Uncommon Sense | Back to the Future, and Beyond: TINA Audits

The Truth in Negotiations Act, or TINA, has (again) become a hot topic in the government contracting community. After a near decade-long trek over its mountain of aged incurred cost audits, the Defense Contract Audit Agency (DCAA) signaled a resource shift toward more post-award defective pricing audits. These audits will be a new experience for many auditors, contracting officers and government contractors – fun for all.

Although TINA hasn’t changed much in recent decades, the government contracting environment has. Since TINA’s heyday of the 1970s and 1980s, government procurements have expanded away from negotiated fixed-price contracts and toward competitive cost-type and hybrid IDIQ contracts. Accordingly, the prevalence of TINA-covered procurements has decreased significantly since yesteryear, and, in our view, the community’s respective TINA experience has followed that trend. TINA’s recent name change – now “Truthful Cost or Pricing Data” – is a good example of this atrophy. What was wrong with “truth in negotiations?” Call us old school.

TINA applies to noncompetitive procurements where the government’s only means to negotiate a fair and reasonable price depends on knowing what the contractor knows (i.e., a level playing field). Thus, if TINA applies, the prospective contractor must disclose all facts (i.e., cost or pricing data) that “prudent buyers and sellers would reasonably expect to affect price negotiations significantly.” The disclosure must be current, accurate and complete as of the date of price agreement (or some other mutually agreeable date). The key word here – “facts” – has become a blurry subject these days, so even fuzzier words like prudent, reasonably, significantly and disclosure will present many challenges as the government contracting community re-enrolls in the TINA school of hard knocks.

This is not a box-checking exercise. If a contractor must disclose its cost or pricing data, then the government must do something with it. It’s called a cost analysis (which often takes the form of a “pre-award (or forward pricing) audit,” despite no mention of an audit in FAR 15.305 and FAR 15.404; but that’s a topic for a different day). Based on this cost analysis, the government must develop a price objective and negotiate with the contractor. Until the parties agree upon price, contractors must perform periodic “sweeps” to discover and disclose new cost or pricing data. Upon price agreement, the contractor certifies its cost or pricing data are current, accurate and complete. This sets TINA’s hook. Subsequent discovery of defective cost or pricing data yields the government a dollar-for-dollar price reduction (a rebuttable presumption).

But it won’t stop there. The recent tide of rulemaking continues to shift many of the government’s responsibilities to the contractor. In this regard, we expect the new era of TINA audits to target all manners of DFARS Estimating System and Proposal Adequacy Checklist infractions. The persistent threat of an estimating system significant deficiency will become more acute as post-award audits increase.

This is a new game for most involved and it will take some suffering to relearn the rules and develop fitness. So now is a good time to study the playbooks, watch some tape and get some practice. If your team is looking for a good coach, please give us a call. We can help you identify and resolve existing risks, and prevent future risks, of defective pricing and estimating system deficiencies. 

Engineering and construction M&A update: H1 2019
Next up

Engineering and construction M&A update: H1 2019