Recently, there has been much discussion around comments made by Katie Arrington, the special assistant to the Assistant Secretary of Defense for Acquisition for Cyber in the Office of the Under Secretary of Acquisition and Sustainment in DoD. She made the following statement before a roomful of vendors at the PSC meeting in Arlington, VA.
It has been years since the contract period of performance has ended, DCAA has finally concluded their audit or review of your incurred cost proposal, and you have received the final indirect rate letter from DCAA. Now what? By design, the contract closeout process begins in earnest. Typically, the Administrative Contracting Officer (ACO) is responsible for initiating administrative closeout of the contract after receiving evidence of its physical completion.
“A sound internal control environment, accounting framework, and organizational structure” is criteria number one in DFARS 252.242-7006 Accounting Systems. In fact, all six of the business systems identified in DFARS 252.242-7005 Contractor Business Systems, or commonly known as the “DFARS Business Systems Rule”, references adequate internal controls and the reliability of data. Even more far-reaching than DFARS is that FAR, adhered to by most, if not all US Federal Government agencies, requires adequate contractor internal controls over financial data relied upon for acquisitions. For the purposes of this blog, we shall focus primarily on the DFARS Business Systems Rule as it applies to defense contractors because of the activities of DCAA.
DCAA has had MMAS (Material Management and Accounting System) audit cognizance or review responsibility for DOD contractors since the advent of the DFARS Business Systems Rule in 2012. DCAA’s scope of audit is to determine if a contractor’s MMAS complies with the ten criteria or standards set forth in DFARS 252.242.7004.
Estimating System Deficiencies
In its recent report (DODIG 2015-139), the DOD-IG (Inspector General) found that DCMA Contracting Officers failed to comply with DFARS timing requirements related to contractor business systems (DFARS 215,407-5-70 and DFARS 252.242-7005. In this case, the IG evaluated actions (or more accurately inactions) on 18 DCAA audit reports related to contractor estimating systems which are subject to the criteria in DFARS 252.215-7002. The DFARS Business Systems rule includes no time frames concerning government audits of contractor systems; however, once a government audit report is (finally) issued, DFARS has the following time-requirements (“requirements” used loosely because due dates applicable to the government are routinely ignored as evidenced in the IG report):
A Prospective View of Model Employer (Government Contractor)
On April 15, 2015, members of the self-proclaimed Congressional Progressive Caucus called for an Executive Order (EO) which would define a model employer and provide model employers with preferences in terms of government contract awards. The Progressive Caucus envisions an EO which would define a model employer to include a minimum wage of $15/hour, other benefits including paid time off, full-time hours and predictable schedules. As noted by this Caucus, the 2014 EO which raised the minimum wage to $10.10/hour for employees of government contractors was simply not enough to eliminate stagnant wages which tether jobs to poverty and government assistance.
In honor of today’s date and what it represents, a special blog concerning government actions and reactions.
As a follow-up to a brief article in our February Newsletter which noted the February 4, 2015 disposition of a business systems proposed rule, “closed without further action”, it’s critical for government contractors to recognize that the proposal would have just added to an existing rule; however, what remains is far more substantial than the proposed changes.
Government contractors have been undergoing accounting system reviews by DCAA for years, but more recently, the adequacy of a contractors accounting system does not necessarily have to be determined by DCAA. Some Government agencies are relying on outside accounting and consulting firms to offer confidence that a government contractor has an adequate accounting system as a prerequisite for awarding a cost reimbursable contract.
Many of us who have retired from DCAA as well as contractors like to discuss the “good old days” before DCAA audits became marathons and helping contractors was not forbidden. As DCAA became more demanding and intrusive, the preferred alternative for a contractor was to be subjected to the less-intrusive review by DCMA. Now it appears that contractors may soon be longing for the “good old days” of DCMA as well.