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)

Oh, My Goodness I Think We Are CAS Covered! Life Changing? Maybe Not.

Let’s Set the Stage

So as a contractor you have received several cost-based contracts (i.e., subject to FAR part 31), however they have all been less than $7.5M. You are flying under the Cost Accounting Standards (CAS) radar. You get a $9M cost-based contract that does not meet any of the exceptions to CAS covered listed at 9903.201-1(b) – categories of contracts and subcontracts exempt from all CAS requirements. The dreaded “trigger contract.”

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Topics: Defense Contractors, Cost-Type Contracts, 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

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

Thought There Were 52 Unallowable Costs – Not So Fast

A Little Background

FAR Part 31, Cost Principles, is the regulation that government contractors must follow in order to account for cost on most government contracts. Within FAR Part 31 is FAR 31.205, Selected Costs. This part of the cost principles regulation specifically spells out unallowable cost that the government will not pay for under a government contract. This section starts at FAR 31.205-1 and goes all the way up to FAR 31.205-52. However, it should be noted that FAR 31.205-2, 5, 9, 24, 45, and 50 are “Reserved” – These reserved cost areas went the way of the dinosaur over time, hopefully not to return. For example, FAR 31.204-2, Automatic Data Processing Equipment Leasing Costs, required an annual demonstration that leasing computer equipment was cost-effective, i.e., lowest cost to the Federal Government.

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Topics: Incurred Cost Submission, Contracts Administration, Defense Contractors, Government Compliance Training, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, FAR, Government Regulations, 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

President Trump Signs Executive Order on Combatting Stereotyping and Scapegoating

On September 22, 2020, President Trump signed an Executive Order (EO) seeking to end what is characterized in the Order as "training sessions based on race and sex stereotyping and scapegoating" in the federal workforce, the Uniformed Services, and among federal contractors. The EO provides that it will be the policy of the United States "not to promote race or sex stereotyping or scapegoating" in the federal workforce and the Uniformed Services, and not to let grant funds to be used for these purposes.

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Topics: Government Regulations, OFCCP

DCAA Takes the Lead on Compensation Cap

DCAA Takes the Lead Over OFPP

In 2013, Congress put in place a new process for the calculation and publication of the compensation limitation (Cap) for all federal contractor employees. The process places the responsibility to calculate and publish the cap using the Bureau of Labor Statistics (BLS) Employment Cost Index (ECI) data on the Office of Federal Procurement Policy (OFPP). OFPP has failed in this responsibility for the last few years.

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Topics: Contractor Employee Compensation, Incurred Cost Submission, Defense Contractors, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, FAR, Government Regulations, DOD Contractors

Subcontract Considerations, Basic Tip on Compliance for Prime Contractors

If your business pipeline is growing and you are issuing more subcontracts of higher values, Contractors should be aware that your organization has a duty under 48 CFR §22.805 to the Office of Federal Contract Compliance Programs (OFCCP).

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Topics: Contracts Administration, Defense Contractors, FAR, Contractor Purchasing System Review (CPSR), Government Regulations, DOD Contractors

PPP Loan Forgiveness – Impacted by Related Party Lease Cost

Apportioning the Costs of Buildings

The SBA and Treasury have made it clear that if you own or lease a building that you sublet to another company, the portion of the lease or mortgage expense that can be used as nonpayroll costs for PPP loan forgiveness is limited to the share of the expense applied to the business who’s PPP loan is being forgiven. The simple example is, you lease an office building for $10,000 per month and sublease part of the space to another company for $2,500 per month. Only $7,500 would be used toward your nonpayroll cost for loan forgiveness. This proration applies to utility and other shared costs of the tenants.

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Topics: Defense Contractors, DPAP, Accounting & Billing System, Government Regulations, DOD Contractors, COVID-19