Certified Cost or Pricing Data Under FAR 15.403-4
When negotiating federal construction contracts or processing substantial modifications, estimators and project managers must understand statutory data disclosure rules. Under 10 U.S.C. chapter 271 and 41 U.S.C. chapter 35, contracting officers must obtain certified cost or pricing data when prospective actions cross established dollar thresholds. Misinterpreting how change orders are valued or when flow-down rules apply to subcontractors can create compliance bottlenecks during critical negotiations.
A Hypothetical Change Order: Net Difference vs. Total Pricing Adjustment
To examine how the regulation functions in practice, consider a hypothetical federal building modification negotiated after project award. In this hypothetical scenario, the underlying prime contract was awarded on or after July 1, 2018. During construction, the government issues a change that alters interior wall assemblies and ceiling framing:
- A scope reduction of $1,500,000 resulting from the deletion of specified interior wall layouts and finishes.
- A scope addition of $1,000,000 resulting from new acoustic framing, structural stiffeners, and specialized ceilings.
Looking strictly at the net change, the contract price drops by $500,000. An estimator unfamiliar with federal procurement regulations might assume that a net credit of $500,000 falls well below statutory review levels. Under FAR 15.403-4, however, that evaluation method is completely wrong.
The Additive Rule for Scope Increases and Decreases
Under FAR 15.403-4, price adjustment calculations for contract modifications must consider both increases and decreases together. Rather than netting the additive and deductive scopes, the absolute values of both components are combined to establish the total pricing adjustment.
In our hypothetical example, combining the $1,500,000 deletion with the $1,000,000 addition results in a $2,500,000 pricing adjustment. Even though the net contract modification totals only $500,000, the total pricing action reaches $2,500,000. As detailed in the regulation, a $500,000 modification resulting from a reduction of $1,500,000 and an increase of $1,000,000 constitutes a $2,500,000 pricing adjustment, exceeding the historical $2,000,000 benchmark and meeting the current threshold. Estimators dealing with complex modifications should reference our review of pricing change orders to ensure all scope alterations are priced with audit standards in mind.
This additive rule does not apply when completely unrelated and separately priced modifications are grouped together within the same administrative paperwork solely for convenience, provided certified data would not otherwise be required for those separate actions.
Statutory Dollar Thresholds for Prime Contracts
Whether certified cost or pricing data is mandated depends on the prime contract award date and the size of the action:
- Contracts awarded before July 1, 2018: The threshold for obtaining certified cost or pricing data is $950,000.
- Contracts awarded on or after July 1, 2018: The threshold for obtaining certified cost or pricing data is $2.5 million.
When a contract clause incorporates this threshold, any inflation adjustment made pursuant to FAR 1.109(a) applies throughout the remaining term of that contract pursuant to FAR 1.109(d). Unless an exception applies, certified cost or pricing data must be submitted before awarding any negotiated contract (excluding undefinitized actions such as letter contracts) or executing modifications to sealed bid or negotiated contracts.
Negotiated final pricing actions also trigger these requirements. For instance, termination settlements and final price agreements under incentive contracts require certified data if the total settlement exceeds the applicable threshold, or if a partial termination settlement combined with the estimate to complete the remaining work exceeds the threshold pursuant to FAR 49.105(c)(15).
Subcontractor Tiers and Flow-Down Obligations
Subcontractors at every tier are subject to the same thresholds. The award of a subcontract requires certified cost or pricing data if the prime contractor and every higher-tier subcontractor were required to provide it. Similarly, subcontract modifications are evaluated using the additive rule for increases and decreases.
For older agreements, prime contractors subject to the pre-July 1, 2018 threshold of $950,000 can request relief for their lower tiers. Upon request, the contracting officer must modify the prime contract without requiring consideration to reflect the $2.5 million threshold for subcontracts entered into on or after July 1, 2018, as referenced in FAR 15.408. Understanding these tiers helps trade contractors evaluate whether their proposals fall under commercial or negotiated rules, as explored in our guide on lump sum vs unit price vs cost plus contracts.
Submissions and Special Contracting Officer Authority
When certified cost or pricing data is required, the contractor and prospective subcontractors must submit:
- Certified cost or pricing data and any data other than certified cost or pricing data needed by the contracting officer to determine price reasonableness.
- A Certificate of Current Cost or Pricing Data in the exact format shown in FAR 15.406-2.
This certificate confirms that the cost or pricing data is accurate, complete, and current as of the date agreement on price is reached. If data is submitted but a statutory exception under FAR 15.403-1(b) is later found to apply, that submission must not be treated as certified cost or pricing data under FAR 2.101 and cannot be certified under FAR 15.406-2.
Finally, contractors should recognize that agency leadership possesses discretionary authority. The head of the contracting activity, without power of delegation, may authorize a contracting officer to demand certified cost or pricing data for actions below the $2.5 million threshold, provided the dollar value exceeds the simplified acquisition threshold. Doing so requires a written finding demonstrating that certified data is necessary to determine a fair and reasonable price.
Sources
Published October 30, 2026. No affiliate links on this page. Facts come from the sources linked above; check them for updates.