Wednesday, January 9, 2013

Examples of Cost or Pricing Data

Most contractors have a pretty good understanding of the definition of and the types of items that constitutes "cost or pricing" data. If not, the idea is usually drilled into them during negotiations and when the certificate of current cost or pricing data is pushed across the table for signature, contractors will need to read and understand the definition before signing it.

Nevertheless, the Government continues to dedicate resources to defective pricing reviews (TINA audits) to test whether the contractor did indeed provide all the factual information it was aware of at the time of agreement on price. They dedicate these resources because there is payback, a return on their investment. The Government continues to find cases where contractors did not provide the most current, complete, and accurate data available to them as of the date of agreement on price. The consequences of getting caught are severe. The contract price is adjusted downward to reflect the impact of the non-disclosure, interest is applied on any overpayments that occurred, and more than likely, there will be a referral to an investigative body. Regarding the latter, audit guidance is written in such a way that an auditor, having disclosed defective pricing data, must have a good reason not to refer the matter for investigation.

The official definition of "cost or pricing data" is found in FAR 2.101 (Federal Acquisition Regulations). It states in part, "Cost or pricing data means all facts that, as of the date of price agreement ...prudent buyers and sellers would reasonable expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental, and are verifiable.

A contractor's judgment is not cost or pricing data but to the extent that judgment is based on factual matters, it is. The definition provides that "While they do not indicate the accuracy of prospective contractor's judgment about estimated future costs or projections, they do include the data forming the basis for that judgment".

FAR provides a non-exclusive list of items that are included in the definition of cost or pricing data. These include (parentheses are ours):

  • Vendor quotations (even the ones that are not used in pricing)
  • Nonrecurring costs
  • Information on changes in production methods and production/purchasing volume,
  • Data supporting projections of business prospects, business objectives, and related operational costs (this will impact indirect rate projections),
  • Unit-cost trends such as those associated with labor efficiency (learning curve applications),
  • Make-or-buy decisions (or, even if decisions have not been made, the fact that you're considering such alternatives should be disclosed),
  • Estimated resources to attain business goals (affects indirect cost allocation bases), and
  • Information on management decisions that could have a significant bearing on costs (union negotiations).

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