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Since the passage of the Federal Acquisition Streamlining Act (“FASA”) in late 1994, the use of FAR Part 12, Commercial Item Acquisitions, has exploded. Agencies are using the authority in FAR Part 12 to acquire an enormous variety of goods and services because it is easier and quicker to complete the procurement. In acquisitions under FAR Part 12, offerors are not required to submit cost of pricing data; hence, many contractors have grown unaccustomed to the preparation and submission of cost or pricing data.
The Truth in Negotiations Act (“TINA” or the “Act”), P.L. 87-653, codified at 10 U.S.C. 2306a, was originally passed by Congress in 1962. Although it has been amended a few times over the years, it remains in full force and effect. The Act is not applicable to all acquisitions, but it is critical in many so-called “stand-alone” procurements.
TINA requires contractors to submit cost or pricing data (note the conjunction is “or” not “and”) in all proposals that exceed $550,000 (soon to be $600,000) with certain exceptions and a certificate of current cost or pricing data. An exception to the requirement for the submission of cost or pricing data exists when there is (1) adequate price competition; (2) prices set by law or regulation; or (3) prices of commercial items sold to the public. Cost or pricing data must be complete, accurate, and current at the time of price agreement.
TINA was discussed in the case of VIACOM, Inc. v. General Services Administration (“GSBCA” or the “Board”), GSBCA 15871, decided on September 21, 2005. This case was in existence for over 16 years and demonstrates that the Government may be slow, but they are inexorable, and they are not always correct or right in their charges.
The case involved a GSA Schedule proposal and submitted by the predecessor-in-interest, Westinghouse Furniture Systems (“WFS”) to the GSA on May 21, 1984. Thereafter, the GSA awarded a Schedule to WFS on July 21, 1985. WFS submitted its Discount Schedule and Marketing Data (“DSMD”) to GSA claiming commerciality. The RFP included the Truth in Negotiations Act and the Post Award Review clause that would be activated if GSA determined the DSMD was not accurate. The GSA Inspector General (“IG”) office conducted a post-award review (also known as a defective pricing audit) beginning on April 21, 1989 and alleged a violated of the TINA. The GSA Contracting Officer finally issued a final decision on February 22, 2002 demanding a refund of $3,808,507 almost 17 years after the schedule was awarded.
Eventually, the Board ruled that the Government failed to meet its burden of proof and ruled that the Government was due only $4,191 as a result of incorrect payment terms. After 16 years of litigation, the case was finally concluded. This case proves that, although GSA Schedule sales have grown astronomically, the TINA cannot be ignored by contractors.
Contractors who are unfamiliar with the TINA should be aware that cost or pricing data consists of all data existing up to the time of agreement on price that prudent buyers and sellers would reasonably expect to have a significant effect on price. Cost or pricing data maybe required in the initial proposal, and it will be required when submitting post-award proposals pursuant to the Changes clause or similar clauses. When there is adequate price competition, or for commercial item acquisitions, the regulations authorize an exemption from the submission of cost or pricing data by offerors; absent these exemptions the Government is required to obtain cost or pricing data. Any factual cost information obtained after agreement on price will not trigger the Defective Pricing Clause and is not cost or pricing data.
Given the explosive growth in GSA Schedules, there is no requirement to submit cost or pricing data for commercial items; as a result, many contractors have forgotten about the TINA or never heard of it. The Congress has never repealed the TINA, so it remains the law. As can be seen from the GSBCA case, if the Government makes a claim against a contractor for a violation of the TINA, it never relents until it is paid by the contractor or the Board or a court orders a dismissal of the claim.
Do you need assistance with cost or pricing data in federal procurements and contracts or with other issues?
This article is not legal advice and should be not be construed as a legal opinion. You should consult your attorney for legal advice.
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