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  • Question

    The contractor and government agree on a price of $100 for a non-competitive FAR 12 part. After award the contractor then gets the part from another supplier for $50. Do any of the TINA procedures apply to this scenerio, and if not, does the Gov't have any recoarse to ask for a refund for the difference? I've done quite a bit of research but all references to TINA are for FAR 15 requirements. This seems to be a type of defective pricing to me. Thanks


    Answer

    Based on the information provided, this should not be considered defective pricing.

    FAR Part 12 provides guidance for the acquisition of commercial items, as that term is defined in FAR 2.101. Since commercial items are by nature competitive, a non-competitive or sole-source part generally should not be procured under FAR Part 12 rules.

    Assuming the part is indeed a commercial item, FAR 12.207 requires the contract type to be firm-fixed-price (or a variation). With FFP, the contractor assumes all of the cost risk; they may make or lose money depending on their cost structure. Under a FFP contract, whether the contractor makes more or less profit is not a concern for the government because the contracting officer has already determined the contract price to be fair and reasonable.

    Without more information, the bigger concern in this scenario is the "non-competitive FAR Part 12" aspect. Strictly speaking, if this is a sole-source part, it seems unlikely that FAR Part 12 is the appropriate methodology. In addition, if this is truly a commercial item, why does the government not have access to the other cheaper supplier? This does not appear to be a defective pricing issue, but there may be larger concerns to address.

    Note that FAR 12.503(c)(2) states the applicability of the Truth in Negotiations Act (41 U.S.C. 254(d) and 10 U.S.C. 2306a) has been modified with regard to Executive agency contracts for the acquisition of commercial items. Acquisitions for commercial items are exempt from the requirement for cost or pricing data. (See FAR 15.403-1(c)(3)).

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