Government Contracting by — TINA Threshold & Exception

The Truth in Negotiations Act (now codified at 10 U.S.C. 3702) requires contractors to submit certified cost or pricing data for negotiated procurements when the value exceeds the TINA threshold, currently set at $2 million. This threshold applies to prime contracts, subcontracts, and modifications that are expected to exceed the threshold amount. The requirement ensures the government has access to accurate, complete, and current cost data before agreeing to a price.

When a contractor fails to submit accurate, complete, and current cost or pricing data, the government is entitled to a price reduction equal to the overstatement in price caused by the defective data, plus interest. Defective pricing reviews are conducted by DCAA and can be initiated up to three years after final payment. The Price Reduction for Defective Certified Cost or Pricing Data clause (FAR 52.215-10/11) provides the contractual mechanism for recovering overpayments.

When TINA applies, contractors must submit "certified cost or pricing data" as defined in FAR 2.101 — all facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. This includes vendor quotations, nonrecurring costs, changes in production methods, make-or-buy decisions, unit-cost trends, and data on management decisions that could affect future costs. The data must be current, accurate, and complete as of the certification date.

TINA requirements flow down to subcontracts expected to exceed the $2 million threshold. The prime contractor is responsible for ensuring that subcontractors submit certified cost or pricing data when required, unless an exception applies. The prime contractor's contracting officer must approve any subcontractor request to waive or modify TINA requirements, and the prime bears liability for defective pricing at the subcontract level.

TINA does not apply to contracts or subcontracts for the acquisition of commercial products or commercial services as defined in FAR 2.101. This is the most commonly invoked TINA exception and reflects the policy that commercial market pricing provides sufficient basis for determining price reasonableness without requiring certified cost data. The contracting officer must determine that the item meets the commercial item definition.

TINA does not apply when the contracting officer determines that the price is based on adequate price competition. Adequate competition generally exists when two or more responsible offerors submit priced offers responsive to the solicitation's requirements, and award is made to the offeror whose proposal represents the best value. This exception recognizes that competitive market forces serve as a substitute for cost analysis.

TINA does not apply when the price is set by law or regulation. This exception covers situations where the government has no discretion in pricing because the price is established by statute, regulatory body, or other legal authority. Examples include utility rates set by public utility commissions, postal rates, and prices controlled by other governmental pricing mechanisms.

The head of the contracting activity (HCA) may waive the requirement for certified cost or pricing data in exceptional cases. A waiver must be supported by a written determination that the waiver is in the best interest of the government and must explain why the pricing action cannot proceed with certified cost data. Waivers are rare and must be reported to Congress when exercised for DoD contracts.