Definition
A Forward Pricing Rate Recommendation (FPRR) is a unilateral government document, issued by the Administrative Contracting Officer (ACO), that establishes the government's recommended indirect cost rates for use in pricing contracts and contract modifications when a Forward Pricing Rate Agreement (FPRA) has not been established or has been invalidated.
In simple terms, an FPRR is the government's best estimate of a contractor's reasonable indirect cost rates, issued without the contractor's formal agreement, used as a fallback when an FPRA is not available.
The Simple Explanation
Think of the FPRA as a jointly signed lease agreement between a landlord and tenant, both parties have agreed to the terms. The FPRR, by contrast, is more like the landlord posting a recommended rent based on market analysis; the tenant doesn't have to formally agree to it, but it is what the landlord will use as the basis for any transaction until a formal lease is signed.
In government contracting: when a contractor and the ACO cannot reach an FPRA, perhaps because negotiations stalled, the contractor is too small to warrant a full FPRA, or the existing FPRA has been invalidated by changed conditions, the ACO issues an FPRR. Contracting officers at buying activities then use this recommendation as their basis for pricing, even though the contractor has not formally agreed to it.
Key Characteristics of an FPRR
- Unilateral: Unlike an FPRA, an FPRR is issued by the government alone. The contractor does not sign or formally agree to it.
- Not binding on the contractor: Because it is a recommendation rather than an agreement, contractors are not contractually obligated to accept FPRR rates. However, contracting officers will use them when pricing proposals in the absence of an FPRA.
- Used as a fallback: An FPRR is always the secondary option, it exists because an FPRA could not be established or is no longer valid.
- Issued by the ACO: The Administrative Contracting Officer, typically from DCMA for defense contractors, is responsible for issuing and distributing FPRRs to all affected buying activities.
- Documented and distributed: The ACO distributes the FPRR to all contracting offices that deal with the contractor, along with supporting documentation to assist negotiators.
- Governed by FAR Subpart 42.17 and FAR 15.407-3.
When Is an FPRR Issued?
An FPRR is issued in the following situations:
- No FPRA has ever been established: The contractor has a government contract volume that warrants rate guidance, but negotiations for a full FPRA have not been completed.
- The existing FPRA has been invalidated: Significant changes in the contractor's business, restructuring, rapid growth, and major cost shifts have made the agreed rates no longer valid. The contractor should submit a new FPRP and the ACO issues an FPRR in the interim.
- Negotiations for a new FPRA are in progress: While the ACO and contractor are negotiating updated rates, the ACO issues an FPRR within 30 days of receiving an adequate FPRP, so that contracting offices are not left without rate guidance while negotiations continue.
- The contractor's government sales do not meet the $200 million threshold: Below this threshold, a full FPRA may not be required, but a business need (high proposal volume, customer demand) may still justify issuing an FPRR.
FPRR vs. FPRA: A Side-by-Side Comparison
How Contracting Officers Use an FPRR
When a contracting officer receives an FPRR from the ACO, they use it as their starting point, their negotiation position, for pricing any proposal or modification involving that contractor. The FPRR gives the contracting officer a defensible, documented basis for their cost position without having to conduct independent rate analysis from scratch.
If the contractor's proposed rates differ from the FPRR, the contracting officer will push back and require the contractor to justify the deviation. The FPRR does not prevent negotiation; it sets the government's baseline.
In the absence of both an FPRA and an FPRR, the ACO must independently support whatever rates are used in pricing. This increases the administrative burden on both sides and can significantly slow down contract award.
What Contractors Should Know About FPRRs
- An FPRR is not the same as acceptance: Just because the government issues an FPRR does not mean those rates are correct or final. Contractors can and should engage with the ACO if the FPRR rates do not accurately reflect their cost structure.
- Use it as motivation to pursue an FPRA: The FPRR is a signal that your proposal volume warrants more formal rate treatment. Proactively working toward an FPRA is almost always preferable; it gives you more predictability and bilateral agreement on rates.
- Submit your FPRP promptly: If your FPRA has been invalidated or you do not have one, submit a new Forward Pricing Rate Proposal as soon as possible. The ACO has 30 days to issue an FPRR after receiving an adequate FPRP, and 60–90 days to complete FPRA negotiations.
- Notify the ACO of significant changes: If your cost structure changes materially, new facilities, major hiring, or restructuring, notify the ACO immediately. An outdated FPRR can create pricing disputes on multiple contracts simultaneously.
The FPRR in Context: The Rate Lifecycle
Understanding where the FPRR fits in the broader indirect rate lifecycle helps clarify its role:
- Contractor submits FPRP, projected rates for the coming period
- ACO issues FPRR within 30 days, a unilateral recommendation while negotiations proceed
- ACO and contractor negotiate, working toward a bilateral agreement
- FPRA is executed, bilateral agreement replaces the FPRR
- Contractor performs work, using FPRA/FPRR rates in proposals
- Contractor submits Incurred Cost Submission (ICS), reports actual costs after year-end
- Final rates are settled, actual rates compared to FPRA/FPRR rates; variances are resolved
The FPRR occupies the space between steps 2 and 4, it bridges the gap between submission and agreement.
Common Terms Associated with FPRRs
FPRR in the SLED Market
Like the FPRA, the FPRR is a federal contracting concept; state and local governments do not formally issue FPRRs. However, the underlying scenario, a government needing to use its own rate estimate when a contractor has not formally agreed to rates, does arise in SLED contexts:
- State indirect cost rate negotiations: When states negotiate indirect cost rates with contractors under federally funded programs, they may issue their own unilateral rate guidance when negotiations are incomplete, functionally similar to an FPRR.
- Uniform Guidance (2 CFR Part 200): For nonprofits and educational institutions receiving federal pass-through funds, the Cognizant Federal Agency may issue rate recommendations that state agencies are expected to follow, even without a formal bilateral agreement.
- Professional services rate guidance: Some state procurement offices maintain published rate schedules for professional services, used when contractor-proposed rates cannot be independently verified or agreed upon.
Quick Summary
A Forward Pricing Rate Recommendation is the government's unilateral fallback when a bilateral Forward Pricing Rate Agreement is not available. It is issued by the ACO within 30 days of receiving an adequate contractor rate proposal and distributed to all affected contracting offices. Unlike the FPRA, it does not require the contractor's agreement, but contracting officers will use it as their negotiating position when pricing proposals. For contractors, receiving an FPRR is a signal to engage promptly with the ACO and work toward a formal FPRA, which provides more predictability, more bilateral protection, and a stronger foundation for proposal pricing across all government work.
