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I believe that any contract containing the TINA clause has a potential to be reviewed for Defective Pricing. However, as a practical matter I would expect that only those contracts, where DCAA has determined there may be a significant risk to the government, have a realistic chance of being selected for audit.

I have a vague recollection that there was once a threshhold used by DCAA in determining which contracts they would or would not review for Defective Pricing.

I am hoping that someone may be as old as I am, and has this same notion, and that it is a reality, and not the musings of a weathered old ex-auditor. Any insight would be greatly appreciated

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Guest Vern Edwards

Might you be referring to the standard for what is considered a "significant amount" under the defective pricing clause? See DCAAM 14-120.1:

14-120.1 Materiality of the Defective Pricing Findings

a. The TINA and regulations do not define what is a "significant amount" by which a contract price was increased because the contractor furnished defective cost or pricing data. The Courts and the BCA have made differing decisions regarding what is a significant amount.

b. The Government expends a substantial amount of resources finding, pursuing, and settling claims of defective pricing. Accordingly, materiality should be one of the underlying factors when doing postaward audits. In determining the significance of defective pricing, consider the magnitude of the defective data including all applicable burdens (see 10-103.3j(2) and 14-116.4).

c. Any issue involving significance of a defective pricing recommendation should be resolved using the following working guideline.

Potential price adjustments of 5 percent of contract value or $50,000 whichever is less should normally be considered immaterial. When applying this standard consideration must be given to contract type. For example, on a CPFF contract with a 10 percent fee a $500,000 price adjustment is required to effect a $50,000 recovery. These materiality criteria do not apply in the following circumstances:

(1) when a contractor?s deficient estimating practices have resulted in recurring defective pricing; or

(2) the potential price adjustment is due to a systemic deficiency which affects all contracts priced during the period.

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Mr. Edwards, Thank you!!

While this is excellent feedback, it addresses whether or not the "findings", as the result of having performed a DP review, are significant.

I have a recollection that DCAA had some manner of a Matrix or decision tool they used to determine if a particular contract award was even worthy of bothering to do a review.

Does anyone else have similar rememberances?

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Mr. Edwards, Thank you!!

While this is excellent feedback, it addresses whether or not the "findings", as the result of having performed a DP review, are significant.

I have a recollection that DCAA had some manner of a Matrix or decision tool they used to determine if a particular contract award was even worthy of bothering to do a review.

Does anyone else have similar rememberances?

Casius,

DCAA obtains a listing of all pricing actions subject to defective pricing (i.e., subject to TINA) which is the "universe of activity". The entity is given a PASS rating which is the overall risk assessment of the likelihood of defective pricing based on DCAA's experience. PASS = Post-Award Something Something (I forget.) The PASS is essentially a co-efficient that drives sample selection; the higher the PASS rating the larger the sample size selected from the universe of activity.

Hope this helps.

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