TINA Monitoring

Introduction - Monitoring a Contracts Cost

Sound business practices dictate that contracts should be monitored to ensure that they are profitable, and are not incurring costs in excessive of what was estimated (they are operating at losses).

In the case of a The Truth In Negotiations Act contract there is the added risk of making too much profit by having an estimate that was not current, complete and accurate. If all facts known to the contractor were not disclosed to the US Government (or Prime) and not disclosing that information resulted in the price being higher, had the information been disclosed, there is the problem of defective pricing.

If a contract is under-running its costs, the government may assert, correctly or incorrectly that the price was inflated because all facts disclosed during negotiations was not current, complete and accurate.

There can be many reasons a business is under-running it's costs, and these facts were not known during negotiations of a particular contract. For instance, technological advances can reduce labor costs, increases in business can result in less indirect costs being allocated to individual contracts, material and commodity costs could have been reduced, the complexity of design could have been reduced, redesign work anticipated may have been eliminated, etc. The reasons for a reduction in cost need to be captured as they occur on TINA based contracts. Post-Award, or Defective Pricing audits occur years after an award, and often times years after performance of a contract. Individuals with knowledge of particular circumstances may not recall all of the details, or may not be employed when these audits occur. It is therefore imperative to capture these details as they occur, and document these details in a contract file.

TINA Monitoring

TINA Monitoring is comparing what was proposed/estimated to actual costs. It can be done at a total contract and fee basis, or it can be done at a cost element basis. The preference is cost element by cost element. This is because, one element can be under-running cost and another over-running costs. The good thing about TINA is does allow a contractor to offset costs in certain circumstances, do some contractors prefer to eliminate administrative costs and do it at the higher level. Other contractors are not only concerned about under-running costs, but over-running costs and getting future estimates more accurate and therefore chose the more granular approach of cost element by cost element.

TINA Monitoring is an industry best practice, and should be required by any contractor performing on TINA Contracts.