In Section 5.2 of the Defense Contract Pricing Reference Guide it states...

"If the contractor requests a copy of the price negotiation memorandum (PNM), most agencies authorize contracting officer release of pertinent portions. However, you should consult your agency legal counsel to determine your authority for release and any conditions required for release."

I recall that Eleanor Spector, as Director of Defense Procurement Policy, put out a memo authorizing/encouraging PCOs to release MNMs to contractors defending defective pricing allegations. Is this memo still effective? I am trying to find support for an AF PCO that the PNM should be provided.

I don't know if the meo is still in effect, but why would you not release the PNM to the contractor in the circumstances you describe? If the defective pricing allegation goes into litigation, it will be discoverable. Unless you have some internal policy that says PNM's will not be released to contractors, there is nothing in the FAR that prohibits you from releasing it. You may just be creating more work for yourself in the disputes process by not releasing it.