Contracts & Legal

Business Clearance

Business Clearance is the formal approval from leadership to execute a contract after negotiations have been finalized. It’s accomplished by a contracting officer that develops a draft and final Price-Negotiation Memorandum (PNM) or Price-Competitive Memorandum (PCM) to be submitted for approval.

Definition: Business Clearance is the formal authorization from leadership to execute a contract following the conclusion of discussions.

Business Clearance Requirements

The contracting officer shall document in the contract file the principal elements of the negotiated agreement in the Price-Negotiation Memorandum (PNM) or Price-Negotiation Memorandum (PNM) and contain the following:

  • The purpose of the negotiation
  • A description of the acquisition
  • The name, position, and organization of each person representing the contractor and the Government in the negotiation
  • status of any contractor systems considered in the negotiation
  • Cost exception (if needed)
  • A summary of the contractor’s proposal
  • The most significant facts or considerations
  • The basis for the profit or fee pre-negotiation objective and the profit or fee negotiated
  • Documentation of fair and reasonable pricing

Price-Negotiation Memorandum (PNM)

The PNM is the required formal document that reflects the price agreement for all negotiated awards not based on adequate price competition. The Contracting Officer is required to document all factors of price negotiation. [1]

FAR 15.406-3, DFARS 215.406-3, and AFFARS 5301.9001, a preliminary and a final PNM are required to ensure proper documentation of the principal elements of the negotiated agreement.

Price-Competitive Memorandum (PCM)

For acquisitions that are determined to meet the adequate price competition requirements, a PCM is the required formal document. [1]

AcqNotes and References:

Updated: 7/10/2021

Rank: G10

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