TINA Under FAR: Thresholds, Exemptions, and Defective Pricing

The Truth in Negotiations Act sets a dollar line above which contractors must hand the government detailed cost or pricing data and certify it as accurate, complete, and current; if that certified data later proves wrong, the government can claw back the difference, add interest, and stack a matching penalty for knowing violations. Under current TINA thresholds and defective pricing rules in FAR Part 15, the trigger sits at $2.5 million for prime contracts awarded on or after July 1, 2018, and it rises to $10 million for prime contracts entered into after June 30, 2026.

The Dollar Threshold That Triggers TINA

FAR 15.403-4 requires certified cost or pricing data whenever a negotiated contract, subcontract, or modification is expected to exceed the threshold. Right now that number is $2.5 million.¹ The requirement reaches three situations: the initial award of a negotiated contract, a subcontract at any tier where the prime and higher-tier subcontractors also had to furnish certified data, and modifications to existing contracts or covered subcontracts.

Under 10 U.S.C. § 3702, prime contracts entered into after June 30, 2026 carry a $10 million threshold. The same $10 million figure applies to subcontracts under those new primes and to modifications of them.² Contracts entered into on or before June 30, 2026 stay under the current $2.5 million threshold for the life of the contract. Contractors will need to track which threshold applies based on the prime contract’s award date, because active contracts from before July 2026 keep running under the old rules even as new awards move to the higher figure.

How Modifications Count

Modifications use absolute-value math, not net change. Both increases and decreases in the price adjustment add together toward the threshold. The FAR’s own example: a modification that decreases costs by $1.5 million and increases costs by $1 million produces a $2.5 million pricing adjustment and crosses the threshold, even though the net price change is only a $500,000 reduction.¹ Contractors who look only at the net figure routinely miss that they owe certified data.

Exemptions That Switch TINA Off

Even above the threshold, FAR 15.403-1 identifies five situations where the contracting officer cannot require certified cost or pricing data.³

Adequate price competition, meaning two or more responsible offerors independently submit priced proposals that meet the government’s requirement, award goes to the best-value offer where price is a substantial factor, and the winning price is not found unreasonable.
Commercial products or services, which carry established marketplace pricing the government can benchmark against.
Prices set by law or regulation, where there is nothing to negotiate.
A written waiver from the head of the contracting activity, based on a finding that a fair and reasonable price can be determined without certified data. The authority cannot be delegated, and a waiver at the prime level does not automatically cover subcontractors unless it says so.
Modifications to contracts or subcontracts for commercial products or services, which follow the commercial-item exemption.

When an exemption applies, the contracting officer can still request “data other than certified cost or pricing data” to support a fair-and-reasonable price determination. Prior sales history, catalog prices, and cost breakdowns are common examples. The contractor does not sign a certificate for this lesser category and is not exposed to defective-pricing liability on it, but a refusal to supply it can lead to being declared ineligible for award.⁴

What Counts as Certified Cost or Pricing Data

FAR 2.101 defines certified cost or pricing data as data submitted under FAR 15.403-4 and 15.403-5 and certified under FAR 15.406-2 as accurate, complete, and current as of a specific date before contract award.⁵ In practice, the category sweeps in any factual information that could reasonably affect the negotiated price: direct labor hours and wage rates, vendor quotes for materials, subcontractor proposals, overhead and indirect cost rates, make-or-buy decisions, and management decisions about production methods. If a vendor sent an updated, lower quote three days before the price agreement, that quote is disclosable even though it never made it into the original proposal.

The Certificate and the Sweep Before Signing

Data must be current through the date of price agreement, so contractors should nail down a cutoff date with the contracting officer early in negotiations. FAR 15.406-2 encourages both sides to agree in advance on the criteria for closing or cutoff.⁶

Before signing, experienced contractors run an internal data sweep to catch anything that arrived after the original proposal: updated vendor quotes, revised labor estimates, recently awarded subcontracts, changed overhead rates. The FAR treats any data “reasonably available” within the contractor’s or a subcontractor’s organization as something the contractor must disclose.⁶ Missed sweeps are one of the most common paths to a defective-pricing finding, because auditors later compare what sat in the contractor’s files against what was actually submitted.

Once both sides reach agreement on price, the contractor signs a Certificate of Current Cost or Pricing Data. That signature is what gives the government its legal footing to pursue a price reduction later if the data turns out to be flawed.

Subcontractors and Prime Contractor Exposure

TINA flows down to subcontractors at every tier. When the prime had to submit certified data, any subcontract expected to exceed the threshold triggers the same duty for the subcontractor. The same exemptions are available at the subcontract level.¹

The exposure sits with the prime. The government’s right to a price reduction for defective data applies whether the flawed information came from the prime, a prospective subcontractor, or an actual subcontractor.⁷ The government reduces the prime contract price and looks to the prime for repayment. The prime then has to chase its own recovery against the subcontractor. Primes that do not actively verify their subcontractors’ cost submissions carry real financial risk.

Defective Pricing: Price Reduction, Interest, and Penalty

When a post-award audit shows certified data was inaccurate, incomplete, or not current, the government is entitled to reduce the contract price to what it would have been had the correct data been available during negotiations. FAR 52.215-10 covers price reductions on initial awards; FAR 52.215-11 covers modifications.⁸⁹ The government does not need to prove intent. Either the data was accurate, complete, and current, or it was not.

Several common-sense defenses are off the table. A contractor cannot argue the price would not have changed because it was a sole source. It cannot argue the contracting officer should have caught the error. And it cannot defend on the ground that there was no agreement on the cost of individual items, only on the total price.⁹

If the price reduction covers items already paid for, the contractor owes interest compounded daily on the overpayment, using the underpayment rate set each quarter by the Secretary of the Treasury under 26 U.S.C. § 6621(a)(2), running from the date of overpayment to the date of repayment.⁸ A contractor who knowingly submitted incomplete, inaccurate, or noncurrent data owes an additional penalty equal to the full overpayment, which effectively doubles the financial hit before interest is added.

Offsets

Not every finding runs entirely against the contractor. Under FAR 15.407-1, the contracting officer must allow an offset when the contractor shows that other certified data in the same pricing action was understated. The offset is capped at the amount of the government’s overstatement claim, so it can reduce what the contractor owes but cannot produce a net price increase.⁷ The understated and overstated amounts do not have to sit in the same cost category. The contractor carries the burden of proving the understatement, certifying the offset amount, and showing the understated data was available before the certificate date but was not submitted. The offset disappears entirely if the contractor knew the data was understated before certifying.

How DCAA Establishes a Finding

The Defense Contract Audit Agency reviews completed contracts for defective pricing, either through its annual audit plan or at a contracting officer’s request. To make a finding stick, the auditor must prove all five elements: the information qualifies as cost or pricing data; accurate data existed and was reasonably available to the contractor before the price agreement date; the contractor failed to submit or disclose it; the government relied on the defective data during negotiations; and that reliance caused a price increase.¹⁰ Break any one of those and the claim falls apart.

When Defective Pricing Turns Into Fraud

A standard defective pricing adjustment is a contract remedy, not a fraud case. The government reduces the price, the contractor repays, and both sides move on. Where evidence suggests the contractor knowingly submitted false data, the matter can escalate into a False Claims Act investigation carrying treble damages and additional per-claim penalties under 31 U.S.C. § 3729. DCAA auditors and Department of Defense inspectors general work fraud indicators into their defective pricing checklists, and sole-source contracts, unusually high profit margins, and wartime procurement urgency tend to draw the closest scrutiny. The line between a pricing error and a fraud case usually comes down to what the contractor knew before signing the certificate and whether internal records show the correct data was on hand and withheld.

1
Acquisition.GOV. FAR 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
Acquisition.GOV. FAR 15.403-1 – Prohibition on Obtaining Certified Cost or Pricing Data
4
Acquisition.GOV. FAR 15.403-3 – Requiring Data Other Than Certified Cost or Pricing Data
5
Acquisition.GOV. FAR 2.101 – Definitions
6
Acquisition.GOV. FAR 15.406-2 – Certificate of Current Cost or Pricing Data
7
Acquisition.GOV. FAR 15.407-1 – Defective Certified Cost or Pricing Data
8
Acquisition.GOV. FAR 52.215-10 – Price Reduction for Defective Certified Cost or Pricing Data
9
Acquisition.GOV. FAR 52.215-11 – Price Reduction for Defective Certified Cost or Pricing Data – Modifications
10
DCAA. Contract Audit Manual Chapter 14 – Other Contract Audit Assignments