GODDARD SPACE FLIGHT CENTER

**PROCUREMENT CIRCULAR**

Circular 02-01 Date: 6/18/02

**Revision 1 (10/1/03)**

**Revision 2 (12/13/04)**

This Circular provides:

GSFC Procurement Policy

Guidance or Best Practices

Other

SUBJECT: **PRENEGOTIATION POSITION AND PRICE NEGOTIATION MEMORANDUMS**

# REFERENCES

-   Federal Acquisition Regulation (FAR) 15.406-1 & -3

-   NASA FAR Supplement (NFS) 1815.404 and 1815.406

-   Procurement Information Circular (PIC) 00-04, GOVERNMENT NEGOTIATION
    OBJECTIVE

-   PIC 99-17, HOW TO FILL OUT NASA FORM (NF) 634

-   GSFC Procurement Circular 98-2, REVIEW AND APPROVAL OF PROCUREMENT
    DOCUMENTS AND RELATED ACTIONS

# PURPOSE

This Circular sets forth new ISO-controlled forms for the preparation of
a Prenegotiation Position Memorandum (PPM) for all actions valued up to
\$50M; two new Price Negotiation Memorandum (PNM) forms; and establishes
policy and approval levels for the use of a "stand-alone" PNM.

# PRENEGOTIATION POSITION MEMORANDUM

FAR 15.406-1 states that when cost analysis is required, the contracting
officer shall document the pertinent issues to be negotiated, the cost
objectives, and a profit or fee objective. NFS 1815.406-1 states that
before conducting negotiations, a PPM setting forth the technical,
business, contractual, pricing, and other aspects shall be prepared, and
NFS 1815.406-170 sets for the contents of the PPM. A PPM is not required
for contracts awarded under the competitive negotiated procedures of FAR
15.3 and 1815.3.

The new enclosed PPM form, GSFC 210-90, shall be used for all
negotiations (basic contracts and modifications) valued up to \$50M.

Special emphasis should be placed on the documentation of the cost
analysis, by element of cost, in the attached detailed narrative
reference notes. Contract specialists are required to fully analyze all
costs proposed. Contracting Officer's Technical Representative (COTR)
acceptance of proposed labor rates and Other Direct Costs is not an
adequate basis for acceptance without further analysis and supporting
documentation by the contract specialist. Also, the PPM reference notes
must explain fully any significant differences between the field pricing
or audit reports/recommendations and the prenegotiation objective (NFS
1815.406-170(d)(2)).

The \"Maximum\" position is defined as the high end of what it will cost
the Government and it is to be used only when there are uncertainties,
ambiguities, or omissions in a contractor\'s proposal; differences in
judgment; or incomplete field pricing support information. The
\"Maximum\" position for each element of cost or profit/fee must be
fully supported and explained in the PPM reference notes.

For actions valued over \$50M, the PPM should be prepared in a narrative
form and address all of the elements in GSFC 210-90.

# PRICE NEGOTIATION MEMORANDUM

The enclosed GSFC 210-92, PNM (PPM Prepared), has been revised to remove
redundancy between the PPM and PNM and updated to reflect recent
procurement regulation/policy changes. This PNM form is to be used
[only]{.underline} when a PPM has been previously prepared in accordance
with NFS 1815.406-1. This is an ISO-controlled document, and previous
versions of this form should be not be used. A PNM is not required for a
contract awarded under competitive negotiated procedures.

Special emphasis should be placed in documenting the extent to which the
certified cost or pricing data submitted was not fully relied on when
negotiating the final price. Also, when the negotiated amount of an
individual element of cost exceeds your prenegotiation objective for
that particular element (not maximum position), the attached PNM
detailed cost element breakout narrative must provide adequate rationale
for agreeing to the higher figure.

GSFC 210-92 **[cannot]{.underline}** be used as a "stand-alone" PNM
document.

# "STAND-ALONE" PRICE NEGOTIATION MEMORANDUM

A PPM shall be prepared and approved before entering into all
negotiations unless authorization to use a "stand-alone" PNM is granted.
A contract specialist must obtain permission to prepare a "stand-alone"
PNM prior to entering into any discussions. ***A Stand-Alone PNM should
be used only on an exception basis, in very limited situations, when the
cost analysis performed reveals [no or only very minor]{.underline}
differences between the Contractor proposed and Government objective
cost and fee/profit positions and other negotiation issues (contract
terms or conditions).*** The contract file must contain a separate
memorandum documenting sound rationale for not preparing a separate PPM
and requesting permission to prepare a "stand-alone" PNM. ***The request
for "stand-alone" memorandum shall contain a summary of the cost and
fee/profit differences as well as any other negotiation issues.*** There
must be an individual "stand-alone" PNM authorization memorandum for
each procurement action---"class" authorization memorandums are not
permitted. The approval authority for the use of a "stand-alone" PNM
shall be the same as that specified for a PPM of that dollar value.

NFS 1815.406-3(a)(iii) states that when a PNM is a "stand-alone"
document (no previous PPM), it shall contain all of the information
required by the FAR and NFS for both PPMs and PNMs (FAR 15.406-1 & --3
and NFS 1815.406-1 & -3).

GSFC 210-94, PNM (Stand-Alone Document), shall be used when the use of
"stand-alone" PNM document has been previously authorized in writing.
The approval authority for the "stand-alone" PNM is the same as that for
a PPM. Special emphasis should be placed on the documentation of the
cost analysis, by element of cost and profit/fee, in the attached
detailed narrative reference notes. A PNM is not required for a contract
awarded under competitive negotiated procedures.

In conjunction with the issuance of this circular, GSFC Procurement
Circular 98-2 is being revised to reflect the approval level for the
authorization to use a "stand-alone" PNM.

Billie D. Smith

Senior Staff

Procurement Operations Division

Enclosures: GSFC 210-90, PPM---Word File

GSFC 210-92, PNM (PPM Prepared)---Word File

> GSFC 210-94, PNM ("Stand-Alone" Document)---Word File