Jump to content
The Wifcon Forums and Blogs
KT Administrator

Prenegotiation Objective Memorandum (POM)

Recommended Posts

I?m new to the contracting career field and in need of help on writing a POM to support the recommended position and objective position. I was told that the technical evaluator(s) are responsible for providing the both positions of minimum and maximum, so it can be used in the POM to specify the recommended and objective position. I guess the words are interchangeable, min/max vs. recommended/objective, so I?m not too hung-up on the words, but not clear on who is responsible for providing the objective (maximum) position. I read the FAR Part 15, but it seems unclear and appears to be this is one of the gray areas for using the KO?s discretion. By the way, this is a noncompetitive/sole source procurement situation. Any advice would be very much appreciated.

Share this post

Link to post
Share on other sites

The question is: Who is responsible for determining the government's "maximum" position? I am going to answer at length.

For the sake of those who may not have already read it, here is the FAR coverage of prenegotiation objectives:

15.406-1 Prenegotiation objectives.

(a) The prenegotiation objectives establish the Government?s initial negotiation position. They assist in the contracting officer?s determination of fair and reasonable price. They should be based on the results of the contracting officer?s analysis of the offeror?s proposal, taking into consideration all pertinent information including field pricing assistance, audit reports and technical analysis, fact-finding results, independent Government cost estimates and price histories.

(B) The contracting officer shall establish prenegotiation objectives before the negotiation of any pricing action. The scope and depth of the analysis supporting the objectives should be directly related to the dollar value, importance, and complexity of the pricing action. 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.

Note that FAR says nothing about any minimum or maximum, but speaks only of an "initial negotiation position." However, local policy may require some statement about a- Negotiation Preparationmum or a maximum.

See the Contract Pricing Reference Guides, Volume 5 - Federal Contract Negotiation Techniques, Chapter 3 - Negotiation Preparation. Section 3.1 - Tailoring The Negotiation Team To The Situation, says:

In contract negotiations, the ultimate team leader is the contracting officer responsible for the contract action. The contracting officer has ultimate responsibility for the negotiation, because only the contracting officer has the authority to bind the Government to a contract.

The contracting officer may act as the day-to-day team leader or delegate that responsibility to a contract specialist after considering factors such as the:
  • Dollar value of the contract action;
  • Complexity of the issues involved in the negotiation;
  • Contractual and operational importance of the contract action;
  • Policy of the contracting activity; and
  • Experience of the assigned contract specialist.

In a noncompetitive procurement, the "technical evaluators" advise, recommend, and support, but do not "determine" or decide anything, except the opinions and advice that they will give to the contracting officer.

Section 3.2 - Identifying Negotiation Issues And Objectives, then provides as follows:

Identifying Issues. An issue is any assertion about which the Government and the contractor disagree. In contrast, nonissues are assertions about which both parties agree.

Typically, issues arise when the Government and the contractor make different assertions based on the same or related facts. Differences occur because the two parties have different perspectives and interests in the negotiation.

  • A nonissue can become an issue if it is challenged during the course of negotiations.
  • An issue can become a nonissue if the assertion is no longer challenged.

Sources of Issues. In contract negotiation, an issue can come from any challenge to an assertion made by the contractor or the Government. Generally, an assertion made in the contractor's proposal is challenged based on:

  • The field pricing report;
  • The audit report;
  • The in-house technical analysis;
  • Your cost or price analysis;
  • Exchanges with the contractor; or
  • Another type of Government analysis.

The issue may also be related to a contractor challenge of Government requirements as stated in the solicitation, contract, or contract modification.

Issues and Objectives. Issues are the bases for the differences between the Government and contractor negotiation positions. For example, the positions on labor rates might differ because the Government challenges the contractor's use of a particular labor index to estimate future direct labor rates.

Because issues are the bases for differences between the Government and contractor positions, you must identify the key issues that effect those positions before you develop your prenegotiation objectives. If you do not, there is a good chance that your objective on one issue will not be consistent with your objectives on related issues. For example, if the Government challenges the use of a particular index to forecast direct labor rates, that challenge should effect all similar rates estimated under similar conditions.

Prenegotiation Objectives (FAR 15.101). Your objective in any contract negotiation should be best value for the Government.

  • In a competitive negotiation, the objective in negotiating with each contractor should be a final proposal revision that provides the best value based on the contractor's proposal, the solicitation criteria, and the conditions affecting the contractor's operations. The Government can then award a contract to the firm whose proposal provides the overall best value.
  • In a noncompetitive negotiation, best value is a contract with a responsible source that:

Will satisfy Government requirements in terms of product quality and timely delivery:

Has a fair and reasonable price:

Fairly apportions risk between the Government and the contractor; and

Satisfies Government socioeconomic goals (e.g., small business set-asides).

Technical Objectives. Government technical objectives are based on Government's requirements and its evaluation of the contractor's technical proposal based on those requirements. Technical objectives should center on whether the contractor can effectively and efficiently meet Government requirements. Typically, technical objectives deal with the:

  • Acceptability of the contractor's technical proposal. For example, the Government may maintain that a larger motor is required to meet an equipment requirement.
  • Performance risk associated with the contractor's technical proposal. For example, the technical proposal may propose to perform the required service with individuals who may not be qualified.
  • Technical factors that may unreasonably affect cost -- often referred to as "gold plating." For example, the contractor may be proposing stainless steel nails to build wooden cabinets. Common nails would work just as well at a fraction of the cost.

Cost or Price Objectives. Issues related to technical issues and issues related to rates and factors will eventually effect cost and price objectives, because the "total package" under consideration will in part determine what price is fair and reasonable.

Whether your negotiation involves price analysis supported by cost analysis or price analysis alone, you must establish an overall price objective. Without an overall price objective, negotiations will often flounder and result in settlements that can be neither explained nor defended. Negotiating cost element by cost element can be risky unless you understand the affect of these agreements on overall price.

Objectives such as "the lowest price we can get" or "a price about ten percent lower than the proposed price" do not qualify as acceptable objectives because they are not in the win/win spirit and are too vague. Price objectives should be planned in terms of a definite dollar amount reflecting a reasonable evaluation of contract requirements and the methods proposed by the contractor to meet those requirements.

Objectives May Change During Negotiation. Your prenegotiation objectives represent your best judgment based on the information available prior to negotiations. As more information becomes available, your objectives may change.

When you must obtain management approval of your negotiation objectives, that approval should address the latitude that you will have to adjust your objectives during negotiations. Depending on your contracting activity's policies and the situation, you may have complete latitude or you may be required to obtain a new approval any time your objectives change. A requirement for a new approval is most likely when a change in your objectives will probably lead to a higher contract price.

I apologize for quoting at such length, but the guidance is so good that I saw no reason to write my own version. The Guides are available here: https://acc.dau.mil/CommunityBrowser.aspx?id=406579.

Now to answer the question: The contracting officer is responsible for establishing the government's objective -- maximum, minimum, in the middle, whatever. Here are three quotes from FAR:

  • From 15.404-1(a)(1): "The contracting officer is responsible for evaluating the reasonableness of the offered prices."

  • From 15.404-3(a): "The contracting officer is responsible for the determination of a fair and reasonable price for the prime contract, including subcontracting costs."

  • From 15.405(a): "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."

The "technical evaluators" provide analyses and other inputs, including recommendations, but ONLY THE CONTRACTING OFFICER DETERMINES the prenegotiation objectives (subject, perhaps, to higher level approval). There is no "gray area." Whoever said "the technical evaluator(s) are responsible for providing the both positions of minimum and maximum, so it can be used in the POM to specify the recommended and objective position" (sic) does not understand the role of the contracting officer in government contracting. Hopefully, he or she is a clerk and not a contracting officer.

Share this post

Link to post
Share on other sites
This topic is now closed to further replies.