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FAR 15 Mistake After Award

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Here is the timeline:

The contractor submitted a proposal with the mistaken bond percentage.

The contractor then submitted certified cost & pricing data with the mistaken bond percentage.*

After award, when the contractor was submitting the bonds, it discovered the error.

 

 

*The bond percentage was shown in a "general requirements" portion of the certified cost & pricing data, so the Government never saw it here.

 

Also, clause 52.215-10 is in the contract.

 

I will have to look into the case law, it appears.

 

 

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Also, since no one has talked about it, the idea of the Government using the mistake after award clauses (typical used by contractors) to rectify the mistake is a non-starter?

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19 minutes ago, TheLaw said:

Also, since no one has talked about it, the idea of the Government using the mistake after award clauses (typical used by contractors) to rectify the mistake is a non-starter?

Not necessarily.  But it would require mutual agreement, I think. H2H suggested that the contractor ought to move on and go with mutual mistake. 

However, the price reduction for defective cost or pricing clause would be simpler if it is clear that the contractor knew or should have known the actual bond rate at the time of negotiation completion. It has admitted a mistake, right?  The defenses that the contractor have apparently raised are non-starters if you read the US Code and the FAR. 

One of the reasons for TINA was to provide an administrative remedy without having to prove intent, fraud or False statements. As my poor memory serves me, Admiral Rickover wanted a bigger stick without having to prove civil negligence or intent or criminal intent under the Fraud and False Statements Statutes. 

I don’t understand what was meant by 

“*The bond percentage was shown in a "general requirements" portion of the certified cost & pricing data, so the Government never saw it here.”

 

 

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The bonding was grouped in a category that says "general requirements." The contractor has since told us that the bond costs were included in there.

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26 minutes ago, TheLaw said:

The bonding was grouped in a category that says "general requirements." The contractor has since told us that the bond costs were included in there.

Even if the government overlooked the data,in the general requirements,  the Statute says that the contractor can’t use that  as a defense or excuse.  A mistake in the spreadsheet isn’t a defense either. The Govt still needs to show that the contractor (the company, not necessarily the negotiator) knew what the bond rate would be. It apparently represented the rate basis for the cost of the bond in the supporting data for the bond cost. 

Whew - hope there are lessons learned here! Those administering and negotiating and/or performing technical and cost analysis  for construction contract actions must read the entire proposal and understand what they are reading. 

One must also perform some math checks! When negotiating one needs to keep up with the effects on the bottom line as well as possible. 

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10 minutes ago, joel hoffman said:

Whew - hope there are lessons learned here! Those administering and negotiating and/or performing technical and cost analysis  for construction contract actions must read the entire and understand what they are reading. 

Yea, lets not even go down that rabbit hole...

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2 minutes ago, TheLaw said:

Yea, lets not even go down that rabbit hole...

Righto. I can surmise what happened.

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1 hour ago, TheLaw said:

Also, since no one has talked about it, the idea of the Government using the mistake after award clauses (typical used by contractors) to rectify the mistake is a non-starter?

Actually, I do not know. My answer above was along the lines of a mutual mistake theory. That’s not what you were talking about.

 However, wouldn’t the contractor have to be the one to assert the mistake and ask for ean adjustment? How would that be in the contractors best interest?I certainly don’t think that the government would pursue a case concerning fraud.

Good luck with whatever you do.  

By the way, there was no need to be accusatory or confrontational in the three defective pricing cases that I was involved with.  We didn’t make it personal.  

Especially so here, when the contractor admits that it made a math error in the spreadsheet or in the rate expressed in the “general requirements”.  

Without seeing it, it may well be where all the global constants used in an estimating spreadsheet or estimating program are represented.

That’s how I used to build estimates and pre-negotiation objectives. Then, if one of the global values changed, I could quickly recalculate my estimate or a new negotiating position and bottom line counteroffer or bottom line negotiation upper limit. Learned that from a contractor. 😃

Edited by joel hoffman
Sorry

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1 hour ago, joel hoffman said:

I’m only stating that cost and pricing are part of the proposal. I gave two references. 

Retreadfed said a “proposal is not cost or pricing data. “ Not sure what he was trying to say. The FAR and the Statute both require the contractor to submit cost or pricing data with the proposal to support the proposed price. . 

Pepe, do you think that cost or pricing data aren’t part of the proposal? 

And do you think that the government must prove intent and fraud rather than administratively seek and obtain a price reduction due to defective cost or pricing data that increased the price?

PepeTheFrog wants to find the Truth with a capital T about whether or not the proposal itself is considered cost or pricing data (rather than, say, facts that prudent buyers or sellers would reasonably expect to affect price negotiations significantly and which may or may not be used to prepare the proposal itself). Like most on the this forum, PepeTheFrog wants to learn and gain a deeper understanding of key issues in government contracting. When people provide false or misleading or murky or questionable information, PepeTheFrog and others question it, as they should.

 

Retreadfed stated that a proposal is not cost or pricing data and provided a citation to a Board of Contract Appeals case. You responded by talking about your personal experiences and then posted a PowerPoint presentation by Natarsha and Dawn. 

Then you shifted the goalposts by saying that cost or pricing data is part of the proposal, which implies that you are walking back your assertion that the proposal itself counts as cost or pricing data that can be used as part of a defective pricing claim by the government. Of course, you are not walking back your assertion. You are doubling down and squirming around by shifting the terms of the debate. That is bad form.  

So far, PepeTheFrog finds Retreadfed to be persuasive and finds your various explanations and significant changes in argumentation/position to be severely lacking. @joel hoffman Please do not think that PepeTheFrog is picking on you, personally. Truth and order are very difficult and require significantly much more work and effort than lies and chaos. With no vigilance or curiosity, lies and chaos will win every single time. Finding Truth via negativa (by eliminating falsehoods or errors) is a great method and some people say it's the very heart of the scientific method.

 

For your final question, the government does not have to prove intent or fraud to administrative seek and obtain a price reduction based on an assertion of defective cost or pricing data. The proof of intent or fraud will come about in litigation, as you know. Now it seems like your position is that the government should try to get away with whatever it can, as long as it can fool the contractor into compliance, even if what the government is doing is not based on sound principles, case law, legislation about certified cost or pricing data, etc. Throw out scary words like "defective pricing" (even if that situation does not apply!) and just get it done because you won't have to prove intent or fraud unless the contractor moves the entire ordeal into litigation. Well, fine. That actually might work!

That is a form of advice you can provide on the forum, but you should make it clear that you're just telling the government to push around the contractor based on false, misleading, murky, or questionable information. Instead you keep trying to make it seem like your advice is based on something true or backed up by respected or acknowledge authorities, like laws, written policies, regulations like the FAR, or court cases.

 

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1 hour ago, joel hoffman said:

The FAR and the Statute both require the contractor to submit cost or pricing data with the proposal to support the proposed price. .

That is not true.  Here is what 10 U.S.C. 2306a says

The head of an agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows:

(A) An offeror for a prime contract under this chapter to be entered into using procedures other than sealed-bid procedures that is only expected to receive one bid shall be required to submit cost or pricing data before the award of a contract.
 
Thus, the statute only requires contractors to submit cost or pricing data before award of a contract and then only if required by the head of the agency.
 
While Table 15-2 says contractors are to submit cost or pricing data with their proposal, it does not say that such data are part of the proposal or that the proposal is cost or pricing data, which the UTC decision tells us it is not.  Further, Table 15-2 says the obligation to submit cost or pricing data continues until award.  Thus, the Table itself does not require all cost or pricing data does not have to be submitted with a proposal.  In this regard, FAR 52.215-10 states that the government is entitled to a price reduction if the contractor "furnished certified cost or pricing data that were not complete, accurate, and current as certified in its Certificate of Current Cost or Pricing Data."  FAR 15.403-4 requires the contractor to certify that "the cost or pricing data were accurate, complete, and current as of the date of agreement on price or, if applicable, an earlier date agreed upon between the parties."  Based on this, the government is not entitled to a price reduction if cost or pricing data was not submitted with a proposal, but only if the contractor did not submit data that was current, complete and accurate as of the date of agreement on price of the contract or some earlier date.  Further, based on the language of the statute, this data can be submitted after agreement on price, but before award of the contract.
FAR 52.215-10 does not address the situation where there is a mistake or misrepresentation in a proposal.  It only addresses the situation where defective pricing has occurred.  If the government wishes to receive a price reduction for a mistake in a proposal or misrepresentation in a proposal, it will have to do so under some theory other than defective pricing.

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Good luck trying to learn, Pepe. 

Cost or pricing data may be stated within the proposal. They may be submitted separately with the proposal They may be an attachment within the proposal. There is no one way to do it. 

If attached or separately referenced cost or pricing data indicate that the bond will cost 4% of the total direct costs,  plus overhead and Profit and then  “4%” is used to calculate the cost of the bond in the proposal breakdown - is the cost or pricing data part of the proposal?  It is certainly used to calculate the amount of the proposed price. 

I’m  not telling the government to “push around the contractor”.  A provision for a price adjustment due to the effect of defective cost or pricing is the law and in the contract. 

Hey, if the contractor goes bid shipping or finds a better deal after the price agreement, that isn’t necessarily a TINA violation.

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Nice try, Retreadfed. In other words, C&P data submission is only a formality. Thus, it is not intended for any useful purpose by the government to evaluate a proposal to determine that it is fair and reasonable or that the data supporting the proposed amounts are complete, concurrent and accurate. 

The certification generally comes after the price agreement.  Cost or pricing data are to be provided before that for the benefit of the government in the proposal evaluation. It is updated, if necessary, as of the date represented in the certification. 

 

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40 minutes ago, Retreadfed said:

FAR 52.215-10 does not address the situation where there is a mistake or misrepresentation in a proposal.  It only addresses the situation where defective pricing has occurred.  If the government wishes to receive a price reduction for a mistake in a proposal or misrepresentation in a proposal, it will have to do so under some theory other than defective pricing.

If a mistake or misrepresentation in the cost or pricing data, thus not “accurate, current and complete “ it is defective. If it raises the proposed price, then the clause provides a means for a price reduction. The clause also permits certain offsets from the price reduction for other corrections, too. 

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At any rate, the OP can research the regs, laws, caselaw, etc. 

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19 hours ago, PepeTheFrog said:

PepeTheFrog agrees with a bilateral modification based on mutual mistake.

This does not seem like a classic or provable case of defective pricing (in the term of art for federal contracting, not in the general sense of the two words "defective pricing"). Nobody will disagree that the contractor priced their proposal wrong (and that the pricing was "defective" in some way), but that is different from satisfying the elements of a defective pricing case.

Here is the DCAA audit guidance, according to Briefing Papers article, on defective pricing:

"(1) The information in question fits the definition of certified cost or pricing data. (2) Accurate, complete, and current data existed and were reasonably available to the contractor before the agreement on price. (3) Accurate, complete, and current data were not submitted or disclosed to the contracting officer or one of the authorized representatives of the contracting officer and that these individuals did not have actual knowledge of such data or its significance to the proposal. (4) The Government relied on the defective data in negotiating with the contractor. (5) The Government’s reliance on the defective data caused an increase in the contract price."

https://www.crowell.com/files/Litigation-and-Proof-in-Defective-Pricing-Cases.pdf

Numbers (1) and (2) seem questionable.

Why do you find (1) and (2) questionable?  If I understand the scenario:

On (1), the bond percentage did impact the proposed/negotiated price so it is cost or pricing data...aka a fact that one would reasonably expect to affect price negotiations significantly (the bond percentage is factual and verifiable which is how the contractor discovered it as a mistake).  The OP stated that the contractor provided a certificate of current cost or pricing data.

On (2) the correct bond percentage was available to the contractor before the agreement on price (they used 4% instead of 0.4% because of a typo).

Did I miss something?

On 4/11/2019 at 10:48 AM, TheLaw said:

Could the Government possibly use FAR part 15.508 for Discovery of Mistakes (which then references 14.407-4), to correct this mistake? I understand that those sections are used by contractors to rectify mistakes they discover (in their favor), but it seems like the Government should have some recourse in this situation. I've come up empty on my review, however, so any advice would be welcome.

Thanks.

Read 15.502 "Applicability" - while the subpart technically applies to competitive proposals it goes on to read "the procedures in...15.508...with reasonable modification, should be followed for sole source acquisitions..."  (Note: this is a crucial habit to learn - ALWAYS read the Scope, Applicability and Definitions [SAD] of any FAR Part/Subpart first).

I think the question at hand is, what do you think the right way to approach this situation is?  If the contractor was forthcoming with identifying the mistake and earnestly wants to rectify it, I don't know of a rule or regulation that prohibits you from doing so; however, if the contractor identified is not cooperating, I think you could make an argument for defective pricing to either encourage them to cooperate or else...

I would opt for the former vs either of the latter...a defective pricing battle is no way to start a contractual relationship (but if it is necessary, the Contracting Officer has an obligation to recoup the excess amount).

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Thanks for the SIMPLE explanation, Matthew!!  

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1 hour ago, joel hoffman said:

The certification generally comes after the price agreement.  Cost or pricing data are to be provided before that for the benefit of the government in the proposal evaluation

And what is the government's remedy if the contractor does  provide  data that is current complete and accurate as of the date of agreement on price but not until after agreement on price but before award of the contract?

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3 hours ago, TheLaw said:

The bond percentage was shown in a "general requirements" portion of the certified cost & pricing data, so the Government never saw it here.

What was the bond percentage that was shown here?  Was it verifiable by any information that the contractor had?  If so what was that information?  You said the certified cost or pricing data was submitted after the proposal was submitted.  Was it submitted before or after agreement on price?  Also, was the certificate provided before agreement on price?

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Sure seems to be a lot of lawyers in this thread, or people trying to imitate lawyers. Not pointing any fingers, as I am frequently accused of practicing law without the requisite guild admission. I've been waiting for the phrase "rebuttable presumption" to be used because it seems to be the next step in our legal analysis of the case.

My point is that we were provided with a rather straightforward scenario. The government and contractor agreed on a price that was based on a mistake. The price needs to be adjusted to rectify that mistake.

What's the easiest and most straightforward way to acomplish that objective? Is it (a) allege defective pricing and refer the matter to DCAA for quantum and to Legal for action, or (b) bilaterally modify the contract to reduce the price to what it would have been, had the mistake not been made?

Everything else in this thread seems to be ... off point.

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1 hour ago, Retreadfed said:

And what is the government's remedy if the contractor does  provide  data that is current complete and accurate as of the date of agreement on price but not until after agreement on price but before award of the contract?

 I assume that you are saying that the contractor is now providing updated cost or pricing data that indicates that what the parties settled upon was incorrect. 

The remedy is to adjust the settled price to reflect the corrections before award. 

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2 hours ago, PepeTheFrog said:

the government does not have to prove intent or fraud to administrative seek and obtain a price reduction based on an assertion of defective cost or pricing data.

This is a true statement.  The government does not have to prove intent to withhold pertinent data or that the contractor engaged in fraud in order for the government to recover for defective pricing.  However, a defective pricing claim is a government claim against the contractor.  A such, the government has the burden of proving every element of a defective pricing claim. The first element that the government has to prove is that the data in question are cost or pricing data.  Thus, contracting officers need to have a thorough understanding of what is cost or pricing data.  This means going beyond the mere language of the definition of cost or pricing data found in the FAR and statute, but how that language has been interpreted by the appeals boards and courts.  I learned a long time ago that laws regulations and contracts mean what the courts say they mean.

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2 minutes ago, joel hoffman said:

The remedy is to adjust the settled price to reflect the corrections before award. 

The parties have agreed upon a price.  The contractor says the agreed upon price is fair and reasonable, it has complied with the statute and it will not reopen negotiations.  What now?

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 H2H, , I am  aware that you worked for some of the large defense contractors who are used to confrontational relations. When I discussed lawyers I was referring to advice on how to obtain a price reduction if the KO doesn’t know how to. 

I did not mean to imply that the government is going to take any legal action against the contractor. Sorry if I left that impression. 

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17 minutes ago, Retreadfed said:

The parties have agreed upon a price.  The contractor says the agreed upon price is fair and reasonable, it has complied with the statute and it will not reopen negotiations.  What now?

I might consider a unilateral mod, adjusting the price to reflect the corrected data. I’d let the contractor know first and possibly reconsider.. Is the contractor going to base a claim on using mistaken or misrepresented cost or pricing data as the basis for it’s called fair and reasonable price?   

Who knows what might happen next? Obviously you operate in a much more combative and confrontational sphere than I have. Even my most difficult super-contractor didn’t act that way. They took forever to sweep and certify but they didn’t hesitate to address errors in their data. H2H knows who I’m speaking of. 

This is a circular debate. 

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3 minutes ago, joel hoffman said:

I might consider a unilateral mod, adjusting the price to reflect the corrected data.

Based on what authority?  The contractor disclosed certified cost or pricing data that was current, complete and accurate before award of the contract.  How can that be defective pricing? Also, what do you do if the contract has not been awarded when the contractor discloses its mistake?

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