. LABOR                           $                 $                         $                   (a)
2. MATERIALS                       $                 $                         $                   (b)
3. OVERHEAD(S)
4. S UB CONTRACT(S)
5. OTHER DIRECT COSTS
6. G&A
7. PROFIT OR FEE
8. TOTAL COST
9. COST OF MONEY
10. TOTAL AMOUNT
11. PRICE ADJ US TMENT

Use the “ Note(s)” i dentifier to cross reference the discussion of each final cost element amount to the
Cost Element Summary.




DTS85T.3                                                                                           (12/01)
     SOURCE SELECTION INFORMATION – SEE FAR 3.104
                           PRICE NEGOTIATION MEMORANDUM (PNM)

1. DES CRIPTION.

2.   PURPOS E OF NEGOTIATION.

3.   ATTENDEES AT NEGOTIATIONS.

4. S UMMARY OF KEY DOCUMENTS.

5.   CONTRACTOR S YSTEMS.

6.   COST OR PRICING DATA.

7. S UMMARY OF OFFEROR’S PROPOSAL.

8. S IGNIFICANT FACTS.

9. HIGHER-LEVEL DIRECTION.

10. NEGOTIATED PROFIT/ FEE.

11. FAIR AND REASONAB LE PRICING.

12. SOURCE S EL ECTION DECIS ION.

13. SIGNATURES . The fo llo wing signatures represent: (1) agreement with the informat ion contained
herein, including the source selection decision; and (2) that the final negotiated price is fair and reasonable.



Prepared by: ____________________________               Reviewed by: _______________________


Approved by: ____________________________




DTS85T.3                                                                                                 (12/01)
     SOURCE SELECTION INFORMATION – SEE FAR 3.104


                     TABLE 1 - COLUMNAR SUMMARY FORMATS




                            TOP LEVEL PRICE S UMMARY

         O FFERO R          PROPOSED          PRENEGO TIATIO N           NEGO TIATED
         NAME               TO TAL PRICE      OBJECTIVES                 AMO UNT
1.                          $                 $                          $
2.                          $                 $                          $




                             COST ELEMENT S UMMARY

     COST                                         PRENEGO TIATIO N       NEGO TIATED
     ELEMENT                _______________       OBJECTIVES             AMO UNT        NO TE(S)
1.                          $                     $                  $                 (a)

2.                          $                     $                  $                 (b)

3.                          $                     $                  $                 (c)

4.                          $                     $                  $                 (d)

5.                          $                     $                  $                 (e)

6.                          $                     $                  $                 (f)

7.                          $                     $                  $                 (g)

8.                          $                     $                  $                 (h)

9.                          $                     $                  $                 (i)

10.                         $                     $                  $                 (j)

11.                         $                     $                  $                 (k)




DTS85T.3                                                                                     (12/01)

				
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