Navigating Truthful Cost or Pricing Data Obligations: What Prime Contractors Must Know When Contracts Exceed $2 Million

The Truth in Negotiations Act (TINA), now formally referred to as the requirement to submit Truthful Cost or Pricing Data, remains one of the most consequential regulatory obligations facing federal government prime contractors—particularly for those executing contracts that exceed $2 million in value. For prime contractors, understanding and complying with these requirements is not optional—it is essential to maintaining government trust, preserving profitability, and avoiding costly post-award audits or legal exposure.

Originally enacted in 1962 as Public Law 87-653, TINA was born out of the recognition that government negotiators often lack access to the same cost and pricing data that contractors possess. To level the playing field, Congress imposed a statutory requirement on contractors—not the government—to disclose cost or pricing data that is current, accurate, and complete as of the date of price agreement. Importantly, the law does not restrict what a contractor may charge; rather, it mandates disclosure of the underlying facts that could materially influence the negotiation of price. This distinction is critical: TINA is a disclosure statute, not a pricing statute, and prime contractors bear the full burden of compliance.

The law’s impact has been sharpened over the decades through both legislative updates and administrative guidance. The Federal Acquisition Streamlining Act (FASA) of 1994 clarified that certified cost or pricing data is only required in certain non-competitive situations. The threshold for when TINA applies was raised in 2018 from $750,000 to $2 million, reflecting inflationary adjustments and acquisition reform efforts. Today, both the Department of Defense and civilian agencies apply the same threshold. When a contract or subcontract exceeds this amount and no exemption applies, the contractor is required to submit certified cost or pricing data and must execute a certification attesting that the data provided is truthful, current, and complete.

For prime contractors, the implications of this requirement extend deep into subcontracting relationships. If a subcontract exceeds the threshold and is not exempt—for example, because it does not involve commercial items or was not awarded through adequate price competition—then the prime contractor must obtain certified cost or pricing data from the subcontractor. Moreover, if that data is later found to be defective, the prime remains liable to the government, even if the error originated with the subcontractor. This places significant responsibility on the prime not only to comply internally but to actively manage its subcontractor base, ideally through indemnification clauses, diligent review processes, and open communication about the risks of non-compliance.

Understanding what qualifies as cost or pricing data is fundamental. Under FAR 2.101, such data includes all factual information that a prudent buyer or seller would reasonably expect to affect price negotiations. It must be distinguished from mere judgment or opinion. For example, vendor quotations, historical pricing trends, changes in production methods, unit cost efficiency data, and forward-looking projections based on documented assumptions all qualify. Engineering estimates, risk models, and speculative analyses, by contrast, do not constitute cost or pricing data and are not certifiable under TINA. Still, the contractor is free to rely on such methods in preparing its proposal; the law imposes no requirement that a contractor use the disclosed data in forming its prices. Disclosure is mandatory, usage is not.

The consequences of failing to meet these requirements can be severe. Defective pricing occurs when the contractor fails to disclose data that was current, accurate, and complete as of the date of agreement and that was reasonably available at that time. If the government can prove that this non-disclosure resulted in an inflated contract price and that it relied on the defective data in negotiating the contract, the contracting officer has the right to retroactively reduce the price. This remedy is enforced under the FAR 52.215-10 “Price Reduction for Defective Certified Cost or Pricing Data” clause, and can include not only repayment of the overstated amount but also interest and, in some cases, penalties for knowingly submitting false data. Before pursuing penalties, the contracting officer must consult legal counsel, but the potential exposure remains significant, especially given the renewed emphasis from DCAA on defective pricing audits.

A typical DCAA post-award audit will begin with a notice requesting the contractor’s proposal, significant subcontractor pricing, certifications, and incurred cost data. The audit then evaluates whether the submitted data was indeed current, accurate, and complete at the time of agreement. The five essential elements the government must prove are that the data was cost or pricing data as defined by regulation, that it was reasonably available prior to price agreement, that it was not disclosed to the government, that the government relied on the defective data, and that this reliance caused an increase in the contract price. If all five elements are established, the government is entitled to a remedy, even years after contract execution.

In response, prime contractors are advised to implement risk mitigation strategies that emphasize documentation, process discipline, and legal oversight. First, contractors should negotiate and document a firm cutoff date for the submission of cost or pricing data and perform a comprehensive “sweep” of internal systems prior to that date to ensure that all relevant information has been disclosed. This sweep should include systematic queries to departments such as finance, engineering, and supply chain to capture late-breaking updates. Second, contractors should retain full records of their pricing assumptions, methods, and correspondence related to negotiations. Third, if a mistake is discovered after certification but before contract award, it should be disclosed immediately. The government often looks more favorably upon prompt, good-faith disclosures than post-audit surprises.

Subcontractor relationships also deserve special attention. Because primes are liable for subcontractor defective pricing, it is essential to train procurement personnel on TINA obligations and to require subcontractors to submit their own certified cost or pricing data when applicable. Indemnity provisions, flowdown clauses, and clear documentation of what data was received and when can help reduce exposure. Some primes also require subcontractors to agree to audit cooperation provisions in the event that post-award reviews are triggered. Additionally, contractors should pursue commercial item determinations where appropriate and request waivers from certified data requirements when fair and reasonable pricing can be established by other means.

Disclaimer: This blogpost is for informational purposes only and does not constitute legal or financial advice. While efforts have been made to ensure the accuracy of the content, readers should consult with qualified professionals regarding their specific compliance obligations under applicable laws and regulations.