Government Procurement Certification Government Procurement Contract Management & Negotiation 3 — Questions and Answers
Question 1: Under FAR 15.406-3, what must a Price Negotiation Memorandum (PNM) document?
- Only the final agreed price and delivery schedule
- The principal elements of the negotiated agreement, including price, technical, and business judgments made (Correct answer)
- The contractor's cost proposal in its original form
- The names of all personnel who participated in negotiations
Correct answer: The principal elements of the negotiated agreement, including price, technical, and business judgments made
FAR 15.406-3 requires the PNM to document the principal elements of the negotiated agreement, including the judgments made in reaching the agreed price.
Question 2: A contractor requests an equitable adjustment after the government issues a constructive change. What constitutes a 'constructive change'?
- A formal written order to change the contract scope
- Government action or inaction that effectively changes contract requirements without a formal modification (Correct answer)
- A contractor-initiated change to improve performance
- An agreed-upon modification reducing contract price
Correct answer: Government action or inaction that effectively changes contract requirements without a formal modification
A constructive change occurs when government conduct—such as defective specifications or government-caused delays—effectively alters contract requirements without a formal change order.
Question 3: Which termination type allows the government to end a contract when the contractor fails to perform?
- Termination for Convenience (T4C)
- Termination for Default (T4D) (Correct answer)
- Partial Termination
- Termination for Impossibility
Correct answer: Termination for Default (T4D)
Termination for Default (FAR Part 49) allows the government to terminate when a contractor fails to deliver on time, fails to make progress, or fails to perform contract terms.
Question 4: When negotiating a sole-source contract, the contracting officer's price objective must be based on:
- The contractor's proposed price minus 10%
- A fair and reasonable price supported by price or cost analysis (Correct answer)
- The lowest price from a prior competitive acquisition
- The independent government estimate only
Correct answer: A fair and reasonable price supported by price or cost analysis
FAR 15.405 requires the contracting officer to establish a price objective that is fair and reasonable, supported by thorough price or cost analysis techniques.
Question 5: What is the primary distinction between 'price analysis' and 'cost analysis' in source selection?
- Price analysis evaluates profit; cost analysis evaluates overhead
- Price analysis evaluates the offered price without examining underlying costs; cost analysis examines individual cost elements (Correct answer)
- Price analysis is required for all contracts; cost analysis only for cost-reimbursement types
- Price analysis uses historical data; cost analysis uses future projections only
Correct answer: Price analysis evaluates the offered price without examining underlying costs; cost analysis examines individual cost elements
Price analysis (FAR 15.404-1(b)) evaluates the reasonableness of the proposed price without examining cost elements, while cost analysis (FAR 15.404-1(c)) evaluates individual cost components.
Question 6: Under the Truth in Negotiations Act (TINA), certified cost or pricing data must be submitted when the negotiated contract price exceeds what threshold (as of recent updates)?
- $500,000
- $750,000
- $2 million (Correct answer)
- $10 million
Correct answer: $2 million
TINA (now codified at 10 U.S.C. § 3702) requires certified cost or pricing data for negotiated contracts exceeding the current threshold of $2 million.
Question 7: Which of the following is a valid exception to TINA's certified cost or pricing data requirement?
- The contract is for commercial items (Correct answer)
- The contractor has been in business less than three years
- The contract is with a small business concern
- The contract period of performance exceeds five years
Correct answer: The contract is for commercial items
Commercial item acquisitions are explicitly exempt from TINA's certified cost or pricing data requirements because market competition establishes price reasonableness.
Government Procurement Certification Government Procurement Contract Management & Negotiation 3
Under FAR 15.406-3, what must a Price Negotiation Memorandum (PNM) document?