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Price Negotiation Memorandum

Standard form

What’s a Price Negotiation Memorandum? Your Key to Smarter Contract Deals

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Document Description

A Price Negotiation Memorandum (PNM) is the required record under FAR 15.406-3 that records the price agreement reached during negotiations for government contracts, particularly those not based on adequate price competition. It is organised into clear sections: contract details, supplier and work details, offer summary, procurement context and market research, negotiation team and negotiation period, negotiation summary, procurement situation, and detailed unit-price breakdowns.

In the PNM, you first record the contractor/supplier’s original proposal and its basis, e.g., catalogue prices, cost build-ups, or historical benchmarks. Next, you present your market research, covering competition levels, price trends, and risk factors. You then outline your negotiation strategy and identify your team with roles and dates. Finally, you tabulate every contract line item with original, target, and agreed prices plus a brief rationale for adjustments.

A well-documented PNM shows compliance with FAR cost and price analysis rules, supports audit or protest defence, and justifies why the price is fair and reasonable. The justification must provide clear substance, logical reasoning, and detailed support. It should also explain how external factors such as time constraints, funding limits, or policy mandates influenced your approach.

This template guides you step by step through each required section. It helps ensure every fact, assumption, and required information is recorded in the right place. Whether you are negotiating a complex research contract or a routine supply purchase, following this framework keeps you within FAR requirements and creates a complete, auditable PNM.

How to use this document?

  1. Populate Contract Details

Enter contract titles, contract dates, and relevant identifying numbers (e.g., RFP No.).

  1. Supplier and Work Details

Record the supplier’s name, provide a summary of the acquisition, and outline the delivery schedule/period of performance.

  1. Summarise the Offer

List out the supplier proposal, negotiation objective, and the final agreed-upon price.

  1. Document Procurement Context and Market Analysis

Describe competition type, market research results, pricing benchmarks, and key risk factors.

  1. List Negotiation Teams & Timeline

Provide full names, titles, and roles of both your negotiation team and the supplier’s negotiation team. Then, list out the start and end dates of formal negotiations.

  1. Describe the Negotiation Process

Outline objectives, target and ceiling prices, main discussion points, concessions, and trade-offs in order.

  1. Explain the Procurement Situation

Highlight outside influences such as urgency, funding constraints, or higher-level policy direction.

  1. Detail Unit-Price Breakdowns

For each CLIN, list item description, original price, target price, agreed price, and a concise rationale.

  1. Attach Supporting Data

Include cost analysis worksheets, data sources, proposal excerpts, and correspondence as appendices.

  1. Review for FAR Compliance

Cross-check each section against FAR 15.406-3 and any agency supplements before submitting for approval.

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