November 1, 1994

The Federal Acquisition Streamlining Act: Has It Streamlined TINA Coverage?

Government Contract Costs, Pricing & Accounting Report
With the enactment of the Federal Acquisition Streamlining Act (FASA), Congress completed an ambitious effort to reinvent the federal procurement process. The chief purpose of FASA was exempting commercial products from government unique certification and accounting requirements. FASA also narrowed the coverage of the Truth in Negotiations Act (TINA), the number one disincentive to commercial participation in government procurements.
Title I of FASA extends uniform rules on TINA coverage throughout the government. FASA also has changed the threshold for requiring cost or pricing data. Certified cost or pricing data 1) must be required on nonexempt contracts over $500,000, 2) may be required on nonexempt contracts below $500,000 if justified in writing by an agency head, and 3) may not be required on exempt contracts. The $500,000 threshold periodically will be adjusted for inflation.

The higher threshold under TINA will reduce burdens to some contractors, but not to others. Firms competing for smaller contracts still may be required to submit cost or pricing data at the discretion of the agency head if they cannot establish that the contract is exempt.

Apart from the increase in the threshold for requiring cost or pricing data, FASA's most important provisions on TINA coverage relate to commercial items. Formerly there were only three exemptions to TINA: prices based upon "adequate price competition," prices based upon "established catalog or market prices," and "prices set by law or regulation."

FASA applies to a broadly defined group of goods and services, and goes beyond the "catalogue or market price" exemption. The new provisions exempt products 1) customarily used by the general public, 2) that have evolved form such items, 3) certain ancillary services required to support commercial items, and 4) services sold in the commercial market.

While FASA expands the definition of commercial items exempt from TINA, the government retains "limited purpose" audit rights on certain exempt procurements. Whether these rules will prove to be a benefit to commercial companies or simply a trap for unwary novices to government procurement remains to be seen. This, in large measure, will depend on how the new law is implemented.
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