PBMares Accounting Blog

Explaining the Truthful Cost or Pricing Data Act: What Government Contractors Need to Know

Posted by Neena Shukla, CPA, CFE, CGMA, FCPA on Oct 30, 2017 3:08:57 PM

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For government contractors, compliance with the Truthful Cost or Pricing Data Act (TINA) is a critical part of staying on the right side of federal contracting and acquisition requirements. But what is the law, and what does it do? Here’s a brief primer.

Let’s start with the obvious: Why is the Truthful Cost or Pricing Data Act called “TINA”?
Because it started out as the Truth in Negotiations Act. TINA was passed in 1962 because government agencies were concerned that they were not getting a fair price from suppliers. However, it wasn’t until the mid-1980s that the government began treating defective pricing as an indication of criminal fraud, especially in single-supplier situations where the government doesn’t always know if it’s paying a fair and reasonable price. In 2013, the government renamed the law, but the old acronym stuck. Understandably, nobody chose to start calling it “TCoPDA.”

That makes sense. Do all contractors have to follow TINA?
TINA generally applies to negotiated contracts valued above $750,000. This includes modified contracts that increase the value above $750,000 and subcontracts greater than $750,000.

There are few instances in which a contractor can claim exemption from TINA:

  • if there’s adequate price competition and the government knows the price is fair,
  • prices are set by law or regulation, or
  • the item the government is seeking is a commercial item.

A fourth—although extremely rare—claim to exemption is if the head of a contracting company provides evidence that their specific services should be waived.

What exactly is—or are—“cost or pricing data”?
TINA requires contractors to purchase supplies and services at prices deemed fair and reasonable and establishes the requirements for submission of cost or pricing data.

Cost or pricing data includes vendor quotes, nonrecurring costs, information on changes in production methods, estimated resources to attain business goals and operation costs. Contractors may also be asked to provide sales data or other information to explain price estimates.

How is TINA enforced, and by whom?

Contractors may be asked by the government Contracting Officer (CO) to certify submitted cost or price estimates to prove its accuracy and completeness as of the date of the agreement on the contract price or other agreed-upon date. While TINA allows the government to access contractor cost data so it can independently evaluate a contractor's price proposal, TINA does not require the government to disclose any information to contractors.

TINA gives government COs discretion to require cost or pricing data, even if there’s an indication of price competition. However, contractors can challenge these requests. In such cases, exemptions should be requested and the exemption should be provided in writing.

Contractors are not liable for the accuracy of any estimates included in price proposals or negotiations. However, it’s crucial to the prevention of defective pricing, fraud or false claims allegations by the government that all estimates are disclosed.

If such allegations occur, the prime contractor can be held liable for defective data even if the data was certified and a certificate signed.

If the government determines a contractor provided defective pricing, the government gets a price reduction, collects interest from the date of overpayment and assesses penalties on the contractor for submitting defective data.

TINA also grants the government the right to audit and specifies the format a proposal must be submitted. However, this does not apply to subcontractors. The government may audit subcontractors but any price reductions determined will apply to the prime contractor.

Contractors should be aware of the six year statute of limitations that applies to contractors and the government under federal acquisition regulations. The government CO must issue a written decision on any government claim against a contractor within six years after the accrual date of the claim (i.e. the date when all events that fix the alleged liability of either the government or the contractor and permit assertion of the claim were known).

How can contractors protect themselves?

Contractors must take steps to protect themselves early on in the certification process. This can be done by having an estimating system that contains the most up-to-date (no more than 30 days old) cost or pricing data, labor rates and projected burden rates. Contractors should not submit certification data until they can confirm there’s no new information that could impact the costs or prices associated with their services.

There are additional steps government contractors can take to minimize cost or pricing challenges or avoid applicability. Contractors can pursue “cut-off date” agreements (allowed by TINA but used infrequently) and obtain pre- and post-agreement certifications.

By carefully tracking cost or pricing estimates from the beginning of the contracting process, contractors limit their liability and potential false claims allegations by the government.

Topics: Government Contracts, TINA

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Neena Shukla, CPA, CFE, CGMA, FCPA

Neena is an assurance partner and government contracting niche leader at PBMares, LLP, in Fairfax. She is also the leader of the firm’s technical and emerging issues group.

For more information, please contact the author at [email protected] or visit: www.pbmares.com.

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