Government Contracts Cost And Pricing ' The Truth In Negotiations Act ' Or Whatever The Kids Are Calling It These Days (Part 2)

• Published date: 01 June 2023
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Law Firm: Sheppard Mullin Richter & Hampton
• Author: Mr Keith Szeliga and Katie Calogero

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Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing regulations that apply to Government contractors. This is the second installment of a two-part article on the Truthful Cost or Pricing Data Statute, commonly known by its former name, the Truth in Negotiations Act (TINA).¹ As a reminder, TINA is a procurement statute that requires contractors: (1) to disclose information - known as cost or pricing data - when negotiating certain types of contracts, subcontracts, and modifications; (2) to certify that those data were accurate, complete, and current as of the date of agreement on price or other date agreed to by the parties (the "relevant date"); and (3) to agree to a contract clause entitling the Government to a price reduction if the contractor furnishes cost or pricing data that are defective, i.e., inaccurate, incomplete, or not current.²

Part 1 of this article, published last month, addressed the contractor's obligations under TINA, including the definition of cost or pricing data, the circumstances under which the contractor must disclose such data, and the adequacy of the contractor's disclosure.³ Part 2 of the article, set forth below, focuses on the Government's remedies for alleged violations of TINA, including the elements of a defective pricing claim, the availability of certain defenses, and the calculation of damages and offsets.

Elements of a Defective Pricing Claim

There are five essential elements of a defective pricing claim. The Government has the burden to prove each element by a preponderance of the evidence.

First, the Government must establish the information at issue is "cost or pricing data" within the meaning of TINA.⁴ We addressed this element in Part 1.

Second, the Government must prove that more accurate, complete, or current cost or pricing data were reasonably available to the contractor as of the relevant date.⁵ The "reasonably available" standard is less forgiving than the phrase suggests. Cost or pricing data may be considered "reasonably available" even where the Government establishes an extraordinarily short and arguably unreasonable deadline for proposal submission.⁶ Cost or pricing data further may be considered reasonably available to the contractor even if it was not known to the contractor's negotiators.⁷ Unreasonable lag time between availability of the data and transmission to the contractor's negotiators is generally not a defense.⁸ In addition, a contractor must update its certified cost or pricing data between proposal submission and the relevant date.⁹

Third, the Government must prove the data were not submitted or meaningfully disclosed to the Contracting Officer or authorized representative. We addressed this element in Part 1.

Fourth, while the Government must prove it relied on the defective cost or pricing data, . 5here is a rebuttable presumption that the Government relied on data.¹⁰ A contractor can rebut the presumption by showing that the Government never reviewed the defective data,¹¹ or that the Government relied on other data, such as its own independent estimate, instead of the contractor's data.¹²

Fifth, the Government must prove its reliance on the defective data caused an increase in the contract price. Again, there is a rebuttable presumption in favor of the Government: that the submission of defective cost or pricing data causes a dollar-for-dollar increase in the contract...