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What is the penalty for defective pricing, aside from giving the money back?  Are there any penalties or criminal considerations?  And what is the additional effect (if any) if the FINA threshhold calls for Cost and Pricing Data?

Example:  Contractor uses geographical surveys to pay salaries for Labor Categories I, II, and III.  This is a competitive fixed price bid.  Salaries according to the geographical surveys are $30/hr, $50/hr, and $70/hr.  At the time of the bid, it was known that the contractor was going to pay $24, $40, and $55 respectively.  Contractor wins the bid, but is paying $25,000 less in loaded labor than was bid.

Government accepts the bid and awards a fixed-price contract accordingly.  Contractor's actual profit margin on the job is obscene compared to the bid.

Will this result in defective pricing, and if so what are the penalties.  Are there additional considerations if the award is within the FINA requirement for Cost and Pricing Data, except the customer never asks for it.

The situation as presented in the example is to minimize the effect because it was competitive, and a fixed price contract.

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There is no “effect” on the initial contract price for the “competitively bid” contract in your example. Certified cost or pricing data are not applicable in that situation. 

If it was a competitive negotiation under FAR Part 15, the government is prohibited from requiring certified cost or pricing data for the initial contract pricing . Read FAR 15.403-1, for example. 

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Yes, if it exceeds the threshold for C&P and is non-commercial service. Since your example is for geo surveys,  it is likely a contract for A/E services. See definition in FAR Part 2.  It would be negotiated after selection of the most qualified firm. I should have caught that earlier.   If this is a unit-priced contract, it would depend upon how the prices were negotiated.  

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Potential actions by the U.S. Government includes civil and/or criminal penalties under the False Claims Act and suspension or debarment of the contractor. State civil and criminal laws may also be applicable. Shareholders of corporations may initiate court actions against the corporation.  

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Also, look at FAR 52.215-10(d)(2).  In the situation you describe, if it was a sole source procurement where certified cost or pricing data was required, somebody would need to get fitted for an orange jumpsuit.

As for the customer not asking for certified cost or pricing data when it would otherwise be required, the statute places the onus on the contracting officer to require the submission of certified cost or pricing data.  This is usually done through the use of the solicitation provision FAR 52.215-20 which would be inserted in Section L of the RFP (although many contracting officers erroneously put it in Section I).  If that provision is in the RFP, certified cost or pricing data would be required unless the contractor asked for and received an exemption.  If it is not in the RFP, the contractor has no obligation to submit certified cost or pricing data.  If it is not required, the contractor cannot be held liable for defective cost or pricing data.

Joel, I think CR was talking about regional salary surveys that would be used to justify labor rates proposed in a proposal.

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Thanks, Retreadfed.  

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Guest Vern Edwards
On 4/8/2018 at 8:50 PM, Corduroy Frog said:

What is the penalty for defective pricing, aside from giving the money back?

The only penalty for defective pricing is for intentional submission of defective certified cost or pricing data. See FAR 15.407-1(b)(7)(i) and (iii) and 52.215-10(d)(2).

Remedies for defective pricing are contractual matters, not matters of violation of any criminal or civil law. Remedies for defective pricing that involved false claims are remedies for false claims.

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1 hour ago, Vern Edwards said:

The only penalty for defective pricing is for intentional submission of defective certified cost or pricing data. See FAR 15.407-1(b)(7)(i) and (iii) and 52.215-10(d)(2).

Remedies for defective pricing are contractual matters, not matters of violation of any criminal or civil law. Remedies for defective pricing that involved false claims are remedies for false claims.

True.

To me, the key point is that the government may choose to treat contractor invoices for goods/services performed under contracts that have been defectively priced as being false claims. That gets expensive, fast.

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Guest Vern Edwards

See: Briggerman, "U.S. v. United Technologies Corp: Where's the 'False' Claim?", The Nash & Cibinic Report, Nov. 2008.

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