What Is Certified Cost and Pricing Data?

Certified Cost or Pricing Data is a fundamental concept in government contracting, designed to ensure fair and reasonable pricing for taxpayers. It plays a significant role in transactions between government agencies and contractors, particularly when competitive market forces are not fully present. This data provides the government with transparency into a contractor’s proposed costs, allowing for informed negotiations.

The Nature of Certified Cost or Pricing Data

Certified Cost or Pricing Data refers to factual, verifiable, and current information that prospective contractors or subcontractors provide to the government to support their proposed prices. This encompasses all facts available to the contractor at the time the price is agreed upon. The underlying principle is to ensure transparency and prevent overpricing in government contracts, especially in situations where adequate price competition is absent.

This requirement is rooted in the Truth in Negotiations Act (TINA), a federal law. TINA mandates that contractors submit this data for certain contracts or modifications exceeding a specific threshold. This enables the government to negotiate fair and reasonable prices based on the contractor’s actual costs and prevent overpayment due to incomplete or inaccurate information.

The data is “factual” because it represents objective information, not subjective judgments or estimates. It must be “verifiable” to allow government auditors and negotiators to confirm its accuracy. “Current” means the data reflects the most up-to-date information known to the contractor at the time of the price agreement.

Situations Requiring Certification

The requirement for Certified Cost or Pricing Data is primarily triggered by the value of the contract action. For prime contracts awarded on or after July 1, 2018, this data is generally required when the contract value exceeds a statutory threshold of $2 million. This threshold is subject to periodic adjustments.

This requirement most commonly applies to negotiated contracts, where the price is determined through direct discussions rather than robust competition. It is also necessary for certain contract modifications or subcontracts that meet the specified monetary threshold. A modification exceeding the threshold can trigger the requirement, even if the initial contract did not.

There are several exceptions to the requirement for Certified Cost or Pricing Data. Data is not required when prices are based on adequate price competition, where multiple offerors independently compete for a contract. Contracts for commercial items, generally sold to the public, also do not require certified data. Additionally, if prices are set by law or regulation, or if a waiver is granted by the head of the contracting activity, certification may not be necessary.

Elements of Certified Data

Certified Cost or Pricing Data encompasses information expected to affect price negotiations. This detailed information allows government negotiators to understand the basis of a contractor’s proposed price. The data provides a comprehensive financial picture, ensuring all relevant factors are considered.

Examples of information included are vendor quotes or invoices for materials and services. Non-recurring costs, such as special tooling or initial start-up expenses, are also part of this data. Manufacturing costs, including direct labor rates, material costs, and overhead allocations, offer insight into the internal production expenses.

Sales data for comparable items can help establish market reasonableness. Management decisions affecting costs, such as make-or-buy decisions, are also relevant. Actual costs incurred for similar past work provide a historical basis for evaluating current proposals.

Forecasts of costs, like projected labor hours or material quantities, outline future expectations. Royalties or license fees, if applicable, are included.

The Formal Certification Procedure

After the cost or pricing data is compiled and agreed upon, the contractor or a responsible company official must formally certify its integrity. This involves signing a specific certification statement. The current process typically uses a Certificate of Current Cost or Pricing Data.

This certification statement attests that the data submitted is accurate, complete, and current as of a specified date. This “date of agreement on price” is the point at which the government and the contractor conclude price negotiations. The certification declares that the contractor has disclosed all relevant, factual information known at that time that could affect the negotiated price.

The certification does not guarantee the accuracy of future estimates or judgments, but confirms the factual basis upon which those estimates were made. Should the government later discover that the certified data was inaccurate, incomplete, or not current at the time of agreement, it retains the right to adjust the contract price. This adjustment aims to recover any overpayments resulting from “defective pricing.”