Thursday, June 23, 2016

Pilot Program for Increased Cost or Pricing Data Threshold

The Fiscal Year 2016 National Defense Authorization Act (NDAA) authorized a pilot program to test the "efficacy" of using a risk-based approach to increasing the threshold for submission of cost or pricing data. Currently, the threshold sits at $750,000. Under the pilot program, that threshold significantly increases to $5 million.

The purpose of increasing the TINA (Truth in Negotiations Act) threshold is to make things easier on contractors and contracting officers. Auditors are generally opposed to the increased thresholds however, there is a probability that by October 2018 when the pilot program ends, the test will be rendered a success and the $5 million threshold will be made permanent.

The Department of Defense is now seeking candidates to test this authority and has requested the Army, Navy, and Air Force to each nominate at least one candidate program. The nominations must address the following six elements/questions.

  1. Whether the Government received, within the previous 12 months, adequate certified cost or pricing data and completed cost analysis, with similar configuration, and quantity and delivery schedules.
  2. Whether the price analysis demonstrates historical pricing stability with no significant expectation of future deviation.
  3. Report any deficiencies with DFARS 252.215-7002 (estimating system requirements) or DFARS 252.242-7006 (accounting system administration)
  4. Have contractors/subcontractors demonstrated a history of providing quality products in accordance with delivery terms?
  5. Have contractors/subcontractors demonstrated a history of providing data required by the contracting officer to determine the proposed prices are fair and reasonable?
  6. Identify any significant previous audit findings or other required previous contract adjustments.
If you think that you or one of your programs is a candidate for this pilot program, it wouldn't hurt to nominate yourself. Let your contracting officer know of your interest. 

You can read the entire guidance memorandum here.

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