Forward Pricing Rates Agreements Are Written Negotiation Agreements between

08 Feb Forward Pricing Rates Agreements Are Written Negotiation Agreements between

Forward pricing rate agreements (FPRAs) are written negotiation agreements between the government and contractors that establish billing rates for future government contracts. These agreements are an essential component of the cost accounting system used by contractors when billing the government for work completed on a contract.

FPRAs are an alternative to the traditional process of negotiating billing rates for each individual contract. By establishing a set of pre-negotiated rates for various labor categories and indirect cost pools, contractors can avoid the time and expense of negotiating rates for each contract separately.

The process of negotiating FPRAs typically involves a team of contracting officials, auditors, and technical experts from the government working closely with the contractor to understand the contractor`s cost accounting system and current rates. The team will review the contractor`s cost data, accounting records, and other supporting documentation to ensure that the rates proposed by the contractor are fair, reasonable, and accurately reflect the actual costs of performing the work.

Once the government team has completed its review, it will negotiate rates with the contractor for each labor category and indirect cost pool covered by the agreement. The negotiated rates will be incorporated into the FPRA, which will also establish the terms and conditions under which the rates will be applied to future contracts.

FPRAs are typically valid for a period of three to five years but can be extended for longer periods if both the government and the contractor agree. During the life of the agreement, the contractor is required to periodically submit cost data and other supporting documentation to the government to ensure that the rates remain fair, reasonable, and accurately reflect the contractor`s costs.

In summary, forward pricing rate agreements are important negotiation agreements between the government and contractors that establish billing rates for future government contracts. By pre-negotiating rates for various labor categories and indirect cost pools, contractors can reduce the time and expense associated with negotiating rates for each individual contract. FPRAs also provide the government with a mechanism for ensuring that contractors are billing the government fair and reasonable rates that accurately reflect the costs of performing the work.