§ 1815.807-70 - Content of the prenegotiation position memorandum.

The prenegotiation position memorandum (PPM) should fully explain the contractor and Government positions. Since the PPM will ultimately become the basis for negotiation, it should be structured to track to the price negotiation memorandum (see FAR 15.808 and 1815.808). In addition to the information described in FAR 15.807 and, as appropriate, 15.808(a), the PPM should address the following subjects, as applicable, in the order presented:

(a) Introduction. Include a description and a history of the procurement and a history of prior procurements for the same or similar items. Address the extent of competition and its results. Identify the contractor and place of performance (if not evident from the description of the procurement). Document compliance with law, regulations and policy, including JOFOC, synopsis, method of contracting D&F, EEO compliance, and current status of contractor systems (see FAR 15.808(a)(4)). In addition, the negotiation schedule should be addressed and the Government negotiating team members identified by name and position.

(b) Type of contract contemplated. Explain the type of contract contemplated and the reasons for its suitability.

(c) Special features and requirements. In this area, discuss any special features (and related cost impact) of the procurement, including such items as—

(1) Letter contract or precontract costs authorized and incurred;

(2) Results of preaward survey;

(3) Contract option requirements;

(4) Government property to be furnished;

(5) Contractor/Government investment in facilities and equipment (and any modernization to be provided by the contractor/Government). Although not all inclusive, the following are to be covered:

(i) The facilities needed by the contractor;

(ii) How the facilities are to be provided (Government or contractor);

(iii) If to be provided by the contractor, the alternatives considered (operating lease, capital lease, contractor purchase or construction, or other alternatives);

(iv) Whether a financial guarantee has been requested by the offeror;

(v) The reasons for the alternative selected; and

(vi) How the costs are to be charged;

(6) Plant reconversion or plant clearance (see 1845.106-71); and

(7) Any deviations, special clauses, or unusual conditions anticipated, for example, unusual financing, warranties, EPA clauses and when approvals were obtained, if required.

(d) Cost analysis. (1) Include a parallel tabulation, by element of cost and profit/fee, of the contractor's proposal, the Government's negotiation objective, and the Government's maximum position, if applicable. Explain the differences and how the Government position(s) were developed, including the estimating assumptions and projection techniques employed, and how the positions differ in approach. Include a discussion of excessive wages found (if applicable) and their planned resolution (see 1831.205-670). Explain how historical costs, including costs incurred under a letter contract (if applicable), were used in developing the negotiation objective.

(2) Significant differences between the field pricing report (including any audit reports) and the negotiation objectives and/or contractor's proposal shall be highlighted and explained, as shall technical evaluation results that caused the Government's cost negotiation objectives to differ significantly from the contractor's proposed cost (such as differences in staffing). For each proposed subcontract meeting the requirement of FAR 15.806-2(a), provide the contracting officer's price or cost analysis and negotiation objective. The discussion of each major subcontract shall include the type of subcontract, the degree of competition achieved by the prime contractor, the price and, when appropriate, cost analyses performed on the subcontractor's proposal by the prime contractor, any unusual or special pricing or finance arrangements, and the current status of subcontract negotiations.

(3) The rationale for the Government's profit/fee objectives and, if appropriate, a completed copy of the NASA Form 634, Structured Approach—Profit/Fee Objective, and DD Form 1861, Contract Facilities Capital Cost of Money, should be included. For incentive and award fee contracts, describe the planned arrangement in terms of share lines, ceilings, cost risk, and so forth, as applicable.

(e) Negotiation approval sought. Indicate the specific approvals sought, for example, dollar parameters, special clauses/conditions and fee objectives.