On August 17, 2020; Acting Principal Director for Defense Pricing and Contracting issued two memos providing guidance in support of DFARS Class Deviation 2020-O0013 and 2020-O0021 – CARES Act Section 3610 Implementation. There is also a memo providing contracting officers with a template for a Memorandum for Record to document the file for the issuance of the Section 3610 related contract modification.
We Lifted the Vail
A few months back we submitted a request to DCAA under Freedom of Information Act. Based on the DPC guidance referencing both DCAA and DCMA as playing a key role in support of the rest of the DoD Acquisition Community, we expected DCAA would have a significant number of documents disclosing this key role. Turns out, not so much. All we got was a single document listing 13 frequently asked questions (FAQs) DCAA has been fielding from their auditors, dated July 31, 2020.
Topics: Business Systems Review, Cost and Pricing and Budgeting, Defense Contractors, Cost-Type Contracts, DCAA Audit Support, FAR, Accounting & Billing System, DOD Contractors, Cost Accounting Standards (CAS)
DCAA’s Auditing More than ICS & Proposals?
Over the last few years, we have often written on the changing landscape of contractor business system audits. Specifically, the fact that the DCAA has invested considerable resources into the audit of incurred cost proposals and proposals for most of the past decade, which has led to an inability to routinely audit contractor business systems, conduct routine post-award (TINA) defective pricing audits and other audits that should be a routine part of doing business with the government in a flexibly-priced environment. The change in audit focus has been apparent since the end of 2018, but we are just now starting to see the true impact of the Agency’s adaptation to an audit world without a large volume of incurred cost audits.
FAR Subpart 2.1, Definitions, provides the meaning of two general groupings of cost not assignable directly to final cost objectives (i.e., not a direct contract cost):
The FAR establishes that when contracting by negotiation with the Government, the contractor should have an acceptable estimating system. FAR 15.407-5 provides that due to the benefits to both the Government and the contractor in reducing the scope of individual proposal reviews at contractors with an acceptable estimating system, the auditor (likely DCAA) should survey the system and provide a report to all contracting offices and contract administration offices doing substantial pricing activity with the contractor. This is a very open-ended requirement/expectation; therefore, DoD established a structure in the DFARS.
For those of you who may have thought there could be a silver lining to coronavirus restrictions from reduced audit effort, think again! Actual postponement of audits will be rare.
UPDATE: On May 5th, SBA added FAQ #43 extending the safe harbor to May 14, 2020 and stating “SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.”
In days gone by, knowing which contract administration office you needed to work with was as easy as finding your local Defense Contract Management Agency (DCMA) Office. DCMA used to accept and administrate pretty much all contracts, even other Federal Agencies with reimbursement of its services (e.g., NASA contracts). This is no longer the case; Over the last few years, DCMA has made a significant effort to stay focused on what it refers to as its core business – basically research, development, engineering, test, production, and spares for major acquisition programs. This leaves the administration of low value/low risk contracts, management and professional services contracts, architect-engineer services contracts, and many others to the buying command that issued them.