[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR15.405]



[Page 280]

 

            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.



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