When Is Certified Cost and Pricing Data Required?

Certified cost or pricing data serves a fundamental purpose within government contracting: ensuring transparency and establishing fair and reasonable prices. This data represents factual information that prudent buyers and sellers would consider significant in price negotiations. Its collection and review help the government avoid overpaying for goods and services. The requirement for this data provides a structured approach to verifying proposed costs and prices, particularly in situations where market forces alone may not guarantee a competitive outcome.

Circumstances Requiring Submission

Certified cost or pricing data is required for negotiated contracts exceeding a specific monetary threshold. This requirement stems from the Truth in Negotiations Act (TINA), codified in the Federal Acquisition Regulation (FAR). Currently, the threshold for requiring certified data is $2 million for contracts awarded on or after July 1, 2018.

The obligation to submit certified data applies not only to prime contracts but also extends to subcontracts at any tier when the prime contractor and higher-tier subcontractors were required to furnish such data. This ensures that the government can assess the reasonableness of costs throughout the supply chain.

The requirement also applies to modifications of existing contracts, whether sealed bid or negotiated, if the price adjustment amounts are expected to exceed the current $2 million threshold. This means that even if an initial contract was below the threshold, cumulative modifications pushing the total value past $2 million could trigger the requirement. This comprehensive application aims to maintain price transparency across the entire lifecycle of a government contract.

Certified data is sought in scenarios where adequate price competition is absent or insufficient. Examples include sole-source procurements, where only one contractor can fulfill the government’s need, or when modifications to existing contracts are negotiated without new competition. In these situations, the detailed cost breakdown provides the government with the necessary insights to determine a fair price.

Exceptions to the Requirement

Several exceptions exist where certified cost or pricing data is not required, even if a contract might otherwise meet the monetary threshold. These exceptions are designed to streamline the procurement process when other mechanisms ensure fair and reasonable pricing. A common exception applies when prices are based on adequate price competition.

Adequate price competition exists when two or more responsible offerors, competing independently, submit responsive and viable offers that satisfy the government’s requirements. For Department of Defense (DoD), National Aeronautics and Space Administration (NASA), and Coast Guard contracts, this means there must be two or more responsive offers received. If only one offer is received, adequate competition is not considered to exist, even if the contractor initially expected competition.

Another exception applies to the acquisition of commercial items. A commercial item is any product or service customarily used by the general public or non-governmental entities. This exception recognizes that prices for commercial items are established through market forces, reducing the need for detailed cost analysis. Services like installation, maintenance, or training can also be considered commercial items if offered and sold competitively in the commercial marketplace.

Prices set by law or regulation also constitute an exception to the certified data requirement. This applies when a governmental body, through rulings or similar actions, dictates the price for certain goods or services. Additionally, the head of the contracting activity may grant a waiver for the submission of certified cost or pricing data under exceptional circumstances. Such a waiver requires a written finding that the data is not necessary to determine a fair and reasonable price.

Content of Certified Cost or Pricing Data

When required, certified cost or pricing data encompasses factual information that influences the proposed price. This data must be current, accurate, and complete as of the date of agreement on price. It provides a detailed look into the financial elements underpinning a contractor’s proposal, allowing for thorough analysis.

The types of information included are actual costs incurred, projected costs for future work, and vendor quotations for materials or services. It also includes details on subcontractor proposals, which are reviewed to ensure their reasonableness. Data related to make-or-buy decisions, indirect cost rates, and direct labor rates are included.

Other relevant financial or pricing data, such as information on changes in production methods or volume, and management decisions that could affect costs, are also part of the submission. The completeness of this data ensures that the government has a full understanding of all factors contributing to the proposed price. Supporting documentation for each category is to substantiate the figures presented.

The Certification Process

Once the cost or pricing data has been prepared and reviewed, it undergoes a formal certification process. This involves the execution of a Certificate of Current Cost or Pricing Data, as prescribed by FAR 15.406. This certificate is a formal attestation by the contractor regarding the integrity of the submitted data.

The certificate attests that the submitted cost or pricing data is accurate, complete, and current as of the date of agreement on price. A responsible company official, an authorized representative of the contractor, is required to sign this document. The certificate is submitted as close as practicable to the final agreement on price.

Signing this certificate carries implications for the contractor. If the data is later found to be inaccurate, incomplete, or noncurrent, it can lead to what is known as “defective pricing.” In such cases, the government has the right to unilaterally reduce the contract price to what it would have been if accurate, complete, and current data had been provided. This mechanism protects the government from inflated prices resulting from flawed data submissions.