Engineering Advances Constitute Cost must be disclosed
Contractor was issued a task order to manufacture and deliver interface adapters (1A-3) used to test circuit cards. The 1A-3 adapters required use of peripheral devices to work. Six months before the task order was issued, Contractor successfully developed and produced an engineering advance consisting of a different adapter (1A-9) that did not need peripheral devices. After the award Contractor successfully used the 1A-9s. During a post award audit, the government discovered that the contract price included the peripheral devices and the CO put forth a claim for defective pricing, arguing the engineering advances should have been disclosed during price negotiations so the government could delete the peripheral device costs from the contract price.
Before the Board the government argued that the success of the 1A-9 engineering advance together with the fact both adapters performed identical functions made it likely the advance could be incorporated into the 1A-3 adapter making the peripheral devices unnecessary. Contractor asserted there was no guarantee the 1A-9 could be used and added though they performed the same test function, the adapters were dissimilar. The Board sided with the government noting the Truth in Negotiation Act requires contractors to disclose all “cost and pricing data” during negotiation. TINA defines “cost and pricing data” as all facts a prudent buyer or seller would reasonably expect to significantly affect price negotiations, adding only “verifiable” factual information, not projections or estimates of future cost needs to be disclosed. The fact the adapters tested the same circuit cards, the design manager testified he was “reasonably confident” about the new technology and the contractor anticipated using the new technology for testing convinced the Board the engineering advances constituted “cost and pricing data” and should have been disclosed during negotiations (Lockheed Martin Corp. d/b/a/ Sanders, ASBCA 50566).
(Editor’s Note. Commentators on this case have stressed the engineering advance was “cost or pricing data” because it was “relatively certain”, indicating other situations where relative certainty was not present might conclude the information was not “cost or pricing data.” For example, in FMC Corp. (ASBCA 10095, 661) the Board held the contractor’s continued, albeit unsuccessful, experimentation with new, more efficient drilling technology was not “cost or pricing data” even though the process eventually worked because when the price was negotiated, it appeared the new process would only have long range benefits.)
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