41 U.S.C.
United States Code, 2009 Edition
Title 41 - PUBLIC CONTRACTS
CHAPTER 4 - PROCUREMENT PROCEDURES
SUBCHAPTER IV - PROCUREMENT PROVISIONS
Sec. 254b - Cost or pricing data: truth in negotiations
From the U.S. Government Printing Office, www.gpo.gov

§254b. Cost or pricing data: truth in negotiations

(a) Required cost or pricing data and certification

(1) The head of an executive agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows:

(A) An offeror for a prime contract under this subchapter to be entered into using procedures other than sealed-bid procedures shall be required to submit cost or pricing data before the award of a contract if—

(i) in the case of a prime contract entered into after October 13, 1994, the price of the contract to the United States is expected to exceed $500,000; and

(ii) in the case of a prime contract entered into on or before October 13, 1994, the price of the contract to the United States is expected to exceed $100,000.


(B) The contractor for a prime contract under this subchapter shall be required to submit cost or pricing data before the pricing of a change or modification to the contract if—

(i) in the case of a change or modification made to a prime contract referred to in subparagraph (A)(i), the price adjustment is expected to exceed $500,000;

(ii) in the case of a change or modification made to a prime contract that was entered into on or before October 13, 1994, and that has been modified pursuant to paragraph (6), the price adjustment is expected to exceed $500,000; and

(iii) in the case of a change or modification not covered by clause (i) or (ii), the price adjustment is expected to exceed $100,000.


(C) An offeror for a subcontract (at any tier) of a contract under this subchapter shall be required to submit cost or pricing data before the award of the subcontract if the prime contractor and each higher-tier subcontractor have been required to make available cost or pricing data under this section and—

(i) in the case of a subcontract under a prime contract referred to in subparagraph (A)(i), the price of the subcontract is expected to exceed $500,000;

(ii) in the case of a subcontract entered into under a prime contract that was entered into on or before October 13, 1994, and that has been modified pursuant to paragraph (6), the price of the subcontract is expected to exceed $500,000; and

(iii) in the case of a subcontract not covered by clause (i) or (ii), the price of the subcontract is expected to exceed $100,000.


(D) The subcontractor for a subcontract covered by subparagraph (C) shall be required to submit cost or pricing data before the pricing of a change or modification to the subcontract if—

(i) in the case of a change or modification to a subcontract referred to in subparagraph (C)(i) or (C)(ii), the price adjustment is expected to exceed $500,000; and

(ii) in the case of a change or modification to a subcontract referred to in subparagraph (C)(iii), the price adjustment is expected to exceed $100,000.


(2) A person required, as an offeror, contractor, or subcontractor, to submit cost or pricing data under paragraph (1) (or required by the head of the procuring activity concerned to submit such data under subsection (c) of this section) shall be required to certify that, to the best of the person's knowledge and belief, the cost or pricing data submitted are accurate, complete, and current.

(3) Cost or pricing data required to be submitted under paragraph (1) (or under subsection (c) of this section), and a certification required to be submitted under paragraph (2), shall be submitted—

(A) in the case of a submission by a prime contractor (or an offeror for a prime contract), to the contracting officer for the contract (or to a designated representative of the contracting officer); or

(B) in the case of a submission by a subcontractor (or an offeror for a subcontract), to the prime contractor.


(4) Except as provided under subsection (b) of this section, this section applies to contracts entered into by the head of an executive agency on behalf of a foreign government.

(5) A waiver of requirements for submission of certified cost or pricing data that is granted under subsection (b)(1)(C) of this section in the case of a contract or subcontract does not waive the requirement under paragraph (1)(C) for submission of cost or pricing data in the case of subcontracts under that contract or subcontract unless the head of the procuring activity granting the waiver determines that the requirement under that paragraph should be waived in the case of such subcontracts and justifies in writing the reasons for the determination.

(6) Upon the request of a contractor that was required to submit cost or pricing data under paragraph (1) in connection with a prime contract entered into on or before October 13, 1994, the head of the executive agency that entered into such contract shall modify the contract to reflect subparagraphs (B)(ii) and (C)(ii) of paragraph (1). All such modifications shall be made without requiring consideration.

(7) Effective on October 1 of each year that is divisible by 5, each amount set forth in paragraph (1) shall be adjusted to the amount that is equal to the fiscal year 1994 constant dollar value of the amount set forth. Any amount, as so adjusted, that is not evenly divisible by $50,000 shall be rounded to the nearest multiple of $50,000. In the case of an amount that is evenly divisible by $25,000 but not evenly divisible by $50,000, the amount shall be rounded to the next higher multiple of $50,000.

(b) Exceptions

(1) In general

Submission of certified cost or pricing data shall not be required under subsection (a) of this section in the case of a contract, a subcontract, or a modification of a contract or subcontract—

(A) for which the price agreed upon is based on—

(i) adequate price competition; or

(ii) prices set by law or regulation;


(B) for the acquisition of a commercial item; or

(C) in an exceptional case when the head of the procuring activity, without delegation, determines that the requirements of this section may be waived and justifies in writing the reasons for such determination.

(2) Modifications of contracts and subcontracts for commercial items

In the case of a modification of a contract or subcontract for a commercial item that is not covered by the exception to the submission of certified cost or pricing data in paragraph (1)(A) or (1)(B), submission of certified cost or pricing data shall not be required under subsection (a) of this section if—

(A) the contract or subcontract being modified is a contract or subcontract for which submission of certified cost or pricing data may not be required by reason of paragraph (1)(A) or (1)(B); and

(B) the modification would not change the contract or subcontract, as the case may be, from a contract or subcontract for the acquisition of a commercial item to a contract or subcontract for the acquisition of an item other than a commercial item.

(c) Cost or pricing data on below-threshold contracts

(1) Authority to require submission

Subject to paragraph (2), when certified cost or pricing data are not required to be submitted by subsection (a) of this section for a contract, subcontract, or modification of a contract or subcontract, such data may nevertheless be required to be submitted by the head of the procuring activity, but only if the head of the procuring activity determines that such data are necessary for the evaluation by the agency of the reasonableness of the price of the contract, subcontract, or modification of a contract or subcontract. In any case in which the head of the procuring activity requires such data to be submitted under this subsection, the head of the procuring activity shall justify in writing the reason for such requirement.

(2) Exception

The head of the procuring activity may not require certified cost or pricing data to be submitted under this paragraph for any contract or subcontract, or modification of a contract or subcontract, covered by the exceptions in subparagraph (A) or (B) of subsection (b)(1) of this section.

(3) Delegation of authority prohibited

The head of a procuring activity may not delegate the functions under this paragraph.

(d) Submission of other information

(1) Authority to require submission

When certified cost or pricing data are not required to be submitted under this section for a contract, subcontract, or modification of a contract or subcontract, the contracting officer shall require submission of data other than certified cost or pricing data to the extent necessary to determine the reasonableness of the price of the contract, subcontract, or modification of the contract or subcontract. Except in the case of a contract or subcontract covered by the exceptions in subsection (b)(1)(A) of this section, the contracting officer shall require that the data submitted include, at a minimum, appropriate information on the prices at which the same item or similar items have previously been sold that is adequate for evaluating the reasonableness of the price for the procurement.

(2) Limitations on authority

The Federal Acquisition Regulation shall include the following provisions regarding the types of information that contracting officers may require under paragraph (1):

(A) Reasonable limitations on requests for sales data relating to commercial items.

(B) A requirement that a contracting officer limit, to the maximum extent practicable, the scope of any request for information relating to commercial items from an offeror to only that information that is in the form regularly maintained by the offeror in commercial operations.

(C) A statement that any information received relating to commercial items that is exempt from disclosure under section 552(b) of title 5 shall not be disclosed by the Federal Government.

(e) Price reductions for defective cost or pricing data

(1)(A) A prime contract (or change or modification to a prime contract) under which a certificate under subsection (a)(2) of this section is required shall contain a provision that the price of the contract to the United States, including profit or fee, shall be adjusted to exclude any significant amount by which it may be determined by the head of the executive agency that such price was increased because the contractor (or any subcontractor required to make available such a certificate) submitted defective cost or pricing data.

(B) For the purposes of this section, defective cost or pricing data are cost or pricing data which, as of the date of agreement on the price of the contract (or another date agreed upon between the parties), were inaccurate, incomplete, or noncurrent. If for purposes of the preceding sentence the parties agree upon a date other than the date of agreement on the price of the contract, the date agreed upon by the parties shall be as close to the date of agreement on the price of the contract as is practicable.

(2) In determining for purposes of a contract price adjustment under a contract provision required by paragraph (1) whether, and to what extent, a contract price was increased because the contractor (or a subcontractor) submitted defective cost or pricing data, it shall be a defense that the United States did not rely on the defective data submitted by the contractor or subcontractor.

(3) It is not a defense to an adjustment of the price of a contract under a contract provision required by paragraph (1) that—

(A) the price of the contract would not have been modified even if accurate, complete, and current cost or pricing data had been submitted by the contractor or subcontractor because the contractor or subcontractor—

(i) was the sole source of the property or services procured; or

(ii) otherwise was in a superior bargaining position with respect to the property or services procured;


(B) the contracting officer should have known that the cost or pricing data in issue were defective even though the contractor or subcontractor took no affirmative action to bring the character of the data to the attention of the contracting officer;

(C) the contract was based on an agreement between the contractor and the United States about the total cost of the contract and there was no agreement about the cost of each item procured under such contract; or

(D) the prime contractor or subcontractor did not submit a certification of cost or pricing data relating to the contract as required under subsection (a)(2) of this section.


(4)(A) A contractor shall be allowed to offset an amount against the amount of a contract price adjustment under a contract provision required by paragraph (1) if—

(i) the contractor certifies to the contracting officer (or to a designated representative of the contracting officer) that, to the best of the contractor's knowledge and belief, the contractor is entitled to the offset; and

(ii) the contractor proves that the cost or pricing data were available before the date of agreement on the price of the contract (or price of the modification), or, if applicable consistent with paragraph (1)(B), another date agreed upon between the parties, and that the data were not submitted as specified in subsection (a)(3) of this section before such date.


(B) A contractor shall not be allowed to offset an amount otherwise authorized to be offset under subparagraph (A) if—

(i) the certification under subsection (a)(2) of this section with respect to the cost or pricing data involved was known to be false when signed; or

(ii) the United States proves that, had the cost or pricing data referred to in subparagraph (A)(ii) been submitted to the United States before the date of agreement on the price of the contract (or price of the modification) or, if applicable under paragraph (1)(B), another date agreed upon between the parties, the submission of such cost or pricing data would not have resulted in an increase in that price in the amount to be offset.

(f) Interest and penalties for certain overpayments

(1) If the United States makes an overpayment to a contractor under a contract with an executive agency subject to this section and the overpayment was due to the submission by the contractor of defective cost or pricing data, the contractor shall be liable to the United States—

(A) for interest on the amount of such overpayment, to be computed—

(i) for the period beginning on the date the overpayment was made to the contractor and ending on the date the contractor repays the amount of such overpayment to the United States; and

(ii) at the current rate prescribed by the Secretary of the Treasury under section 6621 of title 26; and


(B) if the submission of such defective data was a knowing submission, for an additional amount equal to the amount of the overpayment.


(2) Any liability under this subsection of a contractor that submits cost or pricing data but refuses to submit the certification required by subsection (a)(2) of this section with respect to the cost or pricing data shall not be affected by the refusal to submit such certification.

(g) Right of United States to examine contractor records

For the purpose of evaluating the accuracy, completeness, and currency of cost or pricing data required to be submitted by this section, an executive agency shall have the authority provided by section 254d(a)(2) of this title.

(h) Definitions

In this section:

(1) Cost or pricing data

The term “cost or pricing data” means all facts that, as of the date of agreement on the price of a contract (or the price of a contract modification) or, if applicable consistent with subsection (e)(1)(B) of this section, another date agreed upon between the parties, a prudent buyer or seller would reasonably expect to affect price negotiations significantly. Such term does not include information that is judgmental, but does include the factual information from which a judgment was derived.

(2) Subcontract

The term “subcontract” includes a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor or a subcontractor.

(3) Commercial item

The term “commercial item” has the meaning provided such term by section 403(12) of this title.

(June 30, 1949, ch. 288, title III, §304A, as added Pub. L. 103–355, title I, §1251(a)(2), Oct. 13, 1994, 108 Stat. 3278; amended Pub. L. 104–106, div. D, title XLII, §4201(b), title XLIII, §4321(e)(3), (4), Feb. 10, 1996, 110 Stat. 651, 675; Pub. L. 105–261, div. A, title VIII, §§805(b), 808(b), Oct. 17, 1998, 112 Stat. 2083, 2085.)

Amendments

1998—Subsec. (a)(5). Pub. L. 105–261, §805(b), amended par. (5) generally. Prior to amendment, par. (5) read as follows: “For purposes of paragraph (1)(C), a contractor or subcontractor granted a waiver under subsection (b)(1)(B) of this section shall be considered as having been required to make available cost or pricing data under this section.”

Subsec. (d)(1). Pub. L. 105–261, §808(b), substituted “the contracting officer shall require that the data submitted” for “the data submitted shall”.

1996—Subsec. (b). Pub. L. 104–106, §4201(b)(1), amended subsec. (b) generally, substituting pars. (1) and (2) relating to submission of certified cost or pricing data for former pars. (1) and (2) relating to submission of cost or pricing data and striking out par. (3) relating to FAR standards.

Subsec. (c). Pub. L. 104–106, §4201(b)(1), amended subsec. (c) generally, substituting pars. (1) to (3) relating to authority to require submission of certified cost or pricing data for former par. (1) relating to authority to require submission of cost or pricing data and striking out former par. (2) relating to authority to require information other than certified cost or pricing data.

Subsec. (c)(1). Pub. L. 104–106, §4321(e)(3), which directed amendment of heading of par. (1) by changing each letter that is capitalized (other than the first letter of the first word) to lowercase, could not be executed because of the general amendment of subsec. (c) by Pub. L. 104–106, §4201(b)(1). See above.

Subsec. (d). Pub. L. 104–106, §4201(b)(1), amended subsec. (d) generally, substituting pars. (1) and (2) relating to submission of other information for former pars. (1) to (6) relating to additional exceptions regarding commercial items.

Subsec. (d)(2)(A)(ii). Pub. L. 104–106, §4321(e)(4), which directed amendment of par. (2)(A)(ii) by inserting “to” after “The information referred”, could not be executed because par. (2)(A) did not contain a cl. (ii) or the phrase “The information referred”, subsequent to the general amendment of subsec. (d) by Pub. L. 104–106, §4201(b)(1). See above.

Subsecs. (h), (i). Pub. L. 104–106, §4201(b)(2), redesignated subsec. (i) as (h) and struck out heading and text of former subsec. (h). Text read as follows: “The Federal Acquisition Regulation shall include regulations concerning the types of information that offerors must submit for a contracting officer to consider in determining whether the price of a procurement to the Government is fair and reasonable when certified cost or pricing data are not required to be submitted under this section because the price of the procurement to the United States is not expected to exceed the applicable threshold amount set forth in subsection (a) of this section (as adjusted pursuant to paragraph (7) of such subsection). Such information, at a minimum, shall include appropriate information on the prices at which the same item or similar items have previously been sold that is adequate for evaluating the reasonableness of the price of a proposed contract or subcontract for the procurement.”

Effective Date of 1996 Amendment

For effective date and applicability of amendment by Pub. L. 104–106, see section 4401 of Pub. L. 104–106, set out as a note under section 251 of this title.

Effective Date

For effective date and applicability of section, see section 10001 of Pub. L. 103–355, set out as an Effective Date of 1994 Amendment note under section 251 of this title.

Section 1251(b) of Pub. L. 103–355, as amended by Pub. L. 104–106, div. D, title XLIII, §4321(a)(3), Feb. 10, 1996, 110 Stat. 671, provided that: “Subsection (a) of section 304A of the Federal Property and Administrative Services Act of 1949 [subsec. (a) of this section], as added by subsection (a), shall apply according to the provisions thereof on and after the date of the enactment of this Act [Oct. 13, 1994], notwithstanding section 10001(b) [see Effective Date of 1994 Amendment note set out under section 251 of this title].”

[Section 4321(a) of Pub. L. 104–106 provided that the amendment made by that section to section 1251(b) of Pub. L. 103–355, set out above, is effective as of Oct. 13, 1994, and as if included in Pub. L. 103–355 as enacted.]

Limitations on Tiering of Subcontractors

Pub. L. 110–417, [div. A], title VIII, §866, Oct. 14, 2008, 122 Stat. 4551, provided that:

“(a) Regulations.—Not later than one year after the date of the enactment of this Act [Oct. 14, 2008], the Federal Acquisition Regulation shall be amended, for executive agencies other than the Department of Defense, to minimize the excessive use by contractors of subcontractors, or of tiers of subcontractors, that add no or negligible value, and to ensure that neither a contractor nor a subcontractor receives indirect costs or profit on work performed by a lower-tier subcontractor to which the higher-tier contractor or subcontractor adds no, or negligible, value (but not to limit charges for indirect costs and profit based on the direct costs of managing lower-tier subcontracts).

“(b) Covered Contracts.—This section applies to any cost-reimbursement type contract or task or delivery order in an amount greater than the simplified acquisition threshold (as defined by section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403)).

“(c) Rule of Construction.—Nothing in this section shall be construed as limiting the ability of the Department of Defense to implement more restrictive limitations on the tiering of subcontractors.

“(d) Applicability.—The Department of Defense shall continue to be subject to guidance on limitations on tiering of subcontractors issued by the Department pursuant to section 852 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109–364; 120 Stat. 2340 [10 U.S.C. 2324 note]).

“(e) Executive Agency Defined.—In this section, the term ‘executive agency’ has the meaning given such term in section 4(1) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(1)).”

Minimizing Abuse of Commercial Services Item Authority

Pub. L. 110–417, [div. A], title VIII, §868, Oct. 14, 2008, 122 Stat. 4552, provided that:

“(a) Regulations Required.—Not later than 180 days after the date of the enactment of this Act [Oct. 14, 2008], the Federal Acquisition Regulation shall be amended with respect to the procurement of commercial services.

“(b) Applicability of Commercial Procedures.—

“(1) Services of a type sold in marketplace.—The regulations modified pursuant to subsection (a) shall ensure that services that are not offered and sold competitively in substantial quantities in the commercial marketplace, but are of a type offered and sold competitively in substantial quantities in the commercial marketplace, may be treated as commercial items for purposes of section 254b of title 41, United States Code (relating to truth in negotiations), only if the contracting officer determines in writing that the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for such services.

“(2) Information submitted.—To the extent necessary to make a determination under paragraph (1), the contracting officer may request the offeror to submit—

“(A) prices paid for the same or similar commercial items under comparable terms and conditions by both government and commercial customers; and

“(B) if the contracting officer determines that the information described in subparagraph (A) is not sufficient to determine the reasonableness of price, other relevant information regarding the basis for price or cost, including information on labor costs, material costs, and overhead rates.”

Eligibility for Contracts and Subcontracts To Be Conditioned on Compliance

Pub. L. 105–261, div. A, title VIII, §808(c), Oct. 17, 1998, 112 Stat. 2085, provided that: “Not later than 180 days after the date of the enactment of this Act [Oct. 17, 1998], the Federal Acquisition Regulation shall be amended to provide that an offeror's compliance with a requirement to submit data for a contract or subcontract in accordance with section 2306a(d)(1) of title 10, United States Code, or section 304A(d)(1) of the Federal Property and Administrative Services Act of 1949 [41 U.S.C. 254b(d)(1)] shall be a condition for the offeror to be eligible to enter into the contract or subcontract, subject to such exceptions as the Federal Acquisition Regulatory Council determines appropriate.”

Criteria for Determining Specific Price Information Required

Pub. L. 105–261, div. A, title VIII, §808(d), Oct. 17, 1998, 112 Stat. 2085, provided that: “Not later than 180 days after the date of the enactment of this Act [Oct. 17, 1998], the Federal Acquisition Regulation shall be amended to include criteria for contracting officers to apply for determining the specific price information that an offeror should be required to submit under section 2306a(d) of title 10, United States Code, or section 304A(d) of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 254b(d)).”