Certified Cost or Pricing Data & Defective Pricing

At a Glance

Who it applies to

Contractors and subcontractors in negotiated procurements above the statutory threshold where no exception applies

What it obligates

Submit certified cost or pricing data and sign the Certificate of Current Cost or Pricing Data at FAR 15.406-2

Governing authority

41 U.S.C. § 3502 and 10 U.S.C. ch. 271; FAR 15.403 through 15.407; clauses FAR 52.215-10 / 52.215-11 / 52.215-12 / 52.215-13

The big exceptions

Adequate price competition, prices set by law or regulation, commercial products and services, and waivers (FAR 15.403-1)

The stakes

A price reduction for defective pricing, plus interest — and potential False Claims Act exposure for a knowingly false certificate

What It Is

When the government negotiates a price without the discipline of competition, it wants the same information the contractor has. The Truthful Cost or Pricing Data statute — long known as the Truth in Negotiations Act, or TINA — requires that, above a statutory threshold and absent an exception, the offeror submit certified cost or pricing data and execute the Certificate of Current Cost or Pricing Data at FAR 15.406-2, stating that the data were accurate, complete, and current as of the date agreement was reached on price. 'Cost or pricing data' is defined broadly: all facts, as of the certification date, that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. It is factual, not judgmental — a quote you received, a vendor's price reduction, a make-or-buy decision already taken, a change in your labor mix — and the obligation is to disclose the facts, not your conclusions about them. The threshold is currently $2 million, subject to periodic inflation adjustment, and it applies to the award, to modifications, and down the supply chain to subcontracts that meet the same test. Most of the time it does not apply, because FAR 15.403-1 exempts the situations where a market price already exists: when the contracting officer determines there was adequate price competition, when prices are set by law or regulation, when the acquisition is for a commercial product or commercial service, and when the head of the contracting activity grants a waiver. In those cases the CO may still require 'data other than certified cost or pricing data' under FAR 15.403-3 — real information, just not certified. The consequence of a defective certificate is what makes this rule feared. Under the Price Reduction for Defective Certified Cost or Pricing Data clauses (FAR 52.215-10 for the award and 52.215-11 for modifications), if the data were not accurate, complete, and current, the government is entitled to a price reduction in the amount by which the price was overstated, plus interest — and the review can occur years after award. Crucially, the government does not need to prove you intended to mislead; a defective pricing finding turns on whether the data were defective and whether the defect increased the price. A knowingly false certificate is a different and far more serious matter, reaching the False Claims Act.

When It Applies

• On a sole-source negotiated award above the statutory threshold where no FAR 15.403-1 exception applies.
• On a modification or change order above the threshold — even under a contract awarded competitively, because the modification is negotiated without competition.
• On an SDVOSB sole-source award, where by definition there was no competition to establish the price.
• As a flow-down: a prime must obtain certified data from a subcontractor whose subcontract meets the threshold and has no exception.
• During a post-award defective pricing audit examining whether the data were accurate, complete, and current at the certification date.

Key Features

The SDVOSB Angle

Two SDVOSB-specific situations put a small firm squarely inside this rule, and both are easy to walk into unprepared. The first is the SDVOSB sole-source award. Under FAR 19.1406 and 15 U.S.C. § 657f a contracting officer can award to an SDVOSB on a sole-source basis within the applicable ceiling — an enormous advantage, but by definition there is no competition to establish the price, so if the value exceeds the certified data threshold and no other exception applies, you will be submitting certified cost or pricing data and signing the certificate. The second is modification growth. A firm that won a competitive award — where the adequate-price-competition exception applied — can find that a large negotiated modification, priced without competition, crosses the threshold on its own. Three practical protections. First, build a disclosure discipline: keep every vendor quote, subcontractor proposal, and internal make-or-buy decision in a proposal file, because the most common defective pricing finding is not a fabricated number but a real quote that existed and was never handed over. Second, sweep for updates right before you sign; the certificate speaks as of the agreement date, so a lower vendor quote received during negotiations must be disclosed even though your proposal was built weeks earlier. Third, read the exceptions before you assume: many small-business awards are for commercial products or services, where the commercial-item exception applies and the whole regime falls away — but that determination belongs to the contracting officer, and you should confirm it rather than presume it.

How to Comply

1. Determine early whether certified cost or pricing data will be required — check the threshold and each FAR 15.403-1 exception with the contracting officer.
2. Maintain a complete proposal file: vendor quotes, subcontractor proposals, historical cost data, make-or-buy decisions, and the basis of every estimate.
3. Disclose facts even when they cut against you — an unfavorable quote you possessed and withheld is the classic defective pricing finding.
4. Sweep for new or changed data immediately before agreement on price, and disclose anything that arrived during negotiations.
5. Identify in writing what you submitted and when, so the record of your disclosure is as clear as the data itself.
6. Flow the requirement down to subcontractors whose subcontracts exceed the threshold with no applicable exception, and obtain their certificates.
7. Have the certificate signed by an officer with authority, only after confirming the data are accurate, complete, and current as of the agreement date.

Watch Out For

• Assuming the threshold makes you safe on the base award while a later negotiated modification quietly crosses it on its own.
• Believing a competitive award exempts everything — the exception attaches to the pricing action, so sole-source modifications stand on their own.
• Submitting a proposal and never updating it: the certificate speaks as of agreement on price, not as of proposal submission.
• Withholding a favorable-to-the-government quote as negotiating leverage; that is exactly what the price-reduction clause is designed to recover.
• Confusing 'data other than certified cost or pricing data' with no obligation — the CO can still require substantial information under FAR 15.403-3.
• Forgetting the subcontract flow-down, which leaves the prime holding the defect the sub created.
• Treating the certificate as an administrative signature; a knowingly false certification reaches the False Claims Act, not just a price reduction.

Run the Numbers

Frequently Asked

Primary Sources

• FAR 15.403-4 — Requiring certified cost or pricing data
• FAR 15.403-1 — Prohibition on obtaining certified cost or pricing data (exceptions)
• FAR 15.403-3 — Requiring data other than certified cost or pricing data
• FAR 15.406-2 — Certificate of Current Cost or Pricing Data
• FAR 52.215-10 — Price Reduction for Defective Certified Cost or Pricing Data
• 41 U.S.C. § 3502 — Truthful cost or pricing data required

Plain-English reference, not legal, accounting, or tax advice. Cost allowability and accounting determinations are fact-specific, and the FAR, the Cost Accounting Standards, and the statutory dollar thresholds quoted here are amended and escalated for inflation over time. Always read the current FAR text and the cost and payment clauses in your specific contract, confirm the applicable thresholds and your accounting treatment with the contracting officer or cognizant administrative contracting officer, and consult a qualified government-contract accountant or counsel before relying on a cost position, signing a certificate, or submitting a claim.

Related Cost Rules

How It Plays by Contract Type

Dollar Thresholds That Matter

Forms You’ll Use

The Authorities Explained

People You’ll Deal With

Put It Into Practice

Terms Used on This Page

In the FAQ Knowledge Base