b) The COA shall obtain the contractor`s proposal and require that it contain cost or price data that is accurate, complete and up-to-date at the time of submission. The COA invites the auditor and procuring entities with a significant interest to participate in the development of a government objective and in the negotiations. At the end of the negotiations, the COA prepares a Price Negotiation Memorandum (MFN) (see 15.406-3) and forwards copies of the MFN and FPRA to the grateful auditor and to all contract offices known to be affected by the FPRA. A certificate of current costs or price data is not required at this time (see 15.407-3(c)). Anyone can initiate an FPRA request. It can be requested by the client or contractor or initiated by the COA. When deciding whether or not to enter into such an agreement, the COA should consider whether the benefits to be derived from the agreement are proportionate to the efforts made to justify and monitor it. Normally, PEAs should only be negotiated with contractors who have a large volume of government contract proposals. The competent contract management body is usually the last authority when an FPRA is established. c) The FPRA sets specific conditions for the procedure, application and data requirements for systematic monitoring to ensure the validity of tariffs. The agreement provides for termination at the option of one of the parties and obliges the contractor, the COA and the identifiable contract auditor to submit any material changes in cost or price data. (d) If an FPRA is not valid, the contractor shall submit and negotiate a new proposal that takes into account the modified conditions. If an FPRA has not been established or declared invalid, the COA issues a Forward Pricing Rate (RPF) recommendation to purchasing activities with documentation to assist negotiators.
In the absence of an FPRA or FPRR, the COA includes support for the tariffs used. FPRA are very useful for contractors with a large volume of government contract proposals. When an FPRA is in place, the contractor and the government do not have to spend time haggling over indirect cost rates during contract negotiations – the proposed indirect rates are already settled. As a contractor who enters into an FPRA, you are also responsible for keeping cost or price data up to date through constant disclosure to the Administrative Contracting Officer (ACO). Since this data is not certified at the beginning of the FPRA, you must ensure that you have adequate controls in place to understand what cost or price data has been disclosed and whether the data is current, complete and accurate. This obligation can potentially expose your business to government claims for wrong prices, so you need to be extremely careful. (b) Contract agents shall use the FPRA tariffs as a basis for fixing the price of all contracts, amendments and other contractual measures to be performed during the period covered by the agreement. Conditions that may affect the validity of the contract must be communicated immediately to the ACO.
If the COA determines that an amended condition invalidates the agreement, the COA informs all interested parties of the extent of its impact and the status of efforts to introduce a revised ARPF. e) The COA may negotiate ongoing updates of the FPRA. The FPRA provides specific conditions for notification, enforcement, and data requirements for systematic monitoring to ensure the validity of tariffs If your company is able to estimate direct and indirect costs and monitor their performance during your fiscal year, you can benefit from the use of FPRA. However, FPRAs require you to constantly guess and monitor trends, otherwise you might be in a deal that doesn`t match reality. In this scenario, your business could lose money on a contract that costs more than expected. While an FPRA can help you ensure a fair and reasonable price for your work, agreements present several challenges. They must perform the regular and time-consuming task of continuously monitoring performance against established rates to demonstrate that it continues to be adequate. Such agreements may include rates for indirect costs such as ancillary services, overheads, and general and administrative costs, as well as for direct labour and material costs. Your business needs to understand how these indirect costs, which cannot be identified, are calculated and allocated to a particular project.
THE FPRA falls within the range of special costs and prices far 15.407-3 and far subpart 42.1701. An important consideration is that an FPRA is not the same as a forward pricing rate proposal (FPRP) for projecting preliminary indirect prices. .