FAR 15.406—Documentation.

Prenegotiation objectives.

FAR 15.406-1 explains how the Government prepares for price or cost negotiations by setting prenegotiation objectives. This section covers the purpose of those objectives, the information that should support them, when they must be established, how much analysis is appropriate, and what must be documented when cost analysis is required. In practice, it tells the contracting officer to build an initial Government negotiation position based on a reasoned review of the offeror’s proposal and all relevant pricing data, including field pricing assistance, audit reports, technical analysis, fact-finding results, independent Government cost estimates, and price histories. The rule is important because prenegotiation objectives are the foundation for determining whether a proposed price is fair and reasonable and for guiding the Government’s negotiation strategy. It also reinforces that the depth of analysis should match the dollar value, importance, and complexity of the action, so the Government does not over- or under-analyze a pricing action. When cost analysis applies, the section requires the contracting officer to identify the issues to be negotiated and document cost and profit or fee objectives, creating a clear record of the Government’s position before negotiations begin.

Certificate of Current Cost or Pricing Data.

FAR 15.406-2 explains when and how the Certificate of Current Cost or Pricing Data must be used, what the certificate actually means, and what it does not mean. It covers the required certificate format, the contracting officer’s duty to obtain and file the executed certificate when certified cost or pricing data are required, the contractor’s certification that submitted data are accurate, complete, and current as of the date price agreement is reached, and the inclusion of data supporting advance agreements and forward pricing rate agreements. It also clarifies the important distinction between factual data and the contractor’s judgment or estimates, and it warns that the contractor’s responsibility is not reduced just because its negotiators personally lacked knowledge of information that was reasonably available. The section encourages the parties to agree in advance on closing or cutoff dates to reduce proposal-update delays and explains how cutoff dates and periodic accounting data may be used. Finally, it states that merely having the certificate does not replace the contracting officer’s obligation to analyze the proposal, and that if an exception to certified cost or pricing data later applies, the data are not treated as certified and should not be certified under this subsection. In practice, this section is central to defective pricing risk, negotiation timing, and the integrity of the pricing record in negotiated procurements requiring certified cost or pricing data.

Documenting the negotiation.

FAR 15.406-3 tells the contracting officer how to document a negotiated acquisition in the contract file, usually through a price negotiation memorandum (PNM) or similar record. It covers the purpose of the negotiation, the acquisition description and identifiers, the names and roles of the negotiators, the status of contractor systems that affected the negotiation, and how certified cost or pricing data were handled. It also requires a summary of the contractor’s proposal, field pricing assistance, the Government’s negotiation objective, the negotiated position, the key facts and considerations behind prenegotiation objectives and the final agreement, any significant direction from Congress or higher-level officials, the basis for profit or fee objectives and outcomes, and the documentation supporting a fair and reasonable price. In practice, this section is the audit trail for how the Government reached the negotiated price and terms, especially in actions where cost analysis, price analysis, or defective certified cost or pricing data are involved. It also ensures that field pricing offices receive the final negotiation record so their support can improve future acquisitions.