Well, of course, The Department of Defense (DOD) can. The three most common situations where DoD requires cost data on a fixed price contract are:
- Pricing of a follow-on contract where the contracting officer is required by FAR part 15 to obtain certified cost or pricing data or data other than certified cost or pricing data to support cost analysis to determine a fair and reasonable price;
- Performance-based payments; and
- Cost data reporting requirements under a major defense acquisition program.
Let’s review each of these situations.
Follow-on Contract Pricing
This is the most common and, for the most part, understood situation. FAR 15.402 requires the contracting officer to purchase supplies and services at fair and reasonable prices. This section goes on to require the contracting officer to obtain cost or pricing data from the contractor and perform cost analysis when price analysis does not allow for the determination of a fair and reasonable price. Cost or pricing data comes in two forms:
- “Certified cost or pricing data,” which the contractor must certify, is current, accurate, and complete as of the date of award; and
- “Data other than certified cost or pricing data,” which must be current, accurate, and complete as of the date of submission. See our prior article, “Is Submitting Other Than Certified Cost or Pricing Data Risk-Free?”
As a side note: Do not think that because your product or service has been found to be commercial, you are not required to submit cost data. If the contracting officer cannot determine that the price is fair and reasonable, the requests will come.
Performance-Based Payments
Both DFARS 252.232-7012, Performance-Based Payments—Whole-Contract Basis, and 252.232-7013, Performance-Based Payments—Deliverable-Item Basis, require under (c)(1) that “Total costs incurred to date” be included with each request for payment. The note for this data item states:
Incurred cost is determined by the Contractor’s accounting books and records, to which the Contractor shall provide access upon request of the Contracting Officer. An acceptable accounting system in accordance with DFARS 252.242-7006 is not required for reporting of incurred costs under this clause. If the Contractor’s accounting system is not capable of tracking costs on a job order basis, the Contractor shall provide a realistic approximation of the allocation of incurred costs attributable to this contract in accordance with the Contractor’s accounting system. FAR 52.232-32(m) does not require certification of incurred costs.
While, for the most part, I have not seen a contracting officer make a big issue out of this requirement, should your relationship with the Government go south, do not be surprised if it becomes an issue and access to your accounting system is requested.
Cost Data Reporting
DFARS 234.7101 requires contracting officers to include 252.234-7003, Notice of Cost and Software Data Reporting System, in any solicitation and 252.234-7004, Cost and Software Data Reporting, in contracts for major defense acquisition programs (as defined in 10 U.S.C. 4201) when the value exceeds $50M. Both clauses require the cost data reporting requirement to be flowed down in all subcontracts exceeding $50M.
Additionally, DFARS 234.7101(b)(2) allows the Director of Cost Assessment & Program Evaluation (CAPE) to lower the threshold to $20M.
The requirements of Cost and Software Data Reporting (CSDR) could be an article in and of itself. For this article, if you see these clauses, or a reference to them, in your contract or subcontract:
- Read the clauses thoroughly (for more information, read our article, “The Critical Importance of Understanding Legally Binding Contracts Before Signing”);
- Review the requirements in DoD 5000.04–M–1, CSDR Manual;
- Develop your CSDR plan for the contract, DD Form 2794, and the related Resource Distribution Table as the basis for reporting in accordance with the required CSDR data item descriptions (DIDs) in conjunction with your cost proposal;
- Ensure the contracting officer approves your CSDR plan;
- Implement a policy and procedure to ensure DD Form 1921 reporting; and
- Price the cost of these reporting requirements into your proposal.
Another side note: Read your contract modification closely. We have seen these clauses added to contracts and subcontracts if the modification increases the value above the threshold.
Staying Prepared for Cost Data Requirements
Understanding the Government’s requirements, implementing an adequate accounting system, and complying with cost data reporting requirements are essential for government contractors working under fixed price arrangements. These obligations can surface at any stage of the contract and often require careful analysis, documentation, and coordination across accounting and contracts teams. Redstone GCI supports contractors by interpreting regulatory requirements, strengthening accounting system adequacy, reviewing contract clauses, and guiding the development of compliant policies, procedures, and reporting practices. Our team also provides proposal pricing support, performance reporting, and training to help contractors better manage cost data obligations throughout the contract lifecycle.
John is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to the DFARS business systems, CAS Disclosure Statements, and DCAA/DCMA compliance preparation, advisory, and defense. Prior to joining Redstone Government Consulting, John served in a number of capacities with DCAA/DCMA for more than 30 years. Upon his retirement, he was based in Texas as an SES-level Corporate Audit Director for DCAA, managing a staff of 300 auditors at one of the largest DOD programs. Professional Experience John began his career in the late 80s working in the Clearwater, FL audit office and over the next three decades he progressed through a number of positions within both DCAA and DCMA with career highlights as DCAA Program Manager at Ft. Belvoir, Chief of Technical Programs Division, Deputy Assistant Director-Policy, Director of the DCMA Cost and Pricing Center, the SES-level Lockheed Martin Corporate Audit Director, and Director of Integrity and Quality Assurance. John’s three decades of experience in performing and leading DCAA auditors and DCMA reviewers provides a wealth of expertise to our clients. John’s role, not only in the performance of audits, but also in the development of audit policy affords him unique insights into the defense of audit findings and the linkage of audit program steps to the underlying regulatory framework. He is an expert in FAR, DFARS, and other agency acquisition regulation, as well as a subject matter expert in the Cost Accounting Standards having reviewed and provided audit feedback on many of the largest and most complex cost accounting practices during his tenure with the DCAA. John’s tenure with DCAA and DCMA came at a critical time during each agency’s history where a number of changes were occurring such as the response to the ICS backlog, development of audit approaches to the DFARS Business Systems and implementation of new audit initiatives as a result of Congressional oversight through the NDAA process. John’s leadership at the DCMA Cost & Pricing center saw oversight of all major DOD pricing actions, leadership of should cost review teams, the Commercial Pricing group and many other areas of strategic value to our clients. His involvement in these and other Agency initiatives is of great value to our clients due to his in depth understanding of DCAA and DCMA’s internal policy directives. Education John holds a Master of Business Administration and a B.A. in Accounting from the University of South Florida. Certifications Certified Information Systems Auditor State of Alabama Certified Public Accountant