Proposed Rule Would Create A Separate, More Restrictive Standard For "Adequate Price Competition" For The DoD, NASA, And The Coast Guard

On June 12, 2018, the Department of Defense ("DoD"), the General Services Administration, and NASA proposed a new rule that would limit the "adequate price competition" exception to certified cost or pricing data requirements on all DoD, NASA, and Coast Guard procurements. Currently, FAR 15.403-1 prohibits contracting officers from requiring contractors to submit certified cost or pricing data to support a contract action when the contracting officer determines that the prices agreed upon are based on "adequate price competition," which the regulation defines in one of three ways:

1. Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government's expressed requirement where award will be made in a best-value competition and there is no finding that the price of the otherwise successful offeror is unreasonable;
2. Only one offer is received from a responsible offeror, but there was a reasonable expectation that two or more responsible offerors, competing independently, would submit priced offers, the offer received was submitted with the expectation of competition, and the determination that the proposed price is based on adequate price competition and is reasonable has been approved at a level above the contracting officer; or
3. Price analysis clearly demonstrates that the proposal price is reasonable in comparison with current or recent prices for the same or similar items, adjusted to reflect changes in market conditions, economic conditions, quantities, or terms and conditions under contracts that resulted from adequate price competition.

The proposed rule, however, would eliminate the second and third definitions for the DoD, NASA, and the Coast Guard. Instead, for these agencies, a price would be based on adequate price competition "only if two or more responsible offerors, competing independently, submit responsive and viable offers." The proposed rule is meant to implement Section 822 of the 2017 National Defense Authorization Act, which amended the Truth in Negotiations Act by adding similar language to that statute's requirements for certified cost or pricing data.

If promulgated as proposed, the rule could have far-reaching implications for contractors. In particular, with the elimination of two alternate definitions of "adequate price competition," contractors can expect to avail themselves of this exception less often and consequently have to submit certified cost or pricing data more frequently. Not only would this increase administrative costs, but as with any certifications to the Government, it could expose contractors to liability under the False Claims Act in a greater number of transactions. Accordingly, contractors should watch closely for any further developments to this proposed rule during the rulemaking process, and they may want to avail themselves of the opportunity to submit comments by the August 13, 2018 deadline.

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