Year of Award
Master of Business Administration (MBA)
College of Business & Professional Studies
Truth in Negotiations Act, contractors, government, regulations, defense
The Truth In Negotiations Act requires Government contractors to submit cost or pricing data with most proposals over $100,000. The contractor is also required to certify that the data so submitted is current, complete, and accurate as of the final agreement on price. If the data is later found to be noncurrent, incomplete, or inaccurate the contractor may be found liable for defective pricing.
This paper presents the regulatory environment surrounding the defective pricing issue and attempts to present methods to be used to prevent such allegations. The paper begins with an overview of the Government procurement process from the identification of a need through the signing of a contract to fulfill that need. As the rational behind the regulations provides one viewpoint of the industry, the current perceptions within the defense industry are also presented.
Cost or pricing data is defined in terms of the statutory and regulatory requirements. The submittal requirements for the cost or pricing data and exemptions from those requirements are delineated. The cost areas that cause the greatest amount of problems for contractors are highlighted with recommendations as to the types of data that should be submitted to prevent problems.
An overview of the audit process that the Government uses to detect defective pricing and the laws that surround such audits are provided. Methods for surviving audits are listed.
The liability arising from defective pricing is outlined with the basis for recovery of cost. The civil and criminal sanctions that may be applied in some cases are reviewed. The paper concludes with some methods to be used to avoid defective pricing allegations.
Creative Commons License
This work is licensed under a Creative Commons Attribution-No Derivative Works 4.0 License.
Rogers, Melanie A., "Methods for Avoiding Defective Pricing" (1989). Theses, Dissertations, and Capstone Projects. 470.
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