Understanding and Complying with TINA

by Terry S. Nuzzo, CPA

This is article is a companion article to the one appearing in our April/June 2006 Newsletter by the same title. It continues the TINA series we began in our January/March 2006 newsletter. The first article in the series discussed cost or pricing data requirements and what constitutes cost or pricing data.  In this article we  discuss how contractors should comply with the TINA requirements for adequate submission and disclosure of cost or pricing data.

Complying with TINA submission requirements begins with clear understanding of what data must be submitted; and when, to whom, and how should cost or pricing data be submitted.

 What Data Must be Submitted?

The fundamental cost or pricing data submission requirement is that all reasonably available current, accurate, and complete cost or pricing data should be submitted and disclosed.  What constitutes reasonably available often depends on the type of cost or pricing data, the contractors’ accounting and estimating systems, and any specific closing or cutoff dates used by the contractor.  However, the overarching concept of reasonably available will hinge on the fact that if the cost or pricing data were known to exist at a reasonably high level of the company, then it will be considered reasonably available.  Furthermore note that a contractor’s negotiator does not need to have personal knowledge of more current, accurate, and complete cost or pricing data to be considered reasonably available.  Also, an additional consideration in determining what data must be submitted is that if data within a contractor’s organization are on matters significant to contractor management and to the Government, the data will be treated as reasonably available cost or pricing data.  The determination of what data must be submitted can often be difficult to assess; however, the bottom line is that if a contractor wishes to minimize the potential for subsequent defective pricing allegations and if the data is significant and meets the definition of cost or pricing data, a contractor most likely will be better off submitting and disclosing the data.

 When Should Cost or Pricing Data be Submitted?

Submission of cost or pricing data is a continuous process, it starts when a proposal is submitted, continues during the Government audit and anytime before and during negotiations.   Ultimately, all reasonably available cost or pricing data must be submitted as of the date of agreement on price (certification date) or an earlier agreed to cutoff date which is as close to the price agreement date as practical.  However, note that a contractor does not have to disclose more current, accurate, accurate, and complete cost or pricing data that comes available after the price agreement date or another agreed to cutoff date.

To Whom Should the Data be Submitted?

 Cost or pricing data must be submitted to the contracting officer or his/her designated representative, for example: someone who is substantially involved in the proposal evaluation or negotiation process.  Obviously cost or pricing data submitted directly to the Contracting Officer would meet the requirement.  Additionally, the Contracting Office Cost/Price Analyst and DCAA Auditor are also considered designated representatives if cost or pricing data were submitted to them during their proposal evaluation process.  However, if cost or pricing data was provided to someone else in the government who was not actively involved in the proposal evaluation or negotiation process, then the requirements for adequate submission would not most likely have been met.    

How Should the Data be Submitted?

 The Government must be clearly advised, or have knowledge of the cost or pricing data.  Merely making the books and records available to the Government does not meet the FAR submission requirements.  Data must be submitted and disclosed in such a way that places the Government on equal footing with the contractor in regard to making pricing decisions.  A contractor normally does not have to analyze data for the Government; however if the Government is unable to do so and if the contractor can and has done the analysis, then the information must be disclosed.  The overarching concept is that for the government to be on equal footing with the contractor in the evaluation and negotiation process, the government is entitled the best cost or pricing data available to the contractor, not the second best.

 The general cost or pricing data submission requirements are discussed in FAR Clauses 52.215-20/21.  These two contract clauses instruct the contractor to provide data in accordance with FAR 15.408, Table 15-2.   This FAR requires contractors to submit a proposal index, show the relationship between total price and contract line items, provide cost element summaries by contract line item, identify any forward pricing rate agreements used and any incurred costs to-date.  In addition, contractors must disclose any information reasonably required to explain the estimating process, including judgmental factors applied and the mathematical or other methods used in the estimate, including those used in projecting from known data; and the nature and amount of any contingencies included in the proposed price.  FAR 15.408, Table 15-2 also provides a comprehensive discussion of the required cost element breakdowns which is too detailed to include in this article; therefore, refer to the FAR 15.408, Table 15-2 for additional information.
 

What are the Subcontractor Cost or Pricing Data Submission Requirements?

 Any contractor required to submit cost or pricing data and a certificate of current cost or pricing data must obtain cost or pricing data from its subcontractors and prospective subcontractors. This requirement applies for any subcontract, purchase order, or modification expected to exceed the cost or pricing data dollar threshold.  In addition, the contractor must submit with its cost or pricing data the subcontractor data if the subcontract cost estimate is $10 million or more, or the cost estimate is more than the applicable cost or pricing data dollar threshold and more than 10 percent of the prime contractor’s proposed price.  The contractor only needs to submit the subcontractor cost or pricing data for the subcontractor most likely to receive the subcontract award.  In addition, contractors are required to perform a price or cost analysis of its subcontractor’s cost or pricing data and to provide the results of the price or cost analysis to the Government as part of the contractor’s cost or pricing data submission. 

Can the Cost or Pricing Data Submission be Audited?

 FAR 15.408, Table 15-2 provides that by submitting the proposal, the contractor is granting the Contracting Officer or his/her designated representative, generally DCAA the right to examine records that formed the basis for the pricing proposal.  Examination may include those books, records, documents, and other types of factual information (regardless of form or whether the information is specifically referenced or included in the proposal as the basis for pricing) that will permit an adequate evaluation of the proposed price.  In addition, note that both FAR and TINA provide the government, for up to 3 years after final payment, the right to examine contractor records to evaluate for TINA compliance.  This right extends to the contract or subcontract proposal, proposal discussions, contract or subcontract pricing, and contract or subcontract performance.  

Summary

 Understanding and complying with TINA is imperative to avoiding subsequent defective pricing allegations.  We at PNWC hope that our newsletter articles on this subject will help shed some light on the TINA requirements.  In subsequent newsletter articles, we will provide additional discussions that will help you navigate the TINA minefield.  If you have any questions, feel free to contact us.