FAR 15.407-3—Forward pricing rate agreements.
Plain-English Summary
FAR 15.407-3 explains how forward pricing rate agreements (FPRAs) are used when pricing contracts and contract modifications that require certified cost or pricing data. It covers four main subjects: how offerors must disclose and incorporate FPRA-related data in specific pricing proposals, how contracting officers must use FPRA rates when pricing actions during the agreement period, how changes in conditions can affect the validity of an FPRA and must be reported to the administrative contracting officer (ACO), and how certification works when an FPRA or other advance agreement is used. In practice, this section is about making sure negotiated prices are based on a consistent, current, and documented set of indirect and other forward pricing rates, while avoiding duplicate certification of the same data at the FPRA stage. It also protects the Government and contractors by requiring prompt notice if the assumptions behind the agreement change. For contractors, the rule means FPRA data must be tracked and cross-referenced carefully in each proposal; for contracting officers, it means using the agreed rates unless and until the agreement is revised or invalidated.
Key Rules
Disclose FPRA use in proposals
When certified cost or pricing data are required, the offeror must identify any FPRA that applies to the proposal and point to the latest cost or pricing data already submitted under that FPRA. The proposal must make clear which rates or data are being relied on so the pricing record is complete.
FPRA data become part of certified data
All data submitted for the FPRA, as updated when necessary, are part of the total data certified as accurate, complete, and current at the time of agreement on price. This means the FPRA package is not separate from the certification obligation for the contract action that uses it.
Use FPRA rates for covered actions
Contracting officers must use FPRA rates as the basis for pricing contracts, modifications, and other contractual actions performed during the period covered by the agreement. The agreement is intended to provide a consistent pricing baseline during its effective period.
Report changed conditions promptly
Any condition that may affect the validity of the FPRA must be reported promptly to the ACO. If the ACO decides the changed condition invalidates the agreement, the ACO must notify interested parties of the impact and the status of efforts to establish a revised FPRA.
No certification at FPRA agreement stage
Contracting officers may not require certification when data are submitted to support an FPRA or other advance agreement. Certification is tied to the later contract action that uses the FPRA, not to the advance agreement itself.
Certification covers all supporting data
When an FPRA or other advance agreement is used to price a contract action that requires a certificate, the certificate for that action must cover both the data supporting the FPRA or advance agreement and all other data supporting the action. The certification therefore reaches the full pricing package, not just the incremental proposal data.
Responsibilities
Offeror / Contractor
Describe any applicable FPRA in each specific pricing proposal, identify the latest cost or pricing data already submitted under the FPRA, and ensure the FPRA-related data are updated as necessary so they remain part of the certified data set for the contract action.
Contracting Officer
Use FPRA rates as the pricing basis for covered contracts, modifications, and other actions during the agreement period, and ensure the certification for a priced action covers all data supporting the FPRA and the action itself when certification is required.
Administrative Contracting Officer (ACO)
Receive prompt notice of any condition that may affect FPRA validity, determine whether a changed condition invalidates the agreement, and notify interested parties of the effect and the status of efforts to establish a revised FPRA.
Interested Parties
Monitor the status of the FPRA when notified of a changed condition or invalidation, and adjust pricing assumptions, negotiations, or proposal support as needed based on the revised or invalidated agreement.
Practical Implications
Contractors should maintain tight control over FPRA files and proposal cross-references so the pricing package clearly shows which rates were agreed and what data support them.
A common pitfall is treating the FPRA as a stand-alone document and forgetting that the supporting data must still be current and included in the certification for the later contract action.
Contracting officers should not re-price covered actions from scratch if a valid FPRA applies; they should use the agreed rates unless a changed condition has been reported and the agreement is revised or invalidated.
If business conditions, labor assumptions, overhead structures, or other rate drivers change, the issue should be elevated quickly to the ACO to avoid pricing disputes and defective pricing exposure.
When an FPRA is used, the certification burden shifts to the final action: the certificate must encompass both the FPRA support and the rest of the proposal, so incomplete documentation can undermine the validity of the price agreement.
Official Regulatory Text
(a) When certified cost or pricing data are required, offerors are required to describe any forward pricing rate agreements (FPRAs) in each specific pricing proposal to which the rates apply and to identify the latest cost or pricing data already submitted in accordance with the FPRA. All data submitted in connection with the FPRA, updated as necessary, form a part of the total data that the offeror certifies to be accurate, complete, and current at the time of agreement on price for an initial contract or for a contract modification. (See the Certificate of Current Cost or Pricing Data at 15.406-2 .) (b) Contracting officers will use FPRA rates as bases for pricing all contracts, modifications, and other contractual actions to be performed during the period covered by the agreement. Conditions that may affect the agreement’s validity shall be reported promptly to the ACO. If the ACO determines that a changed condition invalidates the agreement, the ACO shall notify all interested parties of the extent of its effect and status of efforts to establish a revised FPRA. (c) Contracting officers shall not require certification at the time of agreement for data supplied in support of FPRA’s or other advance agreements. When a forward pricing rate agreement or other advance agreement is used to price a contract action that requires a certificate, the certificate supporting that contract action shall cover the data supplied to support the FPRA or other advance agreement, and all other data supporting the action.