DoD Policy Memorandum Rejects 'Sweeps' Data.

• Author: Chierichella, John
• Position: Ethics Corner

Complying with the Truth in Negotiations Act, 10 U.S.C. [section] 2306a, just became a whole lot harder for defense contractors.

The law, also known as TINA, was originally enacted by Congress in 1962. It aims to place the government on a level playing field with contractors in price negotiations. Subject to certain exceptions, the statute requires contractors to disclose cost or pricing data that are current, accurate and complete as of the date of agreement on price--sometimes called the "handshake" date. It also requires contractors to submit a certification of compliance with this requirement.

Cost or pricing data are defined broadly as facts that reasonably prudent buyers and sellers would expect to affect price negotiations significantly and contribute to the soundness of estimates of future costs. They include vendor quotes, production costs, learning curves, estimates to achieve business objectives, and management decisions.

Recognizing the inherent lag time between the creation of the data and its availability to the contract negotiator, contractors have customarily performed immediate post-handshake "sweeps" of their databases and functional organizations to provide the government with any data that may have escaped the pre-handshake dragnet. The government, in turn, has customarily accepted the information, evaluated its impact on price, and negotiated, if and as appropriate, an adjustment to the price.

The net result was that the government had all the data, its impact on price was addressed, and the contractor avoided liability under the Truth in Negotiations Act and the False Claims Act. Everyone was happy.

Not anymore.

In a memorandum dated June 7, the Defense Department reversed decades of procurement practice that has been embraced by industry and the government alike.

The memo, issued by Director of Defense Pricing/Defense Procurement and Acquisition Policy Shay Assad, aims to reduce acquisition lead time by eliminating the time honored practice of conducting Truth in Negotiations Act sweeps after the handshake date.

Data that are not current, accurate and complete as of the handshake date are said to be defective. The consequences of defective pricing can include price reductions, penalties and even False Claims Act allegations based on false certification.

It is impossible for most contractors to provide up-to-the-minute cost or pricing data. Even in the information age, it takes time to make its way to the individual...