Post Negotiation Memorandum- Final Cost Summary and Settlement Structure between JMI and the Federal Affairs Agency
To: The Contracting Officer, Federal Affairs Agency
From: The Contracting Officer, Jottemdown Manufacturing Inc.
Cc: The Chief Executive Officer, Jottemdown Manufacturing Inc.
Date: July 31, 2021
Re: Summary of the Negotiation Between Jottemdown Manufacturing Inc. and the Federal Affairs Agency.
Introduction
Following the final negotiations between Jottemdown Manufacturing Inc. and the Federal Affairs Agency, this memorandum serves as a descriptive summary of the final cost summary, details, and structure of the settlement. The document also summarizes direct and indirect rates, the subcontractor evaluation and selection process, the structured approach to the final negotiated profit, the protocol for confirmation of the negotiations letter, and TINA Compliance in the post-negotiation sweep. The memorandum aims to close the negotiations in a simple, detailed, and official way, for reference and record-keeping purposes. The contract is intended to build 20 seekers for the Stinger Tracking System for the Federal Affairs Agency (FAA). The system will help the agency track its records, procedures, and activities. This will help in the federal agency’s effort to offer quality and timely services. Official closure of negotiations is to occur to give way for the commencement of the work.
Negotiation Process
Negotiations were made in a series of meetings held by the negotiators from both JMI and FAA to reach a consensus on the type of contract and award to execute the project. The team took time to brainstorm and evaluate matters like the proposed direct labor, materials scheduled to be used, and Other Direct Costs (ODCs). The negotiators considered analyzing the labor hour estimates on the proposed direct labor, seeing whether there could be other direct and additional labor costs. This analysis took the course of calculating the costs of physical resources needed, as well as the cost of the human effort involved in all phases of a project. This would provide the space to arrive at clearer costs, cut down on unnecessary costs, and identify otherwise unforeseen costs. The amount and types of labor required to complete a contract would vary based on contract requirements. The contract might require a wide variety of personnel depending on contract requirements and personnel involved in the administration and support of contract operations. A comparison of the costs and benefits was then made (Mind Tools, 2020).
Direct and Indirect Rates
Direct and indirect costs were factored in as imperative for the financial success of the project. The direct costs were determinable and traceable to the project. Direct cost items consist of direct labor, materials, subcontractors, equipment rental, and other costs for a specific project. Indirect costs were projected to include indirect labor, payroll-related burden (payroll taxes and union costs), insurance (including health, general liability, and workers’ compensation), depreciation, equipment repairs and maintenance, rent, salaries (including project management, estimating, and engineering), equipment and other general project overhead items (Mercado & Sisk, 2021).
Subcontractor Evaluation and Selection
The negotiating team identified subcontractors by collecting data from the Seekers industry and related sectors. The most critical concern was the subcontractor’s reputation. Furthermore, the top five parameters that influenced the team’s sub-contractor evaluation and selection are
Reputation
Price
Construction techniques
Ability to implement projects according to commitments and
Subcontractor competence (the team of workers, technician staff, and engineers with full capacity according to regulations).
In a nutshell, the subcontractors agreed upon were selected on the basis of their pricing, financial capacity, technical capacity, the competence of experience, quality, and relationships.
Structured Approach to the Final Negotiated Profit
Weightings were developed for application by the contracting officer to standard measurement bases representative of the prescribed profit factors in the cost summary provided. Each profit factor or subfactor, or its components, was assigned weights relative to their value to the contract’s overall effort, and the range of weights to be applied to each profit factor. The Federal Affairs Agency also performed a cost analysis to determine the reasonability of each element of JMI’s proposed costs. Based on their analysis, they developed cost and pricing objectives prior to negotiations. Included in the cost summary are the negotiated figures (LII, 2020).
Protocol for Confirmation of Negotiations Letter
Upon completion of the negotiations, MJI will present the FAA with the Letter of Intent or the actual contract. Because either the Letter of Intent or the actual contract itself may be legally enforceable, it is very important that MJI is specific and clear as to what the parties agree to. If they have ambiguity or uncertainty as to what was agreed upon, the potential for litigation exists (Catanese, 2014).
TINA Compliance
Jottemdown Manufacturing Inc. is compliant to the requirements of the Truth in Negotiations Act, by providing cost and pricing information that is truthful, accurate, and complete (Tharp, 2020).
Cost Summary
| Proposed | Negotiated | ||
|
Direct Material Sched A |
2,200,000.00 | 2, 200,000.00 | |
| Direct Labor Sched B | 3,220,000.00 | 3,220,000.00 | |
| Subcontracts Sched C | 4,530,000.00 | 4,600,000.00 | |
| Other Direct Costs Sched D | 78,950.00 | 80,000.00 | |
| Total Direct Costs | 10,028,950.00 | 10,100,000.00 | |
| Indirect Costs | |||
| Labor Overhead Sched E | 3,384,986.00 | 3,400,000.00 | |
| Material Overhead | 7.00% | 154,000.00 | 154,000.00 |
| Subcontract Overhead | 1.35% | 61,155.00 | 61,155.00 |
| Total Cost Input | 13,629,091.00 | 13,715,155.00 | |
| G&A | 7.00% | 954,036.37 | 960,060.85 |
| Total Cost | 14,583,127.37 | 14,675,215.85 | |
| COM Sched F | 3,579.48 | 3,600.00 | |
| FFP Profit | 20.00% | 2,916,625.47 | 2,935,043.17 |
| Total Price | 17,503,332.32 | 17613859.02 |
References
Catanese, R. (2014, April 8). How to confirm an AGREEMENT: CATANESE & Wells. Los Angeles Lawyer and Law Firm | Catanese & Wells. https://www.cataneselaw.com/articles/how-to-confirm-an-agreement-when-the-negotiation-process-has-been-completed/.
LII. (2020). 48 CFR & 1515.404-471 – Epa structured approach for developing profit or FEE objectives. Legal Information Institute. https://www.law.cornell.edu/cfr/text/48/1515.404-471.
Mercado, R., & Sisk, C. (2021). Get direct about indirect costs in construction. Construction Executive | Welcome. https://www.constructionexec.com/article/get-direct-about-indirect-costs-in-construction.
Mind Tools. (2020). Cost-benefit analysis: Deciding, quantitatively, whether to go ahead. Cost Benefit Analysis – Decision-Making Tools From MindTools.com. https://www.mindtools.com/pages/article/newTED_08.htm.
Tharp, G. (2020). Why do you need to know about Tina, far, AND ASPR? Why you need to know about TINA, FAR, and ASPR. https://journal.iaccm.com/contracting-excellence-journal/why-you-need-to-know-about-tina-far-and-aspr.
What are Tina’s violations?: Truth in negotiations act Vsg. Vogel, Slade & Goldstein LLP. (n.d.). https://www.vsg-law.com/practice-areas/government-contractor-fraud-whistleblower-attorney/tina-violations/.
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Question 
Your job, in Paper #3, is to close officially close negotiations by writing a Post Negotiation Memorandum (PNM) to provide a descriptive summary of the final Cost Summary details, and structure of the settlement with your organization (JMI) and the Federal Affairs Agency.
Post Negotiation Memorandum- Final Cost Summary and Settlement Structure between JMI and the Federal Affairs Agency
The descriptive summary should concentrate on, but not be limited to, framing the following:
Execution of the negotiation process with explicit emphasis on cost analysis techniques that would have been considered in evaluating the proposed direct labor, materials, and ODCs.
Direct and Indirect Rates.
Subcontractor evaluation and selection.
A structured approach to the final negotiated profit.
Protocol for Confirmation of Negotiations letter.
TINA Compliance in the post-negotiation sweep.