Judge Peacock of the Armed Services Board of Contract Appeals (ASBCA) has sustained the appeal of Lockheed Martin in a Truth in Negotiations Act (TINA) claim made by the Air Force. After a thorough discussion of the many faults in the Air Force's argument in favor of its claim, Judge Peacock simply points out that for an agency to prevail on such a claim, it must show damages or prejudice. Having failed in the attempt, the ASBCA denies the Air Force's claim for $14+ million.
TINA was first passed in 1962 to put the government on an equal footing with contractors in contract negotiations where submission of cost or pricing data is required. TINA now applies to any negotiated contract expected to exceed $700,000, a modification of a contract exceeding $700,000 and in certain cases a subcontract exceeding that same amount. Of course, there are exceptions not relevant here. And there are other arguments a contractor can make in defending the government's defective pricing claim.
In the Lockheed Martin case, the Air Force claimed that Lockheed's failure to disclose date resulted in overstatement of the prices the Air Force paid. And the Air Force grounded its argument on the rule of law that there is a presumption that the non-disclosure of data resulted in an overstatement of the price. Fair enough. There is such a rule. But Judge Peacock pointed out that the ASBCA analyzes the evidence carefully in applying the presumption. And, he pointed out, the presumption can be rebutted and is not a substitute for specific proof establishing the amount of damages.
The government has the ultimate burden of showing a causal relationship between incomplete or inaccurate data and an overstated contract price. "In this case, the government not only has failed to prove the amount of any increase, appellant has rebutted the presumption that an overstated CCIP contract price resulted from the alleged nondisclosure of the data in question." Judge Peacock concluded that it was not necessary for him to address the other issues and defenses raised by Lockheed Martin. Even whether the data were timely disclosed was something he did not need to address.
"To establish defective pricing, it is axiomatic that the allegedly undisclosed data lead to a higher negotiated price. Here, the evidence establishes that any nondisclosure of the Bridge prices did not contribute to an overstatement of the CCIP contract prices. Even if all the other elements of the government's claim were established, its damages are zero." Repeat, even if all the other elements of the government's claim were established, its damages are zero.
The lesson? Cut to the chase. What were the damages, if any. If none, there is no claim.