DFARS Case 2020-D008 – Prohibition on Pricing based on Historical Prices

In 2020 Congress directed through the National Defense Authorization Act (NDAA) that contracting officers be prohibited from determining that the price of a contract or subcontract is fair and reasonable based solely on historical prices paid by the Government. Congress goes on to provide that if the contractor fails to provide data supporting the proposed price, the contractor is ineligible for award, unless the head of the contracting activity (HCA) determines that it is in the best interest of the Government to make the award. Let’s face it they are saying contracting officer should be asking for “cost data.”

Well DoD is finally getting around to issuing a proposed DFARS rule to implement the congressional direction. The Federal Register notice states:

In accordance with 10 U.S.C. 2306a(d)(2)(B)(ii), this proposed rule amends DFARS 242.1502(g), to add the requirement that, unless exempted by the HCA, a notation is required in the Contractor Performance Assessment Reporting System that, despite receiving an award, the contractor has denied multiple requests for submission of data other than certified cost or pricing data over the preceding three-year period.

The proposed rule also amends DFARS 215.404-1(b)(ii) to clarify that price reasonableness cannot be based solely on prices paid by the Government. This section starts by discussing sufficient market research which was a big push from Congress just a few years back – OK more than a few years but it was all the rage when Congress was pushing commercial items.

You have an opportunity to submit public comments on the proposed rule before October 29, 2021, not that any number of comments will likely change what is coming. While there is no stopping this, refining the wording may be very helpful for the inevitable roll down of this requirement to higher level subcontractor pricing.

We can easily see DCAA/DCMA applying the prohibition to prices paid by the higher-tier contractor (i.e., simply replacing the word Government with Contractor) and expecting a high-level contractor official to replace the head of contracting agency. An even more perplexing flow down reading could be that the contractor still needs the head of the agency’s determination of best interest to the Government.

So, get out there and comment. Comments can be submitted through the Federal eRulemaking Portal: https://www.regulations.gov. Search for “DFARS Case 2020-D008.” Select “Comment” and follow the instructions to submit a comment.

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Written by John C. Shire, CPA

John C. Shire, CPA 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

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Government Shutdown, Defense Contractors, DFARS Business Systems, Cost-Type Contracts, Contractor Purchasing System Review (CPSR), Government Regulations