Q. What is defective pricing?
A. Defective pricing, under the Truth in Negotiations Act (TINA), occurs where a successful bidder’s contract price is significantly increased because the contractor or subcontractor submitted to the government or to a prime contractor pricing data that was not complete, accurate and current as specified in the contractor’s Certificate of Current Cost or Pricing Data. See FAR 52.215-10(a). All contracts of $500,000.00 or more require bidding contractors to submit a Certificate of Current Cost or Pricing Data with their bid or proposal.
Q. What are the penalties for engaging ion defective pricing on a government contract?
A. If a contractor has engaged, whether knowingly or not, in defective pricing, the government is generally entitled to a price reduction to remedy any overcharging caused by the submission of defective pricing data. In addition to any adjustment in price, the government is often entitled to interest on any overpayments made by the government based on defective pricing data, and penalties in an amount again equal to the overpayments. Such penalties are assessed by the government against contractors who knowingly submit cost or pricing data that is not accurate, complete and current.
Contractors must be aware of the potential for inadvertently submitting incomplete or inaccurate cost and pricing data to the government. The government takes overpayments based on defective pricing seriously, and will aggressively pursue contractors found to have engaged in defective pricing practices. A contractor’s liability can in some cases extend beyond the repayment of any overcharges, and can include fraud claims against the contractor.
