Jenner & Block

Defective Pricing: The Truth in Negotiations Act

The Truth in Negotiations Act (TINA) has no counterpart in commercial contracting, and is in fact contrary to the way commercial companies negotiate prices.  In the private sector, one would rarely if ever disclose to the other side during a contract price negotiation all the elements of your company’s historical and current actual labor and material costs — both direct and indirect — or your management’s plans for future costs savings, manufacturing efficiencies, new business, pension reform, acquisitions, and other strategic and closely-held information.  But failing to that in a government contract covered by TINA could be a violation of law — known as “defective pricing” — subjecting your company to a unilateral price reduction and opening you up to civil and criminal penalties.   We help clients avoid defective pricing allegations by counseling them on the requirements of the Truth in Negotiations Act.  We help them respond to and negotiate post-award audit allegations of defective pricing.  And, if negotiations break down, we help them litigate — and win.

Counseling.  Our clients encounter TINA compliance issues on all types of contracts, and we are there to help:

  • Am I entitled to a TINA exemption?  How can I convince the contracting officer that cost or pricing data should not be required here?
  • Is particular information “cost or pricing data”?
  • If I fully support my proposal, will I fulfill all my TINA obligations?
  • How do I update my cost or pricing data submittal?  Do I have to prepare a new proposal every time I submit an update?
  • What data do I need to get from my subcontractors?

In addition, we provide effective, broad-spectrum or targeted training to new and existing employees.  We help clients set up their own training programs.  And we help clients develop complete compliance programs, including the policies, procedures, check lists, and day-to-day best practices that will help them comply with their TINA obligations.

Responding to post-award audit requests and allegations.  No matter how committed a company may be to TINA compliance, the company will still have to deal with post award audit requests.  No matter how careful, a company may have inadvertently failed to submit some important information.  And no matter how thorough its compliance efforts, a company still may face allegations of defective pricing.  We help clients respond to post-award audit inquiries, ensuring that the company provides thoughtful, well-researched, factual answers.  We help them manage the audit process.  If a post-award audit results in allegations, we help them assess the allegations, identify all applicable defenses, and convince the Government of the validity of those defenses.  Not every alleged non-disclosure is defective pricing!  For example, we help determine:

  • Even if the information in issue was not formally “submitted,” was it nevertheless given to, or actually known by, members of the Government’s negotiating team?
  • Was the information in issue “cost or pricing data”?
  • Did the Government actually rely on the “defective” data?  Can the contractor demonstrate that, had the cost or pricing data in issue been submitted, it would not have been relied upon?
  •  Has the auditor correctly assessed the impact of the non-disclosure on contract price?
  • What are the “offsets” that can completely negate the allegations.

When negotiations break down.  If a defective pricing allegation should be litigated, we are there to do the job right.  Our lawyers have litigated a range of defective pricing cases, including Civil False Claims (“qui tam”) allegations, to successful conclusion — whether that conclusion is:

  • a dismissal of the allegations;
  • a judgment on the merits, or
  • an acceptable settlement. 

For example, one of our attorneys played a pivotal role in the landmark 1995 victory in Lockheed Corp., 95-2 BCA ¶ 27,722 (ASBCA May 23, 1995), establishing the boundaries of “management decisions” required to be disclosed under TINA.  And negotiations sometimes take on a life of their own, since a strong pre-hearing showing can produce a successful ADR resolution.  We have done that, too.