Contracts/subcontracts and/or modifications where the Truth in Negotiations Act (TINA) applies. Note that the application of TINA is determined on a contract by contract action basis. For example, an initial contract award could be covered, but a particular modification to that contract might not be (e.g., the value of the modification is below the $700,000 threshold for TINA coverage).
The contractor must furnish certified cost or pricing data that are complete, accurate, and current on the “as of date”. That “as of date” is specified in the Certificate of Current Cost or Pricing Data signed by the contractor. The ‘as of date” is generally the date of price agreement; however, the Government and the contractor can mutually agree on a different date.
The primary compliance mechanism is post-award audits (often called “defective pricing audits”). These audits are generally performed by the Defense Contract Audit Agency (DCAA). Contracts selected for audit by DCAA are based on a risk-based selection/sampling of contracts. The highest risk is on large dollar fixed price contracts. Contracting Officers may also request audits based on information disclosed during contract performance (e.g., contracting officer becomes aware of a quote or quotes that should have been but were not disclosed at the time of negotiations). The audits occur sometime after contract award (it could be immediately after award or several years later, depending the particular facts and circumstances).
The Government is entitled to a price adjustment for any increased cost in the contract price that resulted from the failure to provide current, complete, and accurate data, plus interest on any increased costs previously paid. Penalties can also be applied if the contractor knowingly provided incomplete, inaccurate, or noncurrent data. An offset to the price adjustment may occur if the contractor proves that other data was available that understated the contract price. To be entitled to such an offset, the contractor must show that (a) the data was available before the “as of” date specified in the Certificate, and (b) the contractor was unaware that the data was understated before the “as of” date specified in the Certificate.
The purpose of the clause is to provide a level playing field for the Government at the time of price agreement, where an evaluation of the contractor’s estimated cost is the basis for negotiation of the contract price. To provide this level playing field, contractors are required to submit current, complete, and accurate information for all factual data relevant to the price negotiations. For example, assume at the time of price negotiations a contractor has a quote from Vendor A for $10 a widget and that widget will be used to build a non-commercial motor under a sole source fixed price contract with the Government (one widget per motor). The contractor and the Government negotiate a price of $40 per motor, which includes an estimate of $15 for one widget per motor. The Government would be entitled to a price adjustment for the difference of $5 per motor (the $15 priced per widget less the $10 quote that was not disclosed to the Government). In addition, if the Government has made any payments under the contract prior to the price adjustment, the Government is entitled to interest on the amounts that were overpaid as a result of the failure to disclose the quote from Vendor A. Furthermore, penalties equal to the amount of the overpayment would be imposed if it could be shown that the contractor knowingly submitted certified cost or pricing data that were incomplete, inaccurate, or noncurrent.
Just a couple of questions pertaining to defective pricing.
– We are a Subcontractor to a Prime Contractor, what would our liability be to the prime under a defective pricing scenario?
– What would our liability be if our contract was with a Prime Contractor in a defective pricing scenario?