While there has been extensive coverage of the fact that Truth in Negotiations Act (“TINA”) thresholds for DoD were increased from $750,000 to $2M and certain civilian agencies have adopted the thresholds either via a FAR deviation or on an ad hoc basis, we have seen an increase in clients falling into insidious TINA traps—task orders on competitively awarded IDIQ contracts that require new labor categories or requirements not contemplated under the initial RFP.
Specifically, we have seen instances where the agency awarded clients competitive FFP IDIQ contracts under less-than-stellar or poorly thought out RFPs before realizing that new labor categories or other types of work were required. With these, the government adds the new items through task orders or modifications to the IDIQ contract itself. Many companies do not think twice before providing the government with fully loaded rates and pricing when this occurs. It is an FFP contract after all, and the original award was competed, right? Wrong.
TINA requires that the government request and that contractors provide cost and pricing data for any new contract or modification to a contract awarded on a non-competitive basis for greater than $750,000 (or $2M for DoD or civilian agencies under a FAR deviation). This means that, even if the underlying IDIQ contract was awarded competitively, if the government adds work to a contract, the CO should ask for cost and pricing data to support the new prices and that there should be a more fulsome negotiation as to the pricing because it was not vetted through competition.
So, what if the CO fails to request any pricing information? In that case, the language of TINA and its implementing regulations suggest that a contractor may not be required to provide the additional data. Not providing this, though, would put the contractor at risk of a clawback during a DCAA or other audit if it were found that the additional pricing was not fair or reasonable. It may still be possible to make a case that the pricing was fair and reasonable, but if the contractor is unable to say the CO saw the cost buildup and reviewed the information, the contractor cannot stop the government outright. This means the contractor will get dragged into a highly subjective battle where the parties end up arguing over the reasonableness of pricing. And, because the government has already spent time and money on an audit, they will likely be digging for any justification to find an overpayment—if for no other reason than to justify the cost of the audit. This is obviously not a position businesses want to find themselves in.
While you may want to take the business risk of not providing information if it is not requested, know that it is just that—a risk. So go into the situation with eyes wide open.
About the Author: Cy Alba is a partner and member of the Government Contracts and Small Business Programs groups. He may be reached at [email protected].