Recently, we've been discussing cost or pricing data and some of the implications that failure to furnish current, complete, and accurate cost or pricing data can have on government contractors. If a contract price was increased because a contractor failed to submit current, complete, and accurate cost or pricing data, the contract price will be reduce by the impact of that failure. And, if that wasn't enough, the matter could be referred for criminal investigation. To assist in helping auditors determine whether TINA noncompliance should be referred to an investigative organization for potential fraud, the DoD-IG published a Handbook of Fraud Indicators.
According to the DoD Inspector General, the following are general fraud indicators that relate direct to defective pricing reviews and should be considered for referral for criminal investigation.
- High incidence of defective pricing.
- Repeated defective pricing involving similar patterns or conditions.
- Continued failure or refusal to correct known system deficiencies.
- Consistent failure to update cost or pricing data with knowledge that past activity showed that prices have decreased.
- Specific knowledge that is not disclosed regarding significant cost issues that will reduce the proposed cost.
- Repeated denial by responsible contractor employees of the existence of historical records that are subsequently found.
- Continued failure to make complete disclosure of data known to responsible personnel.
- Altered or false documents.
DCAA has taken this this matter very seriously. It has instructed its auditors to consider whether any of these fraud indicators exist for each and every postive defective pricing audit report it issues and if found, to refer the matter for investigation.
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