Government contractors should explore updates to their purchasing system policies and procedures regarding subcontracts subject to Truthful Cost or Pricing Data (TCPD) and Cost Accounting Standards (CAS) requirements based on the upcoming effective date for the increased threshold for obtaining certified cost or pricing data.

Specifically, Section 811 of the National Defense Authorization Act for Fiscal Year 2018 (Pub. L. No. 115-91, 131 Stat. 1283) (FY 2018 NDAA), amends 10 USC § 2306a and 41 USC § 3502, increasing the threshold for obtaining certified cost or pricing data to US$2 million. Inevitably, this increased threshold impacts subcontracting, particularly under contractor purchasing systems that are subject to the Department of Defense (DOD) Business Systems Rule.

A recent memorandum issued by Shay D. Assad, Director of Defense Pricing/Defense Procurement and Acquisition Policy (DP/DPAP), which we addressed in a prior advisory, directs DOD contracting officers that, effective July 1, 2018, they shall use US$2 million as the threshold for obtaining certified cost and pricing data “in lieu of the threshold . . . at [FAR] 15.403-4.” Notably, while this class deviation provides direction to DOD contracting officers, it does not change the “current threshold” in FAR 15.403-4. Accordingly, absent a contract specifying a different threshold, prime contractors must wait until the threshold in FAR 15.403-4 is updated to implement the US$2 million threshold before they may safely use it for subcontracts and modifications that are not otherwise exempt.

Under FAR 52.215-12 and 52.215-13, a prime contractor’s obligation is to require a subcontractor to submit certified cst or pricing data when the expected value of the pricing action will exceed the threshold in FAR 15.403-4 and an exception does not apply. FAR 15.403-4(a)(1) states that certified cost or pricing data are required before the award or modification of subcontracts “expected to exceed the current threshold or, in the case of existing contracts, the threshold specified in the contract.” The same paragraph currently provides that “[t]he threshold for obtaining certified cost or pricing data is US$750,000,” and has not yet been updated to reflect the increased threshold.

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