Sub-part FAR 42.17 – Forward Pricing Rate Agreements (a) Negotiation of Advance Price Agreements (FPRA) may be requested by the contractor or by the contractor or administrator (ACO). When deciding whether or not to enter into such an agreement, the ACO should check whether the benefits of the agreement are consistent with efforts to implement and monitor it. Normally, agreements should only be negotiated with contractors who provide for a large volume of government contract proposals. The contract conscious management authority determines whether a FPRA should be implemented. (d) Where a FPRA is not valid, the contractor must submit and negotiate a new proposal that takes into account the amended conditions. If a FPRA has not been implemented or cancelled, the ACO will make a recommendation for the Forward Pricing Rate (RRPF) for the purchase of activities with documentation in support of the negotiators. In the absence of FPRA or RPF, the ACO must include support for the rates used. Contractors should keep in mind that all FPRAs and/or FPAs (Formula Pricing Agreements) must be prepared and supported with accurate, current and complete cost or price data. These agreements may include indirect cost rates such as ancillary services, overhead and administrative costs, as well as direct labour and equipment costs. Your business needs to understand how these indirect costs are calculated and allocated that cannot be identified for a particular project. The FPRA are covered by the special far 15.407-3 and far 42.1701 cost and price range. An important consideration is that a FPRA is not the same as a forward price proposal (FPRP) for the projection of interim indirect interest rates. In each price proposal, contractors must specifically describe the FPRA, if any, for which the rates apply.
Contractors must also provide the most up-to-date information on costs or prices that have already been provided under the agreement. (c) at the time of the agreement, contract agents do not require a certificate for data provided in support of FPRA agreements or other prior agreements. When a pre-fixing agreement or other prior agreement is used to assess a contractual action requiring a certificate, the certificate supporting that action covers the data provided in support of the FPRA or other prior agreements, as well as all other data that supports the action. It also does not concern collective agreements, but one of the most important areas in which the DCAA has engaged in the search for a sufficient FPRP – that the proposal “must serve as the basis for assessing the adequacy of the proposed rates.” So you can see that the ACO has a relatively short time to get prices in place. As a result, many NTOs rely heavily on a comparison of previous interest rate forecasts with real rates and are developing a reduction in interest rates for rates with higher than expected rates. It is important to consider this eventuality and to conduct your own analysis of previous interest rate forecasts on real rates. Be sure to highlight any underestimates, as they are often overlooked by the government. Then provide a written explanation of how you have treated previous estimates in your current interest rate forecasts.