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For many reasons, including those mentioned above, contractors should avoid submitting certified cost or price data unless necessary. FAR 15.403-1 provides exceptions to the requirements for certified cost or price data and points out that contract agents do not need such data if one of the exceptions is met, for example.B.: Parent heading: 15,407 ranges of costs or special prices. 2. In the case of reimbursement contracts and all fixed-price contracts, with the exception of fixed-price contracts and fixed-price contracts with an economic adjustment of prices, payments to subcontractors that are higher than they would have been if there had been no incorrect cost or price data certified by the subcontractor constitute the basis for the non-inclusion or non-recognition of costs in accordance with the clauses laid down in points (b) and (c) of 15.408. The government has a persistent and direct financial interest in such payments, which is not affected by the initial agreement on the price of the main contract. CADAM requires auditors to exercise professional judgment in determining whether a defect is material. DCAA auditors verify not only the prime contractor`s prices, but also those of all subcontractors. The manual states that « the prime contractor is responsible for price reductions at subcontractors, even if he was not aware of the erroneous data. » 1. Where a main contractor includes incorrect subcontracting data in the determination of the price, but subsequently subcontracts (or does not subcontract for the works) to a cheaper subcontractor, any adjustment to the price of the main contract due to incorrect subcontract data shall be limited to the difference (plus applicable indirect cost and profit increases) between the subcontract price used to set the price of the main contract. and either the actual price of the subcontract or the actual costs to the contractor, unless it is a subcontract, provided that the data on which the actual price of the subcontract is based are not themselves incorrect. This case provides insight into the mindset of DCAA and Defense Contract Management Agency (DCMA) officials when negotiating contracts and trying to claim erroneous prices.

It also provides entrepreneurs with valuable information about possible objections to erroneous price allegations. DCAA intends to triple the number of failed price controls of contractors in fiscal 2020, according to Bloomberg News. DCAA plans to conduct up to 60 truth audits in negotiations in the next fiscal year, compared to 20 in fiscal 2019 and 21 in fiscal 2018. In addition to the financial implications, companies may face a potentially negative perception that the government has of companies that have submitted erroneous data on costs or certified prices. Finally, if the government can prove fraudulent intent, the personnel involved could be prosecuted. Therefore, this is an area that should be taken seriously. The DCAA`s renewed focus on contractor cost and price data is important in several ways. (2) In making a price adjustment, the customer shall take into account when the cost or certified price data was reasonably available to the contractor and the extent to which the government relied on the erroneous data. Second, on October 6, 2020, Kim Herrington also issued a memorandum titled « Call for Quarterly Reporting of Contractors` Refusals of Requests for Data Other than Certified Cost or Pricing Data to Assess the Reasonableness of Prices for Department of Defense Contract Awards. » The memorandum « reaffirms the need » for regular reporting by contractors who refuse to provide data « other than certified cost or price data. » Chapter 14 of the DCAA Contract Audit Manual (DCAAM) establishes procedures and guidelines for the DCAA`s management of TINA compliance audits. To prove incorrect pricing, the audit must establish five points: (B) Consider the date of each overpayment (the overpayment date for this interest calculation is the date on which payment was made for the related completed and accepted contractual elements; or, in the case of incorrect prices for subcontracts, the date on which payment was made to the supervisor, on the basis of the main declarations or deliveries of the progress of the contract, which included payments for a completed and accepted subcontract); and in the fall of 2019, Bloomberg News reported that the Defense Contract Audit Agency (DCAA) plans to conduct a significantly higher number of erroneous price audits in 2020.

We thought it would be helpful to explain what exactly a defective price audit is and what steps contractors can help avoid or prepare for such an audit. 4. Subject to points (b) and (6) of this Subsection, the contracting authority shall authorise compensation for any underestimated costs or price data submitted in support of price negotiations up to the level of the Government`s right to excessive price data resulting from the same price action (e.g. B the initial pricing of the same market or the pricing of the same order of modification). In late 2020, the Office of the Under Secretary of Defense (« OUSD ») issued two memoranda on (1) the creation of a new audit team for erroneous pricing within the DCMA, and (2) the need for the DOD to collect data on contractors who refuse to provide « non-certified cost or price data. » The memoranda are available at DCMA Defective Pricing Team and Reporting of Contractor Rejection of Request for Data Other Than Certified Cost or Pricing Data. Given that the DCAA claims to have made significant progress in resolving the backlog of audits of costs incurred, contractors can expect an increase in erroneous pricing review activities. Due to the fact that erroneous price checks are specific, the new DCMA team is likely to rely on the results of the DCAA audit. The DCMA team will not have been involved in the contract negotiations and will not have a full assessment of the relevant facts. Contractors are therefore well advised to take preventive measures prior to these audits by redoubling their efforts to document their disclosures during negotiations, as well as concessions that could reduce a possible erroneous price claim by the government. (iv) Certified cost or price data were required; However, the contractor or subcontractor has not provided a certificate of current costs or price data in relation to the contract.

Contractors should pay attention to DOD`s efforts to obtain cost data (as part of « non-certified cost or price data ») and impose arbitrary profit restrictions. Contractors must weigh the costs and benefits of rejecting a request for voluntary submission of « data other than cost or price data, » which leads to inclusion in some sort of « list, » as opposed to possible government attempts to use that data to reduce margins. If a contractor agrees to provide « cost or price data other than certified cost or price data, » they should still remind the Department of Defense that any effort to use cost analysis to reduce profits instead of price analysis to negotiate a fair and reasonable price is inconsistent with regulation. The DCAA`s focus on erroneous pricing marks a significant change that highlights the risks for defense contractors who submit certified cost or pricing data to the government. This update provides insight into erroneous pricing and explains why DCAA`s increased attention is important. TINA and the regulations set out in FAR 15.403 require contractors to provide cost or price data to the subcontractor if a certain dollar threshold is exceeded and no exceptions apply, and confirm that the data is accurate, complete and up-to-date. DCAA is responsible for carrying out audits of contracts submitted to TINA. (ii) the contracting entity should have known that the certified cost or price data in question were incorrect, even if the contractor or subcontractor did not take positive measures to draw the attention of the contract agent to the nature of the data. f) If the government audit reveals erroneous data on costs or prices certified by subcontractors, the information necessary to support a reduction in principal and subcontracting prices may only be available from the Government. .

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