NDAA 2020 - Offerors May Need to Provide Cost or Pricing Data to Support Commercial Pricing

The House and Senate conference committee have agreed on a final version of the fiscal year 2020 National Defense Authorization Act (NDAA). A 19 page summary of its key provisions prepared by the Senate Armed-Services Committee can be read or downloaded here. Over the next few posts, we will be discussing procurement related provisions that have been included in the compromise report - none of which, by the way, appear in the Senate's summary. We also intend to highlight some of the provisions that were included in the respective Senate and House versions of the 2020 NDAA but did not make the final cut.

Section 803 of the House version did make the final cut. The purpose of Section 803 is to deal with the problem when contractors refuse to provide the Government with cost or pricing data to support their proposal prices. Last year, the GAO (Government Accountability Office) issued a report concluding that DoD's process for determining whether an item can be purchased commercially and at a fair and reasonable price, is often long and challenging. One of its findings was that the Defense Department was unable to obtain contractor data when adequate market information was not available. Ultimately, contracting officers need to determine that a price is fair and reasonable to the Government, irrespective of how the product or service was priced.

Section 803 attempts to deal with that problem by requiring contractors proposing commercial items to also provide cost or pricing data to the contracting officer when, based on market research, that item will be solely procured by the Defense Department. There are two key provisions within Section 803 and one exception.

Provision 1: Contracting officers shall not determine the price of a contract or subcontract to be fair and reasonable based solely on historical prices paid by the Government.

Provision 2: In the event the contracting officer is unable to determine proposed prices are fair and reasonable by any other means, an offeror who fails to make a good faith effort to comply with a reasonable request to submit data, is ineligible for award.

Exception: The contracting officer may still procure from a recalcitrant contractor if the head of the contracting activity determines that it is in the best interest of the Government to make the award to that offer based on consideration of pertinent factors, including

1. the effort to obtain the data
2. availability of other sources of supply of the item or service
3. the urgency or criticality of the Government's need for the item or service
4. reasonableness of the price of the contract, subcontract, or modification based on information available to the contracting officer
5. rationale or justification made by the offeror for not providing the requested data
6. risk to the Government if award is not made

Look for FAR regulations to implement this provision in the near future.