Dentons' Government Contracts team recently profiled the increased dollar threshold for certified cost and pricing data, and the actions the Defense Pricing/Defense Procurement and Acquisition Policy (DP/DPAP) has taken to implement the increased threshold. This was welcome news, as it should ease the burden on contractors and reduce the number of negotiated contracts where certified cost and pricing data will be required.
The relief DP/DPAP gave with one hand, it appears to be taking away with the other. On June 7, 2018, DP/DPAP issued a memorandum ((Memorandum) directing new policy regarding cost or pricing data sweeps and certifications. Of particular note for contractors, the Memorandum instructs contracting officers to defer consideration of the impact of any cost or pricing data submitted by a contractor after price agreement is reached "until after award of the contract action in order to avoid delays." Cost or pricing data submitted after price agreement "shall be reviewed and dispositioned after award of the contract action" under FAR 15.407-1, Defective Certified Cost or Pricing Data, to determine if it rendered previously submitted certified cost or pricing data defective and entitles the Government to a price adjustment under FAR 52.215-10 or FAR 52.215-11. In other words, this policy may increase DoD defective-pricing claims. Additionally, if contractors are viewed as habitually submitting "sweep" data late, contracting officers are instructed to take appropriate action, which may lead to claims of a significant estimating system deficiency.
In addition to the foregoing, the Memorandum instructs contracting officers to request offerors execute the Certificate of Current Cost or Pricing Data (Certificate) "as soon as practicable, but no later than five business days after the date of price agreement." This five-day certification deadline will compress the timeframe available to ensure the Certification is accurate, thereby increasing the risk to prime contractors of a TCPD violation and/or Government defective pricing claim based on statements made in the Certificate.
Indeed, contractors' policies and procedures often require, after final agreement on price is reached but before the Certificate is executed, a post-negotiation sweep for updated cost or pricing data. This sweep attempts to identify and meaningfully disclose to the Government (or a higher-tier contractor) all cost or pricing data that was available as of the date of final price agreement (or the agreed-upon alternative date), including any cost or pricing data from subcontractors. Generally speaking, contractors try to complete post-negotiation sweeps as soon as possible after completion of negotiations. As noted in the Memorandum, however, prime contractors' submission of sweep data concurrently with or after price agreement "significantly contributes to the timeframe between price agreement and contract award[.]"
From DP/DPAP's perspective, this practice causes delays and, while prime contractors are collecting and submitting cost or pricing data post price agreement, these submissions are untimely because updated data is to be provided before agreement on price. This practice, therefore, from DP/DPAP's perspective has increased acquisition lead times. To minimize the risks of TCPD violations and/or government defective pricing claims, prime contractors should exercise care and attention to detail before certifying their cost or pricing data as current, accurate and complete.
Based on the Memorandum, prime contractors should carefully review solicitations for implementation of the five-day submission requirement and, if necessary, adjust their policies and procedures so that sweep data will be submitted before agreement on price. And subcontractors should expect that the primes' response to the compressed submission timeframe will be to waste no time adjusting their purchasing system practices to flow this new policy down into the supply chain.
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