Getting Along with TINA (The Truth in Negotiations Act)

George W. Ash and Brandi F. Walkowiak

Following the requirements of The Truth in Negotiations Act (TINA) is an important, but significant challenge for government contractors. TINA applies to all non-competitive, non-commercial item, negotiated contracts and modifications of $650,000 or more. By way of background, TINA was enacted in the 1960s in response to the Government’s concern that it did not have enough information to determine if prices quoted and charged by contractors were fair and reasonable. The purpose of TINA, therefore, was to level the playing field between the Government and contractors in contract negotiations. To that end, when TINA applies, it requires disclosure to the Government of all “cost or pricing data” as of the date of the price agreement.

There are a couple of reasons why compliance with TINA can be difficult and cumbersome. First, the Act broadly defines “cost or pricing data.” As a result, it is not sufficient to simply disclose current rates and pricing, although it is a start. Instead, cost or pricing data includes any fact that buyers and sellers would reasonably expect to affect price. The regulations state that it is more than historical accounting data and includes, for example, vendor quotations, unit-cost trends, and data supporting projections in its definition of cost or pricing data. The regulations also cite “information on management decisions that could have a significant bearing on costs” as the type of information that must be disclosed. Accordingly, a contractor that is providing its most current pricing, but is not disclosing all of this data is not complying with TINA’s requirements. The contractor, of course, must disclose any updates or changes and, thus, needs a system in place to do so.

TINA further requires the contractor to file a certification that the data is current, accurate, and complete “as of” the date of agreement on price (or as of a mutually agreed upon date). Prior to signing and submitting such a certification, the contractor should complete a data “sweep” of all of its cost or pricing data as defined in FAR 2.101 to ensure that all required data has been disclosed. The contractor should also review all of the data to confirm all cost or pricing data is accurate, current, and complete. If these steps are not taken, the contractor runs the risk of filing an inaccurate certification, which the government may view as a false statement that carries potential criminal liability. The contractor should designate a particular individual or individuals with the authority to sign the certificates and the accountability to guarantee their accuracy. Clear individual responsibility and an understanding of the significance of these certificates will ensure they are done properly.

Second, given the broad scope of data to be disclosed, the amount of documentation that contractors need to keep track of is extensive. Contractors need to maintain files and documentation demonstrating that all of the relevant data has, in fact, been disclosed. The documentation should include what was disclosed and to whom. And, because contracts are subject to audit until three years after final payment, contractors may need to hold onto these files for years. Thus, an orderly filing system and process that can withstand employee turnover and contract modifications can be a key to TINA compliance. In fact, difficulties in finding old contract documentation in the context of a defective pricing audit is often a contractor’s biggest challenge to a defective pricing charge. In other words, even if the contractor made the appropriate disclosures, if he cannot demonstrate years later through documentation that he did so, he may still face significant challenges.

It is important to remember that TINA is a statute requiring disclosure. For example, it does not require that the contractor use the lowest subcontractor bid it received, it simply requires the disclosure of the bids received and then the parties may negotiate regarding the bid the contractor selected. Thus, when in doubt, disclose.

George W. Ash and Brandi F. Walkowiak are members of the law firm of Foley & Lardner LLP in Detroit, where they specialize in government procurement issues. They may be reached at (313) 234-7100.

Note: This update provides information of general interest presented in summary form, and does not constitute individual legal advice.