Effective October 1, 2010, the final rule amending FAR subpart 15.4 expands government contracting officers' ability to obtain cost or price-related data for all contracts, including currently exempted commercial-items contracts. The amended rule is intended to clarify the FAR's definition of "cost or pricing data" and to make the definition consistent with that used in the Truth in Negotiations Act ("TINA") (10 U.S.C. §2306a and 41 U.S.C. §254b). The final rule's effect, however, may increase both a government contractor's disclosure requirements and its False Claims Act vulnerability.
Under the current iteration of the FAR, "cost or
pricing data" require certification pursuant to FAR
15.406-2. See FAR 2.101. Commercial-item contracts have
long been exempted from the requirement to submit such data.
See FAR 15.403-1(c)(3). But, in the amended final rule,
the FAR now differentiates between "certified
cost or pricing data," "data other than certified
cost or pricing data," and "cost or pricing
data" generally. These distinctions now unbind the
government and may provide it access to formerly unavailable cost
and pricing data associated with commercial-items contracts, as
needed to examine price fairness and reasonableness. This expanded
breadth likely will require more detailed pricing submissions by
contractors, including commercial-item contractors, and,
accordingly, may provide increased fodder for DOJ False Claims Act
allegations. To be sure, the recent Department of Defense
procurement changes include express directions that contracting
officers are now expected "to conduct negotiations with
all single bid offerors and that the basis of that negotiation
shall be cost or price analysis, as the case may be, using
non-certified data." See Can DoD Be "The Biggest
Loser"? Gates Unveils DoD's New Fiscal Diet
Plan.
The final rule, announced in the Federal Register on August 30,
2010 (75 Fed. Reg. 53135), is not markedly different from that
proposed on April 23, 2007 (72 Fed. Reg. 20092). The 2007 proposed
rule and the implications of its definitions were discussed in
detail in the October 8, 2007 Legal Times article
"Rolling Back Past Reforms" authored by
two of our Government Contracts lawyers, John W. Chierichella and
Marko W. Kipa, and reprinted on this Blog with permission here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
