The PNM 4/5/2016

1. The PNM4/5/2016 Integrity ~ Service ~ Excellence

2. Objectives • What is it? • Why do it? • Who reads it? • How do you do it?

3. What Is It? • It explains and justifies why the negotiated price is fair and reasonable. • It is the record of the entire negotiation process for your acquisition. • It is the document in the contract file that describes the principal elements of the negotiated agreement as required by FAR 15.406-3(a). Must be a complete summary of the negotiation process

4. Types of Documentation • Price Negotiation Memorandum (PNM). • Sole source or single source competition that is not considered competition i.e. becomes sole source • Preliminary PNM • Final PNM • Links to the templates for these documents in AFFARS 5315.406-3 • Proposal Analysis Report (PAR). • Price Completion Memorandum (PCM) • Use EZ Source worksheets • https://org.eis.afmc.af.mil/sites/OOALCXP/XPQ/Howto%20EZ%20Source/Forms/AllItems.aspx • Specialized PNM Format. • Use between micro-purchase and simplified acquisition procedures thresholds • May also be used for commercial acquisitions of less than $6.5M

5. Why Do It? • It’s required by FAR 15.406-3 • Other people will read your PNM to find out what you did. • It identifies contractor data that were or were not relied upon by the Government—Support defective pricy case • It is a permanent file record. • Document a Fair and Reasonable Price

6. Who Reads It? • Contracting Officer/Management • Administrative Contracting Officer • DCAA • IG/GAO/AF Audit • Attorneys (Government & Contractor) • Follow-on Buyers, PCOs, Pricers • Terminating Contracting Officer • Congressional Staffers • Posted to CBAR –(>$25M)

7. How Do You Do It? • Follow the “AF Price Negotiation Memorandum Checklist” step by step, and include all relevant information. • A link to this checklist as well as links to the Preliminary and Final PNM formats are found in AFFARS 5315.406-3. http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/af_afmc/affars/5315.htm#P81_5829 • Read good and bad examples of various sections of PNMs.

8. What Information Do I Need ? • Introduction Summary- include date of price agreement & description of the buy • Results of Negotiation-include a table showing cost, COM, profit/fee, total price, profit/fee rate, contract type, & incentive arrangement • A detailed description of the procurement -Get details from various sources • Contractor’s proposal • SOW • Program Manager • Old Case files/PNMs

9. What Information Do I Need ? • Procurement History– • Give basic info on previous buys-same or similar items/services • Focus on previous prices (if applicable) • Focus on any and alldifferences between previous buy and current buy • Info primarily found in old case files/PNMs • Basis for Contract Type Selected- • Describe reason for use of the type chosen • Market Research- • Describe method used • Give rationale for contractor chosen • Delivery Schedule- • Does it meet the requirement? • Show schedule or identify attachment with schedule • Period of Performance-for basic and all options • May be in place of, or in addition to the delivery schedule

10. What Information Do I Need ? • Price Analysis– • Use basic information on previous buys of same or similar items/services from Procurement History section (above) • No previous buys, consider program office estimate, independent government estimate, parametric estimate, etc. • This is required, some type of price analysis must be performed • 25% Price Increase IAW DFARS 215.404-1 - • This applies to Spare parts/Support Equipment • http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/dfars/dfars215.htm#P478_28707 • CLIN Pricing- • Provide CLIN #, description, contract type, quantity, and unit and extended price for proposed, government objective, and negotiated values • Business Clearance Review/Authorization- • Identify reviewing analyst and date submitted for review • Identify clearance authority and date of authorization • Discuss contract clearance; whether required and why or why not

11. Fact Finding/Negotiations – Identify the following: • Dates (beginning and end) • Locations • All Government and Contractor personnel involved (include titles) – specifically identify the lead negotiators on both sides • Outside Influences – Describe any influences that may have affected negotiations (i.e. time constraints, Nunn-McCurdy breach, CBA issues, etc.) • Special Clauses/Unique Features – Describe any unique features for the effort (i.e. savings clauses, EPA clauses, GFP, PBPs, H Clauses, etc.) • Proposal Submission-Identify the proposals issued and the dates received by the government What Information Do I Need ?

12. Recurring/Non-Recurring Costs–Dates (beginning and ending dates) • Keep these amounts segregated • Future buys should not be negotiated based on current non-recurring costs • Definitizing Contracts- • Is this a Definitization of a Undefinitized Contract Actions (UCA)? • Must include the cost incurred to date • Consider reduction in profit for work perform • Final Pricing of an Incentive Arrangement– • Need final cost proposal from contractor • May need DCAA audit-this depends on the total amount • Need final billing rates • Subcontractor Submissions– • Identify all subcontract proposals • Provide cost analysis reports for any that exceed the certification threshold • A contractor/subcontractor must provide certified cost or pricing data (detailed proposal with BOE) for a subcontract if the proposed subcontract price exceeds $12.5M, or if it exceeds the certification threshold and also exceeds 10% of the prime contract proposal What Information Do I Need ?

13. Cost Element Summary– • List all cost elements in the proposal • Provide proposed, objective and negotiated cost for each element • Identify the footnote which addresses each element • Should be in spreadsheet or table format • Footnote Content– • A separate footnote should be written for each direct cost element • Each footnote should address the proposed, objective and negotiated amount for the element being discussed What Information Do I Need ?

14. Elements of a PNM BASIC SPREADSHEET BE AMERICA’S BEST

15. Elements of a PNM Footnotes on Each Cost Element: - Proposed - AF Objective - Negotiated

16. NegotiationSummary – Labor & ODC Examples Key points: • Follow the checklist • Use Tabular Summaries • Include rationale for proposed, objective, and negotiated positions • Focus on significant differences between Objective and Negotiated • Identify sources used to develop positions (i.e. Audits, technical evaluation, rate recommendations)

17. PNM Tips • Don’t have a page with signatures and nothing else • Be accurate & concise – just describe what happened • Write a Preliminary PNM • Write the PNM as you go • Use a good sample • Have your PNM reviewed by someone else in your organization

18. PNM Must Haves Be sure to include the following items in all PNMs: • Contracting Officer’s signature • The following statements (or similar): • Reliance - All cost and pricing data submitted by the Contractor was considered factual and fully relied upon for the development of the Air Force objective and the negotiated amounts. There are no exceptions to the Government’s reliance on the Contractor’s data. See the final PNM template. • Certification. The Certificate of Current Cost or Pricing Data was received, reviewed and found to contain no qualifying statements. The Certificate is dated ??DATE?? with an effective date of ??DATE??.The Certificate is included as Attachment ?? to this document.

19. Certificate of Current Cost or Pricing Data • Required by law • Purpose: Certify that data are "current, accurate and complete" as of the date on which the parties agreed upon a price • FAR Table 15-2 states contractor must submit certificate as soon as practicable after price agreement • FAR 15.406-2 provides Cert language & states • Certification does not apply to accuracy of judgment, but applies to data upon which judgment is based • Contractor’s responsibility not negated by lack of personal knowledge • Try to reach prior agreement on criteria for cut-off dates • Possession of a Cert is not a substitute for examining/analyzing the proposal Date of price agreement is handshake not date of Agreement on sweep impact

20. Certificate of Current Cost or Pricing Data • Your Responsibility • Check the date – Unless otherwise agreed to, certification is “as of” the date of handshake • Review the Cert for “qualifications” (see FAR 15.406-2 for Cert language) • Beware of language from the FAR that has been modified or eliminated • Get Legal advice as appropriate • Recent Real Life Examples of Problem Certs • Cut-Off Dates that were not agreed to • Limitations on Data Being Certified • Incorrect Citing of FAR Definition of Cost or Pricing Data (should be FAR 2.101) • If data log is attached, make sure the list is complete and that you have seen everything that has been identified

21. PNM Tips • Cut & Paste/ Overwrite a good sample/ previous PNM, BUT be careful when you do this (don’t leave in wrong names, data, etc.) • Separate options from basic in your write up • Separate debits and credits in your write up • Prepare a separate WGL for basic and each option • Attachments can reduce clutter in PNM • Use boilerplate where applicable/appropriate

22. UCI “Hot Spots” • Write the PNM • Make sure the PNM is signed by the Contracting Officer • Complete PNM within a reasonable time after completion of negotiations • Do not allow A&AS contractors to sign PNM • Complete explanation of Proposal, Air Force Objective, and Negotiated Results • Include status of Contractor Systems within “Miscellaneous” paragraph • State the Negotiated Results are Fair & Reasonable • State Reliance on contractor provide cost and pricing data • Reference Technical Evaluation, DCAA Audit and DCMA

23. References/Notes • FAR 15.406-3 PNM Documentation • FAR 15.406-2 Certification • FAR 15.407-1 Defective Cost/Price Data • AFMC MP5315.406-3 identifies the AF Templates as required for use with all sole source requirements exceeding $5M • PZCF requires use of the AF Template at or above the TINA Certification threshold