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

What Could Defense Production Act Mean?

The President has announced he has invoked the 1950 Defense Production Act (DPA).  This act provides the Government with the ability to direct businesses to accept contracts and increase the production of necessary goods and services.  The act has been used numerous times since 1950 to support emergencies, including natural disasters and the war on terrorism.  The current fight with COVID-19 has necessitated it once again.  A July 28, 2014, Congressional Research Service paper titled “The Defense Production Act of 1950: History, Authorities, and Reauthorization” summarized the current act to include:

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Topics: Contracts Administration, Government Regulations, COVID-19

What is the Focus of a Billing System Audit Coverage?

Back in the days of DCAA ICAPS audits, the billing system was a standalone audit program.  Even DCAA’s first pass at auditing for compliance with DFARS 252.242-7006 provided a standalone sub-assignment for the coverage of contractor billing systems.

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Topics: Contracts Administration, Accounting & Billing System, Government Regulations

What Are the Rules with Directly Associated Cost?

FAR 31.201-6(a) and CAS 9904.405-30(a) both define directly associated cost as “any cost which is generated solely as a result of incurring another cost, and which would not have been incurred had the other cost not been incurred.”  FAR 31.201-6(a) restates the definition replacing the word “which” with the word “that.”  Still a consistent view of what directly associated cost means.

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Topics: Contracts Administration, Government Regulations

Forward Pricing Rate Proposal: What is the Process and How to get an Agreement on Rates

There is much confusion and frustration on behalf of a contractor when it comes to forward pricing rate proposals (FPRP) and forward pricing rate agreements (FPRA).  This confusion and frustration comes from the lack of direction provided for this process in the FAR.  In this blog, we pull together the regulation and guidance associated with forward pricing so contractors can better understand the process and alleviate some of the frustration and questions which we see often.

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Topics: Contracts Administration, Government Regulations