Government Contracts Cost And Pricing: The Truth In Negotiations Act, Or Whatever The Kids Are Calling It These Days

• Published date: 29 June 2023
• Subject Matter: Intellectual Property, Government, Public Sector, Copyright, Government Contracts, Procurement & PPP
• Law Firm: Sheppard Mullin Richter & Hampton
• Author: Mr Keith Szeliga

Welcome back to the Cost Corner, addressing the complex cost and pricing regulations that apply to government contractors. The previous Cost Corner column provided an overview of the regulatory framework for government contracts cost and pricing, including the Truthful Cost or Pricing Data Statute,¹ the Federal Acquisition Regulation (FAR) Cost Principles,² and the Cost Accounting Standards (CAS).³ This column takes a closer look at the Truthful Cost or Pricing Data Statute, commonly referred to by its former name, the Truth in Negotiations Act (TINA).

Imagine you are hiring a contractor to build a deck. It is a busy time of year. Only one contractor is available. Would you demand that the contractor disclose all of its supplier quotes? What about quotes from suppliers it will not use? Quotes for materials you did not specify? Quotes from suppliers that cannot meet the schedule? Quotes from suppliers on other projects? Would you expect the contractor to disclose its internal analysis of the supplier quotes? What about its scrap rate or learning curve? Would you insist on a price reduction if you discovered, years later, that the contractor failed to provide any of this information?

Most of us would answer "no" to these questions. The government, however, plays by different rules and has far more demanding expectations. Those rules and expectations are set forth in TINA and its implementing regulations. The examples above are derived from cases in which the government was entitled to a price reduction for TINA violations.

TINA is a procurement statute that requires contractors to:

1. Disclose information - known as cost or pricing data - when negotiating certain types of contracts, subcontracts and modifications;
2. Certify that those data were accurate, complete, and current as of the date of agreement on price; and
3. 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.⁴

Congress enacted TINA in 1962 in response to GAO reports of contractors receiving "unwarranted profits because the data used in establishing target costs or prices were inaccurate, incomplete, or out of date."⁵ TINA is intended to "level the playing field" by providing government negotiators the same cost or pricing data available to contractors.

DEFINING COST OR PRICING DATA

TINA defines cost or pricing data to include "all facts that, as of the date of agreement on price . . . or . . . another date agreed upon between the parties, a prudent buyer or seller would reasonably expect to affect price negotiations significantly."⁶ Cost or pricing data are "more than historical accounting data; they are all the facts that can be reasonably expected to contribute to the soundness of estimates of future costs and to the validity of determinations of costs already incurred."⁷

Examples of cost or pricing data include:

1. Vendor quotes;
2. Nonrecurring costs;
3. Information on changes in production methods and in production or purchasing volume;
4. Data supporting projections of business prospects and objectives and related operations costs;
5. Unit-cost trends such as those associated with labor efficiency;
6. Make-or-buy decisions;
7. Estimated resources to attain business goals; and
8. Information on management decisions that could have a significant bearing on cost.⁸

Cost or pricing data do not...