Contractors Take Note: DoD Issues Two Final Contract Cost and Pricing Rules

On October 28, 2022, the Department of Defense (DoD) amended the Defense Federal Acquisition Regulation Supplement (DFARS) by issuing two final rules related to contract cost and pricing.  Specifically:

• Requiring Data Other Than Certified Cost or Pricing Data - DoD issued a final rule to implement a section of the Fiscal Year (FY) 2020 National Defense Authorization Act (NDAA) relating to the submission of data other than certified cost or pricing data (e.g., in connection with pricing actions for commercial products or services, which are exempt from the requirement to disclose certified cost or pricing data).  The new rule prohibits contracting officers (COs) from relying only on historical prices paid by the Government to determine that the price of a contract or subcontract is “fair and reasonable,” and requires COs to consider other factors in addition to historical prices paid.  The rule also states that offerors must make a good faith effort to comply with a CO’s reasonable request to furnish data other than certified cost or pricing data, but this requirement may be waived by the head of contracting activity if he or she determines that it is “in the best interest of the Government” to make the award.  Finally, the rule requires the Government to include a note on contractors’ past performance evaluations in the Contractor Performance Assessment Reporting System (CPARS) if they have denied multiple Government requests for submission of data other than certified cost or pricing data in the preceding three-year period but still received an award.  The new rule raises questions regarding what it means for a request for other than certified cost or pricing data to be “reasonable,” and what a contractor must do to make a “good faith effort” to comply with the request (particularly if the contractor believes that the request is not reasonable).
• Repeal of Preference for Fixed-Price Contracts – DoD issued a final rule repealing preferences for the use of fixed-price contracts.  Implementing section 817 of the FY 2022 NDAA, which repealed section 829 of the FY 2017 NDAA, the rule removes language from DFARS Part 216 (Types of Contracts) and Part 235 (Research and Development Contracting) that favored the use of fixed-price contracts, including fixed-price incentive contracts.  The new rule also removes a DoD requirement for approval by the head of the contracting activity before issuance of a cost-reimbursement contract greater than $25 million.  These changes give the DoD greater contracting flexibility, but time will tell whether it results in increased use of cost-reimbursement contracts.