Wednesday, July 28, 2010

Truth-in-Negotiation - Obligation to Update

This is our fifth posting in a series on defective pricing. If you missed any of the previous ones, you can find them through these quick links.
Sometimes contractors think that their duty to furnish current, complete, and accurate cost or pricing data ends with the submission of their proposal to the Government; that any data received after that date is not relevant to the negotiating process. The law (PL 87-653) however states that contractors are obligated to disclose data in existence as of the date of price agreement. The interval between the proposal submission and agreement on price, as every Government contractor knows is significant. It is not uncommon for several months to elapse between these two events. Contractors have a statutory requirement to continuously update the data in its proposal. Many companies have been found to have violated the Truth in Negotiations Act because of factual data that arrived after proposal submission was not submitted to the Government.

A contractor's duty to provide updated cost or pricing data is not limited to the personal knowledge of its negotiators. Data within the contractor's organization are considered readily available. Therefore, it is incumbent upon contractors to establish internal policies and procedures to ensure that cost or pricing data "gets" to the negotiator. Many companies accomplish this through a "sweep" process. Near the time of price agreement, a contractor will conduct internal "sweeps" of cost or pricing data to ensure it meets its disclosure requirements.

When updating cost or pricing data at negotiations, the contracting officer will request a written statement from the contractor summarizing the impact of the additional data. Contractor's cannot simply provide the data and make the contracting officer figure out what it means. If the data has a significant impact on negotiations, the contracting officer will reduce the tentative price. Whether the data is significant or not, the contracting officer will list the updated data in his/her price negotiation memorandum and identify the extent to which it was relied upon in establishing a fair and reasonable contract price.

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