Monday, August 30, 2010

Revised FAR Definition for Cost or Pricing Data

The FAR Councils just published extensive revisions to FAR regarding cost or pricing data, certified cost or pricing data, and data other than cost or pricing data. We are going to spend a few days to discuss these changes because while on one hand they appear minor and perhaps inconsequential, there are nuances to them that could have significant impact on the way that the Government awards contracts and on contractor responsibilities when submitting data in support of negotiations. This change has been in the works for several years. It was first published as a proposed rule in 2007 and the public comment period closed in November of that year. In fact the proposed rule has been fallowing for so long that we nearly forgot about it.

The premise behind the revision is to make FAR consistent with TINA (Truth in Negotiations Act).

The Councils believe that the implementation of TINA in FAR subpart 15.4 is not sufficiently clear. In particular, there is confusion regarding the right of the Government to request ``data other than certified cost or pricing data,'' the obligation of the offeror to provide this data, and the definition of this term.

This lack of clarity is due, in large part, to definitions that overlap and are not identical to TINA. For example, the term ``cost or pricing data'' is defined in the FAR to mean certified cost or pricing data, whereas TINA does not make certification part of the definition of this term. This regulatory refinement has led to confusion regarding the level of information that a contracting officer may request to establish fair and reasonable pricing including a misunderstanding by some that the data elements that comprise cost or pricing data cannot be requested by the Government unless the data are required by law to be submitted to the contracting officer in a certified form. This confusion has been exacerbated by the FAR's use of the phrase "information other than cost or pricing data,'' which has made it difficult for contracting officers to understand the circumstances when data other than certified cost or pricing data should be obtained to protect the Government from paying unreasonable prices.
The revised definition of "cost or pricing data" at FAR 2.101 is as follows. To make it easy to compare to the previous method, we have used the "line-out" method to show language that has been dropped and the "bold underline" method to show added language.

Cost or pricing data (10 U.S.C. 2306a(h)(1) and 41 U.S.C. 254b) means all facts that, as of the date of price agreement, or, if applicable, an earlier date agreed upon between the parties that is as close as practicable to the date of agreement on price, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are data requiring certification in accordance with 15.406-2. Cost or pricing data are factual, not judgmental; and are verifiable. While they do not indicate the accuracy of the prospective contractor's judgment about estimated future costs or projections, they do include the data forming the basis for that judgment. 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. They also include, but are not limited to, such factors as--

The omitted language is now part of a new definition on "certified cost or pricing data". The added language was probably inserted because of contractor tendency to sometimes assert (in a defective pricing situation) that the examples of cost or pricing data that follow this definition was an inclusive listing.

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