Thursday, December 24, 2015

Do Forward Pricing Rate Agreements (FPRAs) Require Certification?

Negotiated forward pricing rate agreements are very useful for facilitating contract negotiations. Often times, direct and indirect rates are sticking points in the negotiation process. FPRAs remove discussions of rates from the process because the contractor and the Government have already come to an agreement on what those rates should be.

Negotiation of forward pricing rate agreements (FPRAs) may be requested by the contractor or the contracting officer, 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. Practically, that means FPRAs should be negotiated only with contractors having a significant volume of Government contract proposals. Because of the time and effort associated with negotiating FPRAs, there needs to be a lot of pricing actions on the horizon to justify the expense.

When certified cost or pricing data re required, offerors are required to describe any FPRAs in each specific pricing proposal to which the rates apply and to identify the latest cost or pricing data already submitted in accordance with the FPRA. All data submitted in connection with the FPRA, updated as necessary f, form a part of the total data that the offeror certifies to be accurate, complete, and current at the time of agreement on price for an initial contract or for a contract modification.

Contracting officers will use FPRA rates as bases for pricing all contracts, modifications, and other contractual actions to be performed during the period covered by the agreement. Conditions that may affect the agreement's validity shall be reported promptly to the ACO. If the ACO determines that a changed condition invalidates the agreement, the ACO shall notify all interested parties of the extent of its effect and status of efforts to establish a revised FPRA.

Contracting officers shall not require certification at the time of agreement for data supplied in support of FPRAs or other advance agreements. When a forward pricing rate agreement or other advance agreement is used to price a contract action that requires a certificate, the certificate supporting the contract action shall cover the data supplied to support the FPRA or other advance agreement, and all other data supporting the action.

When a contractor certifies the completeness, currency, and accuracy of its cost or pricing data as of the date of agreement on price, it is also certifying the same for its FPRA rates. It doesn't matter that the rates were negotiated months earlier. The contractor still has an affirmative duty to ensure that the rates are still valid and based on current, complete, and accurate cost or pricing data.

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