[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR15.405]

[Page 270]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 15_CONTRACTING BY NEGOTIATION--Table of Contents
 
                      Subpart 15.4_Contract Pricing
 
Sec.  15.405  Price negotiation.

    (a) The purpose of performing cost or price analysis is to develop a 
negotiation position that permits the contracting officer and the 
offeror an opportunity to reach agreement on a fair and reasonable 
price. A fair and reasonable price does not require that agreement be 
reached on every element of cost, nor is it mandatory that the agreed 
price be within the contracting officer's initial negotiation position. 
Taking into consideration the advisory recommendations, reports of 
contributing specialists, and the current status of the contractor's 
purchasing system, the contracting officer is responsible for exercising 
the requisite judgment needed to reach a negotiated settlement with the 
offeror and is solely responsible for the final price agreement. 
However, when significant audit or other specialist recommendations are 
not adopted, the contracting officer should provide rationale that 
supports the negotiation result in the price negotiation documentation.
    (b) The contracting officer's primary concern is the overall price 
the Government will actually pay. The contracting officer's objective is 
to negotiate a contract of a type and with a price providing the 
contractor the greatest incentive for efficient and economical 
performance. The negotiation of a contract type and a price are related 
and should be considered together with the issues of risk and 
uncertainty to the contractor and the Government. Therefore, the 
contracting officer should not become preoccupied with any single 
element and should balance the contract type, cost, and profit or fee 
negotiated to achieve a total result--a price that is fair and 
reasonable to both the Government and the contractor.
    (c) The Government's cost objective and proposed pricing arrangement 
directly affect the profit or fee objective. Because profit or fee is 
only one of several interrelated variables, the contracting officer 
shall not agree on profit or fee without concurrent agreement on cost 
and type of contract.
    (d) If, however, the contractor insists on a price or demands a 
profit or fee that the contracting officer considers unreasonable, and 
the contracting officer has taken all authorized actions (including 
determining the feasibility of developing an alternative source) without 
success, the contracting officer shall refer the contract action to a 
level above the contracting officer. Disposition of the action should be 
documented.