Process for Price Negotiation Memo in Sole-Source Acquisitions

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“Holy-crap, I’m overwhelmed” moments often come before breakthroughts. I recently had that happen to me with a pre-business clearance also known as a price negotiation memo (PNM). The purpose of these are to show we did our homework, the government will get a good deal, and that the government isn’t doing something stupid by entering a negotiation with a contractor.

The rookie mistake I made was feeling overwhelmed by the size of business clearances. (The Navy’s version has 20 pages worth of questions you need to answer. You can imagine that they can get quite thick once complete even without attachments and references.)

Once my day long panic attack subsided, someone gave me a long talk about how to break down the process into management chunks. While not a lot of contract specialists do business clearances (hands raised in one recent class showed less than 10 out of 30 did them), it’s a useful guide to have once you start. I just wish I had it the day I started.

Wonderful Process for Pre-Business Clearances in Sole-Source Acquisition

Step A

1. Request tech memo from technical contacts

2. Request DCMA/DCAA review

3. Request contractor send you Excel spreadsheets

Step B

4. Review proposal for stupid stuff

5. If you find stupid stuff, you send questions to contractor asking “Why are you proposing stupid stuff?” Asking it in this way makes stupid stuff sound stupid, getting your point across so stupid stuff will be taken out.

Step C

6. Start reviewing spreadsheet provided by contractor. Get familiar and look at formulas to understand how things work.

7. Wait for DCMA/DCAA & tech memos

Step D

8. Incorporate recommended changes from DCMA/DCAA & tech memo into an SPN spreadsheet version.

9. Make sure the math is right and there are no rounding errors. (You’ll find these in every proposal spreadsheet, no matter what because of all the little “.000000s” in Excel cells as in $10.004472 instead of properly using $10.00).

Step E

10. Answer “general questions” part of business clearance

11. Answer “cost elements” part of business clearance. Keep your answers simple and remember that you have two audiences. First, the contracting officer signing off wants to make sure he or she isn’t agreeing to something stupid. Second, any auditor who comes in off the street should be able to understand what you did. If it helps, copy/paste separate sections like direct labor hours, labor rate, labor overhead, other direct costs, and G&A into separate Word docs so you only focus on one at a time and don’t get overwhelmed.

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