Cost Corner

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Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing regulations that apply to Government contractors. This is the second installment of a two-part article on the Truthful Cost or Pricing Data Statute, commonly known by its former name, the Truth in Negotiations Act (TINA).[1] As a reminder, TINA is a procurement statute that requires contractors: (1) to disclose information – known as cost or pricing data – when negotiating certain types of contracts, subcontracts, and modifications; (2) to certify that those data were accurate, complete, and current as of the date of agreement on price or other date agreed to by the parties (the “relevant date”); and (3) to agree to a contract clause entitling the Government to a price reduction if the contractor furnishes cost or pricing data that are defective, i.e., inaccurate, incomplete, or not current.[2]…

Continue Reading Government Contracts Cost and Pricing – The Truth in Negotiations Act … or Whatever the Kids Are Calling It These Days (Part 2)

Welcome back to the Cost Corner, where we address the complex cost and pricing regulations that apply to Government contractors. The last edition of the Cost Corner provided an overview of the regulatory framework for Government contracts cost and pricing, including the Truthful Cost or Pricing Data Statute,[1] the Federal Acquisition Regulation (FAR) Cost Principles,[2] and the Cost Accounting Standards (CAS).[3] This edition of the Cost Corner takes a closer look at the Truthful Cost or Pricing Data Statute, commonly referred to by its former name, the Truth in Negotiations Act (TINA).…

Continue Reading Government Contracts Cost and Pricing – The Truth in Negotiations Act … or Whatever the Kids Are Calling It These Days (Part 1)

Welcome to the Cost Corner. This is the first in a series of articles exploring the complex cost and pricing regulations that apply to government contractors. This article provides an overview of the regulatory framework and its rationale. Subsequent articles will explain specific aspects of the regulations in further detail and provide periodic updates on new developments.…

Continue Reading Government Contracts Cost and Pricing – A Brief Overview of the Regulatory Landscape

On June 12, 2018, the Department of Defense (“DoD”), the General Services Administration, and NASA proposed a new rule that would limit the “adequate price competition” exception to certified cost or pricing data requirements on all DoD, NASA, and Coast Guard procurements. Currently, FAR 15.403-1 prohibits contracting officers from requiring contractors to submit certified cost or pricing data to support a contract action when the contracting officer determines that the prices agreed upon are based on “adequate price competition,” which the regulation defines in one of three ways:…
Continue Reading Proposed Rule Would Create a Separate, More Restrictive Standard for “Adequate Price Competition” for the DoD, NASA, and the Coast Guard

By David Gallacher 

Last month we wrote about a provision in the proposed 2013 National Defense Authorization Act (“NDAA”) that would have given the Defense Contract Audit Agency (“DCAA”) statutory authority to demand a company’s internal audit reports in order to audit the efficacy of a company’s internal business systems. Surprisingly, the authorization, as originally proposed, was modified in the final legislation. While Congress directed DCAA to issue new guidance regarding auditor access to internal audit reports, Congress stopped short of giving DCAA actual authority to demand such reports. As such, contractors will remain at loggerheads with DCAA auditors who try to exceed their statutory authority.…

Continue Reading Smash & Grab Redux – Congress Seems to Give DCAA Permission But Forgets to Give It Authority

By David Gallacher 

The Defense Contract Audit Agency (“DCAA”) has long sought access to contractors’ internal audit reports in connection with the routine audit of contractors’ business systems. Contractors have, in most cases, successfully resisted requests for such access on the grounds that DCAA has no statutory authority to request such documents. But that may soon change. Section 843 of the Senate version of the 2013 National Defense Authorization Act (S. 3254) would grant DCAA broad access to contractor internal audit information.…

Continue Reading Smash & Grab – DCAA Poised to Gain Access to Contractor Internal Audit Reports

By David S. Gallacher and Kerry O’Neill

Last April, we wrote about proposed changes to Department of Defense ("DoD") reporting requirements for independent research and development ("IR&D"), raising concerns about how the proposed change would tie recoverability of IR&D costs to new reporting and disclosure requirements. Recently, Defense Federal Acquisition Regulation Supplement ("DFARS") 231.205-18(c) was finalized, with changes. See 77 Fed. Reg. 4632 (Jan. 30, 2012). This final rule is a mixed bag that got some things right, but also leaves some of the most serious issues unresolved.…

Continue Reading Final Rule for IR&D Reports Fails to Address Most Serious Questions

By David Gallacher and John Bonn

On January 2, 2011, the President signed the James Zadroga 9/11 Health and Compensation Act of 2010, Pub. L. No. 111-347, which set up a relief fund for victims, first responders, and construction workers who were injured in the September 11 terrorist attacks in New York City. To pay the estimated $4.3 billion price tag for the Act, Section 301 of the Act imposed on any foreign person a tax equal to 2% of federal procurement payment received by that foreign person. See 26 U.S.C. § 5000C. In addition, any person who makes or otherwise is a withholding agent with respect to such a payment is required to withhold the 2% tax from the federal procurement payment and remit the tax withheld to the Internal Revenue Service (“IRS”) under tax laws and regulations applicable to withholding of United States taxes from payments made to foreign persons. Although the tax has been in place for more than 14 months and the IRS has issued a revised Form 1042 with revised instructions to implement withholding and reporting obligations, the Government is only now turning to the details of how this tax will be accounted for in connection with the procurement process. And – as is often the case – there is quite a lot of devil in those details.…

Continue Reading Terrorism and Taxes – Proposed FAR Rule Imposes 2% Tax on Foreign Offers to Fund 9/11 Relief Fund

By John W. Chierichella and Alexander W. Major

Under FAR 42.709-1, penalties for expressly unallowable costs are to be waived when the expressly “unallowable costs under this proposal” are less than $10,000. Although there are other bases for the waiver of the penalties, those other bases are discretionary. The $10,000 exclusion is mandatory.…

Continue Reading Penalties for Expressly Unallowable Costs – The ASBCA Reconsiders and Ups the Ante for Contractors

By David S. Gallacher

Those familiar with Government contracting know at least a little bit about the elusive and fickle regulatory requirements for Independent Research and Development (“IR&D” or “IRAD”) costs. IR&D is a means by which the U.S. Government supports a Contractor’s independent R&D efforts. By reimbursing a Contractor’s independent R&D costs, the Government long has hoped to advance the state of the art without stifling a contractor’s innovation under the weight of a federal bureaucracy, while simultaneously banking on the fact that the U.S. Government also will benefit from the technology advancements. But two recent developments may change the essential nature of IR&D, making it less “independent” and more “dependent” on Government rights and oversight. To quote Bob Dylan – “the times they are a changin’.” 
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Continue Reading The Times They Are A Changin’ – Independent Research and Development May Not Be So “Independent” Any More

By Louis D. Victorino

A great deal of discussion has transpired regarding recent legislation that reportedly could alter significantly the established “follow-the-funds” test used for the allocation of intellectual property rights in data developed under a government contract. The legislation involved is a provision of the National Defense Authorization Act for Fiscal Year 2011 (the “Act”), signed into law on January 7, 2011. In particular, Section 824 of the Act provides “Guidance Relating to Rights in Technical Data” and, more importantly, amends Section 2320(a) of Title 10 of the United States Code, the provision that defines the allocation of rights in intellectual property under Government contracts.
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Continue Reading Frankenstein’s Monster: Data Rights Changes Adopted In The National Defense Authorization Act For Fiscal Year 2011