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Dentons secures 145 individual and 43 practice rankings in Legal 500 US 2018
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On May 4, 2018, the US Department of Defense (DOD) issued a final rule intended to provide incentives to DOD contractors to voluntarily disclose defective pricing after the award of an affected DOD contract. For DOD contracting officers, the final DFARS rule adjusts FAR 15.407-1(c), which requires a contracting officer to request an audit to evaluate the accuracy, completeness, and currency of certified cost or pricing data if the contracting officer learns or suspects after contract award that the furnished data did not meet this criteria. The final rule softens this requirement for DOD contracts by allowing DOD contracting officers to determine the nature and scope of DCAA audits when a contractor has voluntarily disclosed defective pricing.
The final rule has been adjusted from the proposed rule in that DOD contracting officers under the final rule have discretion to request a limited-scope audit whereas the proposed rule required that a limited-scope audit occur. In other words, it is possible that for certain voluntary defective pricing disclosures there would be no audit. Consistent with the proposed rule, however, under the final rule the DOD contracting officer retains discretion to order a full-scope audit when appropriate for the circumstances. For government contractors, this final rule may provide some incentive for voluntary disclosures of defective pricing. The true test, however, is whether the prospect of avoiding an audit, or undergoing a limited-scope audit, is sufficient inducement to prompt contractors to voluntarily disclose defective pricing.
The final rule creates DFARS 215.407-1, Defective certified cost or pricing data, which states that a contracting officer shall discuss voluntary disclosures of defective pricing with the Defense Contract Audit Agency (DCAA). The discussion will include topics such as:
Notably, the proposed rule required that the contracting officer have DCAA "evaluate" the foregoing issues. See 80 Fed. Reg. 72669. In moving from a DCAA evaluation to a discussion on these issues, the final rule is designed to provide DOD contracting officers with discretion to resolve voluntary defective pricing disclosures without engaging a full-blown audit, while still seeking to ensure the government's interests are protected. The final rule does not affect the government's entitlement under FAR 15.407-1(b)(7) to the recovery of any overpayment, plus interest, and a contractor's voluntary disclosure does not waive the government's right to pursue defective pricing claims on the affected contract or any other government contract.
The final rule became effective on May 4, 2018.
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