Tuesday, August 31, 2010

Cost or Pricing Data under New FAR Rule - Submit It Only When Required

The revised FAR coverage on cost or pricing data, certified cost or pricing data, and information other than cost or pricing data, which we began discussing yesterday, is designed to supplement existing coverage to "clarify ... and achieve greater understanding by contracting officers and contractors". The new rule neither expands nor diminishes the existing rights of contracting officers to request cost or pricing data (whether certified or other than certified) or other information, or the existing responsibilities of the offeror to submit such data or other information. It is important to note that the rule does not require, encourage, or authorize contracting officers to obtain cost or pricing data or other information unless it is needed to determine that prices offered are fair and reasonable, which may include the request for such data in connection with a cost realism analysis. As the rule strongly cautions, requiring contractors to submit more data than what is needed can ``lead to increased proposal preparation costs, generally extend acquisition lead time, and consume additional contractor and Government resources.'' Contracting officers must request only the amount of data necessary to make a determination that the price of whatever they are buying/negotiating, is fair and reasonable; no more and no less.

Whether a contractor must submit ``certified cost or pricing data'' is based on the requirements of TINA and its stated exceptions. With respect to ``data other than certified cost or pricing data,'' the introductory policy statement in FAR 15.402(a) has been clarified to tie together the contracting officer's longstanding statutory responsibility to request the data and information necessary to establish a fair and reasonable price--as stated in TINA at 10 U.S.C. 2306a(d)(1) and 41 U.S.C. 254b(d)(1)--with the caution that, in doing so, the contracting officer must not request more data than is necessary. By doing so, the FAR will provide a more complete articulation of the policy underlying the use of ``data other than certified cost or pricing data'' in establishing price fairness and reasonableness, in furtherance of the contracting officer's duty to serve as a responsible steward of the taxpayer's resources.

Some commentors responding to the proposed rule in 2007 expressed concern that it will result in contracting officers by-passing normal market research and pricing techniques and require contractors to submit full cost or pricing data as if the Truth in Negotiations Act (TINA) applied.

The FAR Councils addressed this concern. The Councils wrote that the current FAR, as well as the new rule, protect against this practice. Contracting officers must generally follow the order of preference at FAR 15.402, and are required by that section to ``obtain the type and quantity of data necessary to establish a fair and reasonable price, but not more data than is necessary.'' In theory, this could include all of the elements prescribed under FAR 15.408, Table 15-2. However, in most cases the data necessary for a contracting officer to determine cost fairness and reasonableness, or cost realism, will fall short of this level of data. The rule should not result in contracting officers requiring contractors to submit full cost or pricing data as if certification will be required when it is not necessary.

The "order of preference" used to determine the type of information required is
  1. No additional information from the offeror, if the price is based on adequate price competition
  2. Information other than cost or pricing data - pricing
  3. Information other than cost or pricing data - cost data that does not meet the definition of cost or pricing data
  4. Cost or pricing data.


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