52.214-27
Price Reduction for Defective Certified Cost or Pricing Data-Modifications-Sealed Bidding
Contractors must ensure all certified cost or pricing data for applicable contract modifications are accurate, complete, and current, or risk mandatory price reductions, interest, and penalties.
Overview
FAR 52.214-27 establishes the requirements for price reductions in sealed bidding contract modifications when defective certified cost or pricing data is discovered. This clause applies to contract modifications that exceed the certified cost or pricing data threshold, unless an exception under FAR 15.403-1(b) applies. Its primary purpose is to protect the government from overpaying due to incomplete, inaccurate, or noncurrent cost or pricing data provided by contractors or their subcontractors.
Key Rules
- Applicability
- The clause is triggered for contract modifications exceeding the certified cost or pricing data threshold, except where specific exceptions apply.
- Price Reduction for Defective Data
- If the contract price was increased due to defective data, the price must be reduced accordingly, and the contract modified to reflect the reduction.
- Subcontractor Data
- Reductions due to defective data from prospective subcontractors are limited to the difference between the estimated and actual subcontract costs, plus overhead and profit, provided the actual price was not also defective.
- Defenses Not Allowed
- Contractors cannot use certain defenses (e.g., sole source status, government knowledge of defects, lack of itemized cost agreement, or missing certificate) to avoid price reductions.
- Offsets
- Contractors may claim offsets for data not previously submitted if certain conditions are met, but not if the data was knowingly understated or would not have changed the price.
- Interest and Penalties
- Contractors must repay overpayments with interest, and may face penalties if defective data was knowingly submitted.
Responsibilities
- Contracting Officers: Must enforce price reductions, determine offsets, and ensure compliance with interest and penalty provisions.
- Contractors: Must provide accurate, complete, and current certified cost or pricing data, repay overpayments with interest, and avoid knowingly submitting defective data.
- Agencies: Oversee compliance and ensure proper application of the clause in applicable contract modifications.
Practical Implications
- This clause ensures the government is protected from overpaying due to defective cost or pricing data in contract modifications.
- Contractors must maintain rigorous data accuracy and documentation practices to avoid price reductions, interest, and penalties.
- Common pitfalls include failing to update data, misunderstanding offset eligibility, or relying on prohibited defenses.