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The Truth In Negotiations Act Essay

1235 words - 5 pages

The Truth in Negotiations Act was passed on December 1, 1962 requiring government contractors to submit cost or pricing data if the procurement met specific requirements in order to establish that the offer is fair and reasonable. The history of The Truth in Negotiations Act will set the stage for its significance in the twenty-first century. Prior to World War II, the United States government conducted its bidding process for procurement in an open bid environment. What was required for a bid was a complete description of the requirement, two or more suppliers capable and willing to complete the requirement, a selection based on price competition and sufficient time to prepare a complete ...view middle of the document...

There is no balance from the market place to ensure that the pricing is fair and reasonable. This was the main point of concern for Congress. The goal of government procurement “is timely delivery of a best-value product or service to the customer while maintaining the public’s trust and fulfilling policy objectives.” (Engelbeck, 2002)
“The United States Government Accountability Office (GAO) blue book reported that the primary cause of the inequity and the resultant overpricing of contracts was the contractor’s failure to provide accurate, current or complete cost data. It was contended by GAO that the government’s negotiator would be in a better position to establish an equitable price if contractor cost data were made available.” (Maddox, 2013)

In 1959, the United States Air Force took the beginning steps of implementing a process that was based on the Government Accountability Office’s recommendation. This process required certification of contractor cost data, as recommended. The Department of Defense followed the example set by the Air Force by issuing a revision to the Armed Services Procurement Regulations to require certification of cost data.
The Truth in Negotiations Act has the purpose of insuring that the government is receiving a fair and reasonable pricing, essentially helping to prevent defective pricing and allowing the government to be able to get set retributions for defective pricing. This is something that is solely found in the world of government contracting, as there is nothing similar to it in a commercial environment. A potential supplier will have to supply the government with a certificate of current cost or pricing data. The Truth in Negotiations Act is also a flow down requirement in government prime contracts, thus it is required of not only the prime contractor but also their subcontractors and suppliers when procurement meets the requirements called out in the act. What does this certificate of current cost or pricing data mean? The supplier has to disclose all costs. This is not as simple as saying that they are charging the government ‘X’ price, the supplier has to disclose how they arrived at this number which includes data such as material costs, labor costs, and rates. This is all information that a company would consider proprietary and normally would not disclose as it could affect their ability to be competitive in their area of the market place. A supplier can refuse to provide backup data required for a certificate of current cost or pricing data, however in this case an assist audit will have to be requested of the Defense Contract Management Agency (DCMA). This can be a lengthy process depending on the agencies...

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