DCAA – The Hidden Cost of Audits

Where does DCAA’s View of the Contractor and their Role in Acquisition Come From?

DCAA Auditor Training

DCAA website provides that new auditors receive in-depth professional training from DCAA’s Defense Contract Audit Institute (DCAI), along with on-the-job training at their assigned field audit office. DCAI is located in Atlanta, GA and provides auditors with an excellent basis on which to start their careers in contract audit. Many at Redstone GCI can speak from personal experience that, once you get past the exciting MARTA ride from the airport, the instructors at DCAI provide a good hands-on learning environment. However, we are not sure if it is a subliminal message piped into the classroom or local indoctrination at assigned field offices, but the auditors are coming away with the impression that no contractors can be trusted, and a good audit opinion has to include questioned cost.

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Topics: Compliant Accounting Infrastructure, Litigation Consulting Support, Incurred Cost Submission, Defense Contractors, DOD IG, Government Compliance Training, DFARS Business Systems, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, FAR, Government Regulations, DOD Contractors, Cost Accounting Standards (CAS)

Commercial Item Determination is Only Needed Over $2M, Right?

DCAA/DCMA Viewpoint

If you look through the DCAA audit guidance and the DCMA Contractor Purchasing System Review guidance, you would think that the Government is only concerned with a Commercial Item Determination when the purchase value exceeds $2M. This is all based on commerciality being an exception to the requirement for certified cost or pricing data at FAR 15.403-1(b)(3) & (c)(3).

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Topics: Business Systems Review, Cost and Pricing and Budgeting, Defense Contractors, DFARS Business Systems, FAR, Contractor Purchasing System Review (CPSR), Government Regulations, DOD Contractors

Contracting with Responsible Subcontractors

Prime contractors must award contracts to responsible subcontractors. One of the required flowdowns from a prime to a subcontract is FAR 52.209-6, Protecting the Government's Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment. This flowdown is required when the solicitation or contract exceeds $35,000 but is not required when purchasing commercially available off the shelf (COTS) items. The purpose of the clause is to protect the government. A contractor that is debarred or suspended is referred to as an excluded contractor.

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Topics: DFARS Business Systems, Contractor Purchasing System Review (CPSR)

Buy American – Don’t Get Caught With Your Documentation Down

What’s new in this long-standing area?

The FAR Council at long last issues final rule to implement the Trump Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials. Only a few days later a Biden Executive Order 14005, Ensuring Future of America is Made in America by all of America’s Workers, hit the streets.

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Topics: Business Systems Review, Cost and Pricing and Budgeting, Incurred Cost Submission, Small Business Compliance, Contracts Administration, Defense Contractors, DFARS Business Systems, Incurred Cost Proposals, DCAA Audit Support, FAR, Contractor Purchasing System Review (CPSR), Government Regulations, DOD Contractors

DoD Expands Treatment of Contractor Purchases as Commercial Items

Here are the Details

DoD issued DFARs Final Rule D2019-D029 – Treatment of Commingled Items Under $10K, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change relative to the treatment of commingled items purchased by a contractor. The final rule is applicable to all solicitations and contracts, including solicitations and contracts using FAR Part 12 procedures for the acquisition of commercial items and solicitations and contracts valued at or below the simplified acquisition threshold.

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Topics: Contracts Administration, Defense Contractors, DFARS Business Systems, DCAA Audit Support, Contractor Purchasing System Review (CPSR), DOD Contractors

DoD Attempts to OPEN the Door to More Nontraditional Contractors

Here are the Details

DoD issued a DFARs Final Rule D2019-D029 – Services Provided by Nontraditional Defense Contractors, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change related to services provided by nontraditional defense contractors as commercial items.

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Topics: Cost and Pricing and Budgeting, Defense Contractors, DFARS Business Systems, DCAA Audit Support, Contractor Purchasing System Review (CPSR), Government Regulations, DOD Contractors, FAR Part 12 Commercial Items

One More Purchasing System Item to Contend With – FAR 52.204-25

Where Did This Come From?

National Defense Authorization Act (NDAA) of 2019, required the implementation of a new Federal Acquisition Regulation (FAR) rule barring federal contractors from using telecommunications products or services or video surveillance equipment from certain foreign companies – The People’s Republic of China. As a result, a new contract clause came into place – FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment – effective August 13, 2020.

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Topics: Business Systems Review, Defense Contractors, DFARS Business Systems, FAR, Contractor Purchasing System Review (CPSR), DOD Contractors

The Changing Contract Audit Landscape

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. 

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Topics: DFARS Business Systems, DCAA Audit Support

DFARS Case 2019-D002: DoD Removes Cost Limitation on Performance-Based Payments

The language in the 2017 NDAA Sec 831, stating “Performance-based payments shall not be conditioned upon costs incurred in contract performance but on the achievement of performance outcomes …” has finally been incorporated into the DFARS (DFARS Case 2019-D002) with an effective date of April 8, 2020.  The rule removes restrictions in DFARS 232.1001(a), DFARS 252.232-7012(b)(i), and DFARS 252.232-7013(b)(i) that limited performance-based payments to amounts not greater than costs incurred up to the time of payment.  However, the rule does not alter the requirement for subcontractors/vendors to report costs incurred when requesting performance-based payments.  The rule also removed the requirement of the subcontractor/vendor’s accounting system to comply with Generally Accepted Accounting Principles, as evidenced by audited financial statements.

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Topics: Contracts Administration, DFARS Business Systems

Just OK, Not OK! New Lowest Price Technically Acceptable (LPTA) Restrictions

Section 880 of the National Defense Authorization Act (NDAA) included provisions restricting the use of the Lowest Price Technically Acceptable (LPTA) source selection criteria to only procurements where:

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Topics: DFARS Business Systems, DOD Contractors