By memorandum dated June 7, 2018, Shay Assad, DoD’s Director, Defense Pricing/Defense Procurement and Acquisition Policy, has reversed decades of procurement practice that has been embraced by industry and the government alike in attempting to manage the often unmanageable process of providing the government with cost or pricing data that is current, accurate and complete as of the date of agreement on price. Recognizing that inherent “lag time” often makes it impossible for contractors to provide “up to the minute” data in real time at the point when the parties “shake hands,” contractors have customarily performed immediate post-handshake “sweeps” of their databases to provide the government with any data that may have escaped the pre-handshake dragnet. The government, in turn, has customarily accepted the data, evaluated its impact on the price, and negotiated, if and as appropriate, adjustments 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, possibly, under the False Claims Act. Everyone was happy.

Not anymore.

Under the June 7th memorandum, contracting officers are generally to request the TINA certificate within 5 days of the agreement on price and thereafter to ignore any sweeps data until after the award of the contract, at which point the government will evaluate the sweeps data to determine whether it rendered the pre-hand shake data defective and entitles the government to a price adjustment. And let’s not underestimate the ability of some enterprising plaintiff to allege that execution of a certificate with the knowledge of outstanding sweeps activity and price impacts is sufficiently reckless to justify an FCA complaint.

This is absurd. OSD is directing contracting officers to ignore data being proffered by the contractor for the purposes of compliance with TINA for the purpose of manufacturing a claim against the contractor under that statute. The memorandum conjures up images of contracting officers behaving like the universally recognized three monkeys strategically placing their hands over their eyes, ears and mouths so that they can later claim “I had no idea!” Or perhaps the image that most parents will recognize – a toddler who puts his hands over his ears and screams “I can’t hear you” when he does not like the message being transmitted by the parent.

Seriously, are these the self-images that any rational government wishes to project?

Assuming that the government is unwilling to recant this latest bit of irrationality, what is the recourse for a contractor? Well, there are several options. None is particularly compatible with a cooperative supplier/customer relationship, but – then again – OSD has thrown the first stone in this episode –

  • Postpone the handshake until the sweep has been completed. Establish a provisional price and make the government wait for the handshake date. There may still be some data that lag, but they will be far more limited.
  • Agree on an effective date for the certificate that is earlier than the handshake date. This is permissible under FAR 15.403-4(b)(2) and it could eliminate from the scope of the certificate some of the “lag time” data that the sweeps are designed to capture.
  • “Just say no.” Advise the government prior to award that the handshake is off unless and until the government accepts, evaluates, and negotiates the impact of the sweeps data. The customer won’t like it; the folks who book the business won’t like it; and Shay Assad won’t like it. But it will work, and that matters.