Truth in Negotiations Act (TINA)

INTRODUCTION

Northrop Grumman customers expect not only product excellence but also the highest standards in our business practices. Our government customers, for example, expect complete and accurate pricing information in contract negotiations. In fact, the law called the Truth in Negotiations Act, known by its acronym TINA, requires government contractors to submit cost or pricing data and to certify that such data is current, accurate and complete on the date of final agreement on price, commonly referred to as the "handshake."

Compliance with TINA is an essential part of doing business with the U.S. Government. Northrop Grumman is fully committed to meeting its requirements, whether as a prime contractor, a team member or a subcontractor. It is the responsibility of every employee who participates in the proposal, bid preparation and contract negotiation processes to be aware of the requirements of TINA and to follow them precisely.

Cost or pricing information or data includes all facts that prudent buyers and sellers would reasonably expect to affect price negotiations significantly. Cost or pricing data are factual, not judgmental, and are verifiable.

Factual information or data includes such things as cost breakdowns on materials, subcontracted items, standard commercial items, direct labor hours and dollars and indirect expenses. It can also include:

Vendor quotations
Nonrecurring costs
Information on changes in production methods and in production or purchasing volume
Data supporting projections of business prospects and objectives and related operations costs
Unit cost trends such as those associated with labor efficiency
Make or buy decisions
Estimated resources to attain business goals
Information on management decisions that could have significant bearing on costs
Historical data upon which estimates are based.

If there is a question as to whether or not information should be disclosed, provide the information to the company's lead negotiator to make a determination. If the lead negotiator is unsure, it is best for the company to make the disclosure.

APPLICATION

TINA applies to all U.S. Government contracts or contract modifications over $650,000. There are exceptions to the requirement to submit certified cost or pricing data. The key exceptions are:

Adequate price competition exists
The price is set by law or regulation
The acquisition is for a commercial item
The head of the contracting activity for the government agency grants a waiver.

CERTIFICATION

There are two parts or phases to the process of certifying the data:

Internal Sweeps ? In this phase, functional representatives must verify all cost or pricing data to assure that it is current, accurate and complete as of the final date of agreement in price. If additional cost or pricing data is identified and is considered relevant to the price negotiation, the data must be summarized and provided to the company negotiator or negotiating team. This data is then disclosed to the government.

Certificate ? In this phase, the cost or pricing data is updated as appropriate and the certificate documenting that the cost or pricing data is current, accurate and complete as of the date the price was agreed upon is executed and submitted to the customer. It is submitted after the internal sweeps phase.

NONCOMPLIANCE

Violations of TINA are typically referred to as "defective pricing." In such cases, the government will require a reduction in the price of the contract along with the payment of penalties and interest costs. Compliance with this law requires precise attention to detail. If a contract is defectively priced, each invoice submitted under that contract can be considered a civil or criminal false claim subjecting both the company and the individual to additional liability. Government contractors have been charged with defective pricing violations in instances where proposed costs have been overstated significantly or where small costing errors have been compounded by large quantities.

Further, intentional failure to comply with TINA can result in significant additional penalties for both the company and individual employees. Beyond defective pricing, if data is knowingly concealed or submitted when known to be false, the company and its employees may be criminally charged with fraud for submitting false claims or making false statements. Penalties can include fines, suspensions, debarment from future government business and even imprisonment.

CHECKLIST

A contract negotiator should take the following steps to ensure compliance with TINA:

Gather all relevant cost and pricing data
Make sure the data is current, accurate and complete
Make proper disclosure of the cost or pricing data to the customer
Maintain a log of all data provided to the customer from the initial proposal through final negotiations
Retain proper documentation of the data and how it was disclosed to the customer
Remain mindful of the multifunctional relationship between all of the groups and individuals contributing to the contract price negotiations. Information and decisions of one organization may impact the estimates of another organization.
In cases where Northrop Grumman is a subcontractor, it is company policy to provide Northrop Grumman proprietary data directly to the government rather than to the prime contractor for any given contract.

If you have any questions as to how to proceed on matter addressed in this brochure, please get help. Contact your sector or site Contract Management, the Law Department, your Business Conduct Officer (BCO), the Sector OpenLine or the Corporate OpenLine.