Unlike commercial business, the vast majority of government contracts are subject to negotiation. Even in competitive procurements, the government may award a contract based on best value (a combination of technical, cost and other factors) not necessarily to the lowest price bidder.

The final price paid by the government is then subject to negotiation. Under General Services Administration (GSA) Schedules and Indefinite Delivery/Indefinate Quantity (IDIQ) Contracts, terms and conditions and labor hour pricing are agreed upon in advance but individual delivery orders are negotiated separately regarding the labor hours, material and travel cost necessary to complete a discrete scope of work.

Cost Plus and Time and Material contracts are also negotiated procurements on many occasions. Only small, fixed price purchase orders under $25,000 and items purchased under FAR Part 12, "Commercial Contracting", are awarded solely on the basis of price.

Contract negotiations can fall under three (3) different business scenarios:

Negotiations directly with a government contracting officer pursuant to a federal government contract

Negotiations with a prime contractor for a subcontract under the prime's federal government contract

Negotiations with a subcontractor to establish a price and flow down the terms and conditions of your contract with the federal government.

NEGOTIATION TEMPLATE

In federal government contracting each of the above scenarios pass through the following template of negotiation steps:

A. Audit

B. Fact-finding

C. Pre-award Survey

D. Cost Negotiations

E. Final Profit Negotiations

F. Contract Award

The above template is recognized throughout the Federal Acquisition Regulation (FAR) and in the Defense Contract Audit Agency (DCAA) Handbook. All government agencies and contractors utilize it.

SMALL BUSINESS FEDERAL GOVERNMENT CONTRACT NEGOTIATION
 
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