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Contracting by Negotiation SOP

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This SOP has internal roles only.

This standard operating procedure (SOP) includes the following sections: Purpose, Procedure, Contacts, and Links.

Purpose

To provide information regarding the contract negotiation process in accordance with FAR Part 15.  Negotiations are exchanges, in either a competitive or sole source environment, between the government and offerors, that are undertaken with the intent of allowing the offeror to revise its proposal.

Procedure

In a competitive acquisition, negotiations take place after a contracting officer establishes the competitive range. In the case of a sole source acquisition, it is unnecessary to establish a competitive range. When negotiations are conducted in a competitive acquisition, they take place after establishment of the competitive range and are called discussions.

Discussions may apply to price, schedule, technical requirements, type of contract, or other contract terms. The primary objective is to enable the government to obtain the best value based on the requirement and evaluation factors in the solicitation. Discussions may include bargaining, which involves persuasion, alteration of assumptions and positions, and give-and-take and may apply to price, schedule, technical requirements, type of contract, or other terms of a proposed contract.

Office of Acquisitions (OA) and program staff work together closely during discussions. Discussions are conducted with all offerors in the competitive range to allow them to clarify, correct, or support their proposals. Contracting officers determine the scope and extent of discussions and allow offerors sufficient time to revise proposals and provide cost and pricing information.  Following discussions, offerors remaining in the competitive range are requested to submit a written final proposal revision.

During discussions, government personnel may not engage in conduct that:

  • favors one offeror over another
  • reveals an offeror's technical solution
  • reveals an offeror's price without that offeror's permission
  • reveals the names of individuals providing reference information about an offeror's past performance
  • knowingly divulges source selection information.

Scientific Review Officers

  • Prepare and provide a technical evaluation report (TER) to contracting officers.  The outcome of peer review, a TER, identifies technical proposal ratings, scores, strengths, weaknesses, and deficiencies.

Contracting Officer's Representatives

  • For each technical proposal in the competitive range:
    • Translate weaknesses, deficiencies, and ambiguities identified in the TER into technical questions for offerors.
    • Identify weaknesses, deficiencies, and ambiguities not addressed in the TER.  Translate any identified weaknesses, deficiencies, and ambiguities into additional technical questions for offerors.
    • Give all technical questions to the contracting officer to provide the offerors during discussions. 
  • For each business proposal in the competitive range:
    • Analyze the following items to determine whether they are necessary, reasonable and realistic:
      • Number of labor hours proposed for various labor categories.
      • Mix of labor hours and categories of labor relative to technical requirements.
      • Types and quantities of material, equipment, and supplies.
      • Number and time of proposed consultants.
      • Basis for proposed subcontracts.
      • Proposed travel, including number of trips, locations, purpose, and travelers.
      • Types and quantities of information technology.
    • Complete a Project Officer's Technical Questionnaire (POTQ), Form NIH-2497. A separate POTQ is required for each proposed subcontractor.  Sign and date each POTQ.
    • Meet with contracting officer to review and discuss the contents of each POTQ.

Contracting Officers

  • Meet with contracting officer's representatives to review and discuss the contents of each POTQ. Sign and date each POTQ and place them in the contract file.
  • Ensure that required proposal analyses are conducted in accordance with FAR 15.404-1.  The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.
    • Price analysis should be used when cost or pricing data are not required (see FAR 15.404-1(b) and FAR 15.404-3).
    • Cost analysis should be used to evaluate the reasonableness of individual cost elements when cost or pricing data are required (see FAR 14.404-1(c)). Price analysis should be used to verify that the overall price offered is fair and reasonable.
    • Cost analysis may also be used to evaluate information other than cost or pricing data to determine cost reasonableness or cost realism.
    • Cost realism analyses should be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror (see FAR 14.404-1(d)).
  • The NIH Division of Financial Advisory Services (DFAS) provides financial advice, participates in the development, coordination and implementation of cost policy relating to contracts and grants, resolves audit findings, performs cost analyses and special reviews and negotiates indirect cost rates with commercial companies. Request DFAS assistance using the Request for Financial Advisory Services Form.
  • When profit or fee is proposed, a structured approach for determining a negotiation strategy is recommended.  These elements are related to other parts of a contract, therefore, it is imperative that contracting officers and project staff agree on cost and type of contract.
  • Prepare cost and administrative questions for negotiations using information from each POTQ and proposal analyses.
  • Open discussions by providing offerors written technical, cost, and administrative questions.
  • Lead the discussions and control exchanges with offerors. Ensure that meaningful, complete discussions are conducted.
    • Indicate to, or discuss with, each offeror being considered for award the deficiencies, significant weaknesses, and adverse past performance issues.
    • You are not required to discuss every area where the offeror's proposal could be improved. The scope and extent of negotiations are a matter of contracting officer judgment.
  • In situations where the solicitation stated that evaluation credit would be given for technical solutions exceeding any mandatory minimums, negotiate with offerors for increased performance beyond any mandatory minimums.
  • Suggest to offerors that have exceeded any mandatory minimums (in ways that are not integral to the design), that their proposals would be more competitive if the excesses were removed and the offered price decreased.
  • After discussions have begun, an offeror originally in the competitive range may be eliminated if no longer considered to be among the most highly rated proposals whether or not all material aspects of the proposal have been discussed, or whether or not the offeror has been afforded an opportunity to submit proposal revision.
  • Close negotiations by stating that negotiations are concluded and requesting a final proposal revision by a due date and time.
  • At the conclusion of negotiations, provide each offeror still in the competitive range an opportunity to submit a final proposal revision.  Establish a common cut-off date only for receipt of final proposal revisions. Requests for final proposal revisions must advise offerors that the final proposal revisions shall be in writing and that the Government intends to make an award without obtaining further revisions.
  • Prepare negotiation memorandums, which document negotiations and include rationale to determine that a negotiated price or cost is fair and reasonable and in accordance with FAR Part 15 and HHSAR 315.372. A negotiation memorandum is a complete record of all actions leading to award of a contract and is included in the contract file.

Contacts

See the Office of Acquisitions staff listing for the appropriate contract specialist.

If you have knowledge to share or want more information on this topic, email deaweb@niaid.nih.gov with the title of this page or its URL and your question or comment. Thanks for helping us clarify and expand our knowledge base.

Links

FAR 15.101, Best Value Continuum

FAR 15.306. Exchanges with offerors after receipt of proposals

FAR 15.404-1. Proposal Analysis Techniques

HHSAR 315, Contracting by Negotiation

HHSAR 315.372, Preparation of Negotiation Memorandum

NIH Manual Issuance 6015-1, Financial Analysis of Contract Proposals and Modifications

Structured Approach, Profit-Fee Objective Spreadsheet (MS Excel)

Contract Specialists Request for Audit Assistance by DFAS

Competitive Range for Contracts SOP

Contracting Officer SOP

Contracting Officer's Representative (COR) SOP

Lock icon: This link will not work for public visitors. Source Selection for R&D and R&D Support Contracts SOP

Last Updated November 13, 2014

Last Reviewed October 03, 2014