42.1701 Procedures
Source: FAR 42.1701 on acquisition.gov
FAR 42.1701 establishes strict procedures for negotiating, documenting, and maintaining Forward Pricing Rate Agreements to ensure accurate and efficient contract pricing.
Overview
FAR 42.1701 outlines the procedures for negotiating, establishing, and maintaining Forward Pricing Rate Agreements (FPRAs) between contractors and the government. FPRAs are typically used with contractors who submit a significant volume of government contract proposals, and their purpose is to streamline the pricing process for future contracts by pre-negotiating indirect cost rates. The section details the roles of the Administrative Contracting Officer (ACO), the requirements for contractor proposals, the involvement of auditors and contracting offices, and the documentation and monitoring obligations associated with FPRAs.
Key Rules
- Initiation and Applicability of FPRAs
- FPRAs may be requested by the contracting officer, contractor, or initiated by the ACO, but are generally reserved for contractors with substantial government business.
- Proposal and Data Requirements
- Contractors must submit forward pricing rate proposals with accurate, complete, and current cost or pricing data; the ACO must involve auditors and relevant contracting offices in negotiations.
- Documentation and Distribution
- After negotiations, the ACO must prepare a price negotiation memorandum (PNM) and distribute it, along with the FPRA, to affected parties.
- Terms, Monitoring, and Cancellation
- FPRAs must specify terms for expiration, application, monitoring, and allow for cancellation by either party; contractors must report significant changes in cost or pricing data.
- Invalid or Absent FPRAs
- If an FPRA becomes invalid, a new proposal must be negotiated; if no FPRA exists, the ACO issues a Forward Pricing Rate Recommendation (FPRR) or supports rates used with documentation.
- Continuous Updates
- The ACO may negotiate ongoing updates to FPRAs, ensuring terms for notification and monitoring are included.
Responsibilities
- Contracting Officers/ACOs: Initiate, negotiate, document, and monitor FPRAs; involve auditors and contracting offices; issue FPRRs if needed.
- Contractors: Submit accurate and current proposals; notify ACO and auditors of significant data changes; negotiate new proposals if FPRAs become invalid.
- Agencies: Oversee the establishment and monitoring of FPRAs; ensure proper distribution of documentation.
Practical Implications
- FPRAs help streamline contract pricing but require rigorous data submission, monitoring, and communication. Failure to maintain valid FPRAs or to update data can delay contract negotiations and lead to compliance issues. Proper documentation and timely updates are critical to avoid audit findings or disputes.
(a) Negotiation of forward pricing rate agreements (FPRA’s) may be requested by the contracting officer or the contractor or initiated by the administrative contracting officer (ACO). In determining whether or not to establish such an agreement, the ACO should consider whether the benefits to be derived from the agreement are commensurate with the effort of establishing and monitoring it. Normally, FPRA’s should be negotiated only with contractors having a significant volume of Government contract proposals. The cognizant contract administration agency shall determine whether an FPRA will be established.
(b) The ACO shall obtain the contractor’s forward pricing rate proposal and require that it include cost or pricing data that are accurate, complete, and current as of the date of submission (but see 15.407-3(c)). The ACO shall invite the cognizant contract auditor and contracting offices having a significant interest to participate in developing a Government objective and in the negotiations. Upon completing negotiations, the ACO shall prepare a price negotiation memorandum (PNM) (see 15.406-3) and forward copies of the PNM and FPRA to the cognizant auditor and to all contracting offices that are known to be affected by the FPRA.
(c) The FPRA shall provide specific terms and conditions covering expiration, application, and data requirements for systematic monitoring to ensure the validity of the rates. The agreement shall provide for cancellation at the option of either party and shall require the contractor to submit to the ACO and to the cognizant contract auditor any significant change in cost or pricing data used to support the FPRA.
(d) When an FPRA is invalid, the contractor should submit and negotiate a new proposal to reflect the changed conditions. If an FPRA has not been established or has been invalidated, the ACO will issue a forward pricing rate recommendation (FPRR) to buying activities with documentation to assist negotiators. In the absence of an FPRA or FPRR, the ACO shall include support for rates utilized.
(e) The ACO may negotiate continuous updates to the FPRA. The FPRA will provide specific terms and conditions covering notification, application, and data requirements for systematic monitoring to ensure the validity of the rates.