Review price negotiation memorandum (PNM) and assess IN DETAIL the degree to which it complies with the requirements of the FAR

PNM, Purchase of 13 previously leased Generators pg 2 of 4

Min

Obj

Max

Negotiated

$227,600.00

$179,875.00

$250,528.25

$334,037.66

$179,875.00

Government

Contractor

Proposed Price

The Government’s primary focus in setting the minimum and maximum values for procurement in obtaining a 13 Generators units at a three three-year depreciation rate plus one months of back pay for lease.

NEGOTIATION RESULTS : The Contractor accepted the Government’s position with regards to the rate at which the generators had depreciation over the three years plus one months of back pay for lease owed to the contractor by the government.

VI. SIGNIFICANT FACTS AND CONSIDERATIONS: The most significant factor

affecting this negotiation was the government saving between 50%-65% of leasing costs with the purchase of the 13 generators in the long term [show how this was computed]lease price -$36,000.00 per month x 12 months = $432,000.00 per year. Purchase price for the generators will cost the government $179,875.00]. The government is purchasing equipment that is less than three years old and in perfect running order for a 28% reduction in cost of purchasing the generators brand new, 48% under the government estimate for the generators alone. The purchased generators are housed to protect them from the environment, which will save the government time and money in the long term.

Contract DASA03-02-M-1023: The government originally purchased five refrigeration units and two generators on this contract. Additionally, maintenance service for these items was purchased on this contract. Maintenance charges under this contract were $1,250.00 monthly. For unknown reasons a modification to this contract was signed by a government contracting officer on 12 Feb 04 for the lease of 8 refrigeration units – this was not a lease contract. After this modification the contractor invoiced and the government paid $8,000.00 per month for eight months for maintenance and unnecessary leasing costs (because we had originally purchased the items). During this eight-month period the government was erroneously charged and the government erroneously paid $64,000.00. The proper amount charged during this eight-month period should have been $10,000.00 in accordance with the contract pricing ($1,250.00 per month vice $8,000.00 per month). Essentially, the government was overcharged and overpaid $54,000.00 ($64,000.00 minus $10,000.00). What the government has done (and the contractor has agreed to) in this negotiation is to deduct the overpayment of $54,000.00 on contract DASA03-02-M-1023 from the final negotiated settlement of the thirteen generators in contract DABM16-04-L-0035-P00003.

DASA03-02-M-1023

Overpayment

DABM16-04-L-0035

Negotiated Settlement

Total Negotiated Price of

this Claim

($54,000.00)

$179,875.00

$125,875.00

VII. OUTSIDE INFLUENCES: US Government requirement for refrigeration units and generator power throughout the Bagram Air Field has grown over the past few years without the long term plan to produce/procure the requirement in an efficient manner.  The US Government has relied on the leasing of generators since US presence at Bagram Air Field.  Leasing such equipment has increased the costs to the US Government compared to the outright purchase of this equipment for the long term (one year or longer)).  The US Government is required to make a lease versus buy determination every time it considers a lease. See:FAR 7.4, DFARS 207.4 and DoD Instruction 7041.3.  We were asked to extend the leases on the two contracts involved int this negotiation. After closer examination, the generators originally leased under DABM16-04-L-0035 would pay themselves off within five months of leasing under the current contract terms if the lease were extended. Thus, it makes better business sense to purchase the generators.

VIII. DETERMINATION OF PRICE FAIR AND REASONABLENESS: The decision to

award subject modification in the amount of $125,875.00 (One hundred twenty-five

thousand, eight hundred seventy-five) was based upon the information

provided above. As a result of the negotiation addressed in this memorandum and

comparison with the government estimate as adjusted for errors in fact or judgment, I

hereby determine the above fair and reasonable and representative of the best interests of

the government.

_____________________________

ROBERT L. HOWARD JR., TSgt, USAF

Contingency Contracting Officer

Attach #1: Contractor Proposal’s – Soufan, Inc., dated: November 2004

Attach #2: Copies of Award and modification documents for DABM16-04-L-0035 and

DASA03-02-M-1023

Attach #3: SF 30 – Modification of Contract DABM16-04-L-0035-P00003 dated: 10 Nov 0

_1162481133.xls

Sheet1

Contractor Proposed Price	Government
	Min	Obj	Max	Negotiated
$227,600.00	$179,875.00	$250,528.25	$334,037.66	$179,875.00

_1162637871.xls

Sheet1

DASA03-02-M-1023 Overpayment	DABM16-04-L-0035 Negotiated Settlement	Total Negotiated Price of this Claim
($54,000.00)	$179,875.00	$125,875.00