Question

Can the Government pursue defective pricing as a result of a cost or pricing data submitted by a prospective subcontractor, even though the subcontract was awarded to another firm?

If a contract is under-priced because the cost or pricing data were not accurate, complete, or current, is the contractor due an increase in contract price?

Answer 1

Answer

Defective pricing is any contracting action subject to the Truth in Negotiations Act (TINA) where the negotiated (other than sealed bidding procedure) contract price including profit or fee was increased by a significant amount because

1 . The contractor or a subcontractor at any tier furnished to the Government cost or pricing data that were not complete, accurate, and current as certified in the contractor's Certificate of Current Cost or Pricing Data .

2 . A subcontractor or a prospective subcontractor at any tier furnished to the contractor cost or pricing data that were not complete, accurate, and current as certified in the contractor's Certificate of Current Cost or Pricing Data or

3 . Any of the above parties furnished data of any description that were not accurate.

When defective pricing occurs, the Government is entitled to a price reduction to eliminate any significant overpricing related to the defective data. That reduction must consider increases in both cost and profit or fee related to the defective data. In addition to a price adjustment, the Government is also entitled to

1 . Interest on any overpayments that resulted from the defective pricing of supplies or services accepted by the Government .  

2 . A penalty equal to the amount of any overpayment, if the contractor knowingly submitted cost or pricing data which were incomplete, inaccurate, or not current.