A Forward Pricing Rate Agreement (FPRA) is an agreement between a contractor and a government agency in which certain indirect rates are established for a specified period of time. These rates are estimates of costs and are used to price contracts and contract modifications. The use of a FPRA can speed up the contracting process by eliminating the need to audit or analyze the rates. The Administrative Contracting Officer (ACO) is responsible for monitoring the contractor’s rates. Any questions concerning the rates should be directed to the ACO. Once a FPRA has been reached, any subsequent proposal should include a copy of the agreement.
The establishment of a FPRA is covered under the special cost and pricing areas of FAR 15.407-3 and Subpart 42.17.
FPRAs are very useful for contractors having a significant volume of Government contract proposals. When there is an FPRA in effect, the contractor and the Government do not need to spend time during contract negotiations haggling over indirect expense rates – the proposed indirect rates are already settled. Anyone can initiate a request for an FPRA. It may be requested by the contracting officer or the contractor or initiated by the ACO. In determining whether or not to establish such an agreement, the ACO should consider whether the benefits to be derived from the agreement are commensurate with the effort of establishing and monitoring it. Normally, FPRA’s should be negotiated only with contractors having a significant volume of Government contract proposals. The cognizant contract administration agency is usually the final authority as to when an FPRA will be established.
FAR Subpart 42.17 – Forward Pricing Rate Agreements
(a) Negotiation of forward pricing rate agreements (FPRA’s) may be requested by the contracting officer or the contractor or initiated by the administrative contracting officer (ACO). In determining whether or not to establish such an agreement, the ACO should consider whether the benefits to be derived from the agreement are commensurate with the effort of establishing and monitoring it. Normally, FPRA’s should be negotiated only with contractors having a significant volume of Government contract proposals. The cognizant contract administration agency shall determine whether an FPRA will be established.
(b) The ACO shall obtain the contractor’s proposal and require that it include cost or pricing data that are accurate, complete, and current as of the date of submission. The ACO shall invite the cognizant contract auditor and contracting offices having a significant interest to participate in developing a Government objective and in the negotiations. Upon completing negotiations, the ACO shall prepare a Price Negotiation Memorandum (PNM) (see 15.406-3) and forward copies of the PNM and FPRA to the cognizant auditor and to all contracting offices that are known to be affected by the FPRA. A Certificate of Current Cost or Pricing Data shall not be required at this time (see 15.407-3(c)).
(c) The FPRA shall provide specific terms and conditions covering expiration, application, and data requirements for systematic monitoring to ensure the validity of the rates. The agreement shall provide for cancellation at the option of either party and shall require the contractor to submit to the ACO and to the cognizant contract auditor any significant change in cost or pricing data.
(d) When an FPRA is invalid, the contractor should submit and negotiate a new proposal to reflect the changed conditions. If an FPRA has not been established or has been invalidated, the ACO will issue a forward pricing rate recommendation (FPRR) to buying activities with documentation to assist negotiators. In the absence of an FPRA or FPRR, the ACO shall include support for rates utilized.
(e) The ACO may negotiate continuous updates to the FPRA. The FPRA will provide specific terms and conditions covering notification, application, and data requirements for systematic monitoring to ensure the validity of the rates
15.407-3 Forward Pricing Rate Agreements
(a) When cost or pricing data are required, offerors are required to describe any forward pricing rate agreements (FPRA’s) in each specific pricing proposal to which the rates apply and to identify the latest cost or pricing data already submitted in accordance with the agreement. All data submitted in connection with the agreement, updated as necessary, form a part of the total data that the offeror certifies to be accurate, complete, and current at the time of agreement on price for an initial contract or for a contract modification.
(b) Contracting officers will use FPRA rates as bases for pricing all contracts, modifications, and other contractual actions to be performed during the period covered by the agreement. Conditions that may affect the agreement’s validity shall be reported promptly to the ACO. If the ACO determines that a changed condition invalidates the agreement, the ACO shall notify all interested parties of the extent of its effect and status of efforts to establish a revised FPRA.
(c) Contracting officers shall not require certification at the time of agreement for data supplied in support of FPRA’s or other advance agreements. When a forward pricing rate agreement or other advance agreement is used to price a contract action that requires a certificate, the certificate supporting that contract action shall cover the data supplied to support the FPRA or other advance agreement, and all other data supporting the action.
AcqLinks and References:
-  Website: FAR Subpart 42.17 – Forward Pricing Rate Agreements
-  Website: FAR 15.407 – Forward Pricing Rate Agreement
- DFARS SUBPART 215-4 Contract Pricing
- Preparation of Provisional Billing and Forward Pricing Rates