Certified Cost or Pricing Data Threshold: $2.5M and Exceptions

The certified cost and pricing data threshold under the Federal Acquisition Regulation is $2.5 million for prime contracts, subcontracts, and modifications awarded on or after July 1, 2018. Cross that number on a negotiated action and the contractor generally has to submit detailed cost data and certify it as accurate, complete, and current. One significant change is already scheduled: for Defense Department contracts entered into after June 30, 2026, the statutory threshold in 10 U.S.C. § 3702 rises to $10 million.

Where the $2.5 Million Number Comes From

FAR 15.403-4 sets the operative threshold that contracting officers apply. For any prime contract awarded on or after July 1, 2018, the threshold is $2.5 million. Contracts awarded before that date carry a lower threshold of $950,000.¹ When a clause in an existing contract references the threshold and a later inflation adjustment changes it, the updated figure applies for the rest of that contract unless another adjustment follows.

The underlying statutes use a lower number. For DoD contracts entered into on or before June 30, 2026, 10 U.S.C. § 3702 requires cost or pricing data when the expected price exceeds $2 million.² For civilian agencies, 41 U.S.C. § 3502 sets the same $2 million floor.³ The FAR’s $2.5 million figure reflects inflation adjustments permitted under FAR 1.109, and it is the number contracting officers actually use on new procurements.

The 2026 DoD Change

For Defense Department contracts entered into after June 30, 2026, 10 U.S.C. § 3702 raises the threshold sharply. Prime contracts, subcontracts, and modifications to prime contracts require certified cost or pricing data only when the expected price or price adjustment exceeds $10 million.² Modifications to subcontracts are the exception; they keep the $2 million threshold even after that date. Civilian agency contracts under 41 U.S.C. § 3502 are not affected and remain at existing thresholds.

Actions the Threshold Applies To

Once the expected value crosses the threshold, three kinds of procurement actions pull the requirement in.

Negotiated prime contracts. Any prime contract awarded through negotiation rather than sealed bidding requires certified data before award if the expected price exceeds the threshold.¹
Subcontracts at any tier. A subcontract triggers the requirement if the prime and every higher-tier subcontractor were themselves required to furnish certified data, and the subcontract price exceeds the threshold.
Contract modifications. Any modification to an existing contract or covered subcontract requires certified data if the price adjustment exceeds the threshold, and this holds whether the original contract was awarded through sealed bidding or negotiation.

How to Value a Modification

The government does not look at the net change. It adds the absolute values of every increase and decrease. The FAR’s own example: a $500,000 net modification that comes from a $1.5 million reduction plus a $1 million increase is treated as a $2.5 million pricing adjustment.¹ Contractors who look only at the net figure and assume they fall below the line can back into a defective-pricing problem later.

Under 10 U.S.C. § 3702, the threshold for modifications to DoD prime contracts is already $10 million, higher than the $2 million floor for new prime awards. Modifications to DoD subcontracts have their own $2 million threshold.² For civilian agencies, both contract and modification thresholds sit at $2 million.³ Day to day, the FAR’s $2.5 million number governs new awards, but these statutory distinctions can matter when a modification sits close to the line.

Exceptions That Remove the Requirement

Being above the threshold is not the end of the analysis. Four situations take the certified data obligation off the table.

Adequate price competition. When two or more responsible offerors independently submit priced proposals that satisfy the government’s requirements, price is a substantial factor in the selection, and the winning price is not found unreasonable, the contracting officer treats the price as competitively established and does not require certified data.⁴
Commercial products and services. An item that meets the FAR 2.101 definition of a commercial product or commercial service is exempt. The exception also covers modifications to commercial products so long as the modification does not turn the item into something non-commercial. Services sold competitively in substantial quantities in the commercial marketplace can qualify even if they are not being sold in those quantities at the exact time of the government purchase.
Prices set by law or regulation. A price fixed by a governing body is treated as inherently fair.
Waivers. The head of the contracting activity can waive the requirement in exceptional cases. The waiver and rationale must be in writing, and the HCA cannot delegate the authority. A waiver for a prime does not flow down; each subcontract needs its own waiver or a separate exception.

An exception does not mean the government takes your price on faith. The contracting officer can still require “data other than certified cost or pricing data” to support a fair-and-reasonable price determination, including sales history, cost breakdowns, or anything else needed.⁵ Refusing can make you ineligible for award unless the HCA makes a written determination that the award is in the government’s best interest.

What Counts as Cost or Pricing Data

FAR 2.101 defines cost or pricing data as all facts that prudent buyers and sellers would reasonably expect to significantly affect price negotiations, as of the date of price agreement or an earlier agreed-upon date.⁶ The definition is deliberately broad. Cost or pricing data is factual and verifiable, not judgmental. Your estimate of what something will cost in the future is judgment; the historical production data and vendor quotes underlying that estimate are cost or pricing data.

Specific categories the FAR lists:

Vendor quotations, including any you chose not to use.
Nonrecurring costs such as tooling, setup, or engineering design.
Production changes that affect unit costs.
Make-or-buy decisions.
Unit-cost trends tied to labor learning curves or efficiency improvements.
Management decisions that could significantly affect costs, such as facility closures or capacity investments.

If a vendor sent you an updated quote three days before you agreed on a price with the government and you did not disclose it, that omission can trigger a defective-pricing claim even if you thought the earlier quote was more representative.

The Certificate and the “As Of” Date

The certificate of current cost or pricing data is a signed statement by a company representative attesting that the submitted information is accurate, complete, and current. The certificate specifies an “as of” date: the day price negotiations concluded and the parties reached agreement, or an earlier date both sides agreed to use as a cutoff.⁷ The execution date of the certificate should be as close as practicable to the date price agreement was reached. Every day between your last data update and the certificate is a window in which new information can emerge that you are legally obligated to disclose.

What Happens If the Data Is Wrong

Certified data that turns out to be inaccurate, incomplete, or not current carries real financial consequences. The government does not have to prove you intended to deceive; the data simply needs to have been wrong as of the certification date and to have caused a higher price.

Price Reduction and Interest

When defective data is discovered after award, the government is entitled to a price reduction for any significant amount by which the contract price was inflated because of the bad data, including the profit or fee calculated on that inflated amount.⁸ On top of the price reduction, the government recovers interest on every overpayment, running from the date of each overpayment to the date of repayment at the Treasury underpayment rates under 26 U.S.C. § 6621(a)(2), which change quarterly.

Penalties for Knowing Submissions

If the defective data was submitted knowingly, the contracting officer assesses a penalty equal to the full overpayment amount, on top of the price reduction and interest. The contracting officer must consult legal counsel before pursuing penalties.

Offsets for Understated Data

The government will allow an offset if you can show some of your submitted data was actually understated while other data was overstated. The offset is capped at the amount of the government’s overstated-data claim from the same pricing action. You must certify the offset request and prove the understated data was available before the “as of” date but was not submitted. If the government can show you knew the data was understated, or that it would not have changed the negotiated price, the offset is denied.

Audit Exposure After Submission

Submitting certified cost or pricing data opens your records to government audit long after the contract is complete. The Defense Contract Audit Agency conducts post-award compliance audits designed specifically to test whether the certified data was accurate, complete, and current as of the certification date.

FAR 4.703 requires contractors to make records available for three years after final payment.⁹ A contract clause specifying a longer retention period controls. If you keep records longer than three years for your own business purposes, the government’s access matches your retention period. Late submission of a final indirect cost rate proposal extends the retention clock by one day for every day the proposal is overdue. When records from a prior contract serve as cost or pricing data for a later contract, the three-year clock restarts from the date of the later contract.

1
Acquisition.GOV. Federal Acquisition Regulation 15.403-4 – Requiring Certified Cost or Pricing Data
2
Office of the Law Revision Counsel. 10 USC 3702 – Required Cost or Pricing Data and Certification
3
Office of the Law Revision Counsel. 41 USC 3502 – Required Cost or Pricing Data and Certification
4
Acquisition.GOV. Federal Acquisition Regulation 15.403-1 – Prohibition on Obtaining Certified Cost or Pricing Data
5
Acquisition.GOV. Federal Acquisition Regulation 15.403-3 – Requiring Data Other Than Certified Cost or Pricing Data
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Acquisition.GOV. Federal Acquisition Regulation 2.101 – Definitions
7
Acquisition.GOV. Federal Acquisition Regulation 15.406-2 – Certificate of Current Cost or Pricing Data
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Acquisition.GOV. Federal Acquisition Regulation 15.407-1 – Defective Certified Cost or Pricing Data
9
Acquisition.GOV. Federal Acquisition Regulation 4.703 – Policy