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Proposals, Negotiations, Audits: a review of the requirements, process, negotiations, audits and an analysis of the latest developments in the use of Forward Pricing Rate Agreements (FPRAs), Forward Pricing Rate Recommendations (FPRRs) and Formula Pricing Agreements (FPAs) in government contracting
An FPRA is a written agreement between the Government and a contractor. The Government will enter into an agreement with a contractor who has a significant volume of pricing activities with the Government. An FPRA can be an efficient way to establish rates as baselines for pricing all contracts, modifications, and other contractual actions that will be performed during the period covered by the agreement. With an FPRA in place, the contractor and the Government save the time required to develop new estimates for bidding on new work during the agreement period.
Both the Government and the contractor have the responsibility to determine if any conditions change that affect the validity of the agreement, rates, and estimates.
Contractors should note that all FPRAs and/or FPAs (Formula Pricing Agreements) submissions must be prepared and supported with cost or pricing data that are accurate, current, and complete.
In addition, FPRAs must include the specific terms and conditions covering the expiration, application, and data requirements for the systematic monitoring of rates to ensure their validity.
In any price proposal, contractors must specifically describe the FPRAs, if any, to which the rates apply. Contractors must also identify the latest cost or pricing data already submitted in accordance with the agreement.
The purpose of this workshop is to:
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Forward Pricing Rate Agreements (FPRAs) Forward Pricing Rate Recommendations (FPRRs) and Formula Pricing Agreements (FPAs)
1. Role of Rates in Government Contracts a. Contract types b. Pricing c. Costing d. Billing
2. The Rules, Regulations, and Guidance a. FAR (Federal Acquisition Regulation) b. DFARS (Defense Federal Acquisition Regulation Supplement) c. TINA (Truth In Negotiations Act) d. CAS (Cost Accounting Standards) e. DCAM (Defense Contract Audit Manual) f. DoD g. DCMA
3. Business System Requirements a. Coverage b. Estimating systems
4. Accounting Systems/Contract Clauses
5. Responsibilities and Initiatives a. Contractor b. CO (Contracting Officer) c. ACO (Administrative Contracting Officer) d. PNM (Price Negotiation Memorandum)
6. Role of Cost Principles and CAS a. Allowable Costs b. Cost Allocation
7. Role and Requirements of The Truth in Negotiations Act, Requirements of Public Law 87-653, and Implementing Regulations a. Applicabiilty b. Certified Cost or Pricing Data c. “Price Reduction” Clause d. Exemptions and Exceptions e. Government Audit Rights f. Contractor Submission of Data g. Defining Cost or Pricing Data h. Data Submission Requirements i. Certifications j. Subcontractor Data
8. Development of Negotiation Objectives a. Government b. Contractor c. Role of the ACO d. Preparation of the PNM e. Forwarding the PNM and FPRA to contract auditors
9. The Rate Process a. Organization Responsibilities, Reviews and Sign-offs b. Budgets c. Data Sources d. Basis of Estimate
10. Updates: Preparing Estimates a. Manufacturing vs. Service Contracts b. Direct Material Costs c. Direct Labor Costs d. Indirect Costs
11. Costs: Implications of Cost Changes on Agreement Rates a. Labor b. Indirect Costs c. Material Obsolescence and usage d. Spare Parts Provisioning e. Material Handling
12. Costs: Business Changes Potentially Affecting FPRAs a. Changes in Business Volume b. Changes in Market Conditions Affecting Material or Labor Costs c. Savings Accruing from Cost Reduction Programs d. Changes in Manufacturing Processes e. Changes in the Treatment of Direct and Indirect Costs
13. Rate Audits a. Proposals-FPRA b. Incurred Costs c. Materiality of Bases, Pools, and Rates d. Adequacy of Internal Controls e. Results of Prior Audits f. Differences Between Forecasted and Actual Rates g. Changes in the Contractor Organization h. Mix of Government and Commercial Business i. Types of Contracts j. Board of Directors’ Minutes k. Estimating Practices l. Disclosed CAS Practices m. Projected Business Volume n. Rate Data o. Rate Computations
14. To FPRA or Not a. Life With an FPRA b. Life Without an FPRA c. Future Cost Uncertainty d. Open CAS issues e. Open FAR Cost Allowability Issues f. Contingencies Summary and Questions/ Discussion
