Most small firms selling commercial products or competing on price never need to certify cost or pricing data. But firms negotiating a sole-source award, a large modification or a subcontract under a large prime can encounter the requirement, sometimes for the first time in the rush of year-end negotiations. It comes from a 1962 statute long known as the Truth in Negotiations Act, now generally referred to by its statutory title, Truthful Cost or Pricing Data. This is general information; talk to an accountant or attorney experienced in government contracts before certifying data.
What certified cost or pricing data is
Cost or pricing data means all facts that, as of the date of price agreement, prudent buyers and sellers would reasonably expect to affect price negotiations significantly. The definition is broad. It covers facts, not judgments, but it includes the factual information from which judgments are made: vendor quotes, labor rates, historical costs, production yields, make-or-buy decisions and similar information.
When the requirement applies, the contractor submits the data and signs a certificate stating that, to the best of its knowledge and belief, the data is accurate, complete and current as of the date of agreement on price, or another date agreed upon. The date matters: facts that come to light between the initial submission and the price agreement must be disclosed too.
When it applies, and the main exceptions
In general, certified cost or pricing data is required for negotiated contracts, subcontracts and modifications expected to exceed a dollar threshold set by statute and adjusted periodically, unless an exception applies. The FAR lists the main exceptions:
- Adequate price competition
- Prices set by law or regulation
- Acquisitions of commercial products or commercial services
- A waiver granted by an authorized official in exceptional cases
- Certain modifications of contracts or subcontracts for commercial products or services
Even when an exception applies, the contracting officer may request data other than certified cost or pricing data to determine that the price is fair and reasonable. Primes that must obtain certified data from their own subcontractors above the threshold flow the requirement down.
Defective pricing and its consequences
If the government later finds that certified data was not accurate, complete or current, and that the price was increased as a result, the contract clause on defective pricing entitles the government to a price reduction, including related profit or fee, generally with interest on overpayments. Knowing submission of defective data can carry penalties and may lead to more serious consequences under fraud statutes. Post-award audits examine exactly these questions, which is why documentation matters.
Practical habits
- Know whether an exception applies before negotiations begin, and confirm it with the contracting officer.
- Disclose data, not just conclusions; when unsure whether a fact is significant, disclose it.
- Update data through the date of price agreement, and track new vendor quotes or rate changes during negotiations.
- Document what was provided, when and to whom.
- Obtain and review subcontractor data where the rules require it.
The FAR’s rules on cost or pricing data are in Part 15, which also states the current threshold, at acquisition.gov.