As we wrap up another hectic year of working with contractors to prepare, review and submit their Incurred Cost Proposals, it had us questioning…“Why do so many contractors wait until the last minute of their deadline to submit? Is there an advantage to submitting at the last minute or is submitting at the last minute actually a disadvantage?”
Accounting for Bid and Proposal (B&P) Explained
Bid and Proposal is a topic that comes up with our contractor clients on a regular basis. Most questions surrounding this topic involve: whom at the contractor should be charging B&P, especially, contractor personnel that typically charge overhead or G&A. We understand why this is confusing. It is our opinion that the guidance per FAR (Federal Acquisition Regulations) and CAS (Cost Accounting Standards) regarding this topic is unclear and leaves contractors scratching their heads trying to be compliant.
Believe it or not, getting DCAA to show up and complete a “Paid Voucher Review” is “Good News.”
To understand where I’m coming from with this statement, let’s start with a little history. The way DCAA dug itself out of its incurred cost backlog hole was with low risk sampling, provided for under FAR Class Deviation (2012-O0013) – DCAA Policy and Procedure for Sampling Low-Risk Incurred Cost Proposals, issued July 24, 2012.
In its report dated November 27, 2018 (DODIG-2019-029), the IG reviewed 12 of 540 task orders (issued between September 2014 to October 2017) to determine if contractor employees met the contract schedule labor qualifications. The contract vehicle is the OASIS (One Acquisition Solution for Integrated Services), administered by the GSA, but used by multiple DoD (and other Government) agencies. The good news is that the IG reported 1,175 of 1,287 contractor employees met the labor category qualifications; the bad news is the remaining 112 employees did not meet the labor qualifications, and/or the DoD agency could not document that contractor employees met the labor qualifications. Thus, DoD agencies authorized $28 million of potentially improper payments (based on the IG’s statistical projection), authorized $574K of potential improper payments for employees who did not have qualification documentation, and did not consider the potential impact on contract performance and price before authorizing $6.8 million for employees without relevant education and work experience.
The incurred cost submission is required for all federal contractors holding cost-type or time and materials (T&M) contracts and is a universal requirement regardless of agency customer. All contracts requiring the incurred cost submission will include the Federal Acquisition Regulations "Allowable Cost & Payment Clause" (FAR 52.216-7) and/or the "T&M Payment Clause" (FAR 52.232-7). Following are answers to frequently asked questions and pointers to resources to help you.
As a business owner or executive, it is highly likely that you are not preparing and submitting your business tax return. After all, tax rules are complicated and submission requirements can be a little unnerving. So, for those reasons and for peace of mind knowing that your tax return is prepared correctly, a savvy business owner or executive will outsource their tax preparation to a trusted firm that specializes in taxes.
Since most incurred cost proposals (ICPs) are due June 30, it is a good time for contractors to review the DCAA criteria for audit selection in order to minimize (where possible) the potential that their ICP will be selected for audit. All ICPs with an auditable dollar volume (ADV) greater than $250 million are automatically selected for audit. ICPs with an ADV between $100 million and $250 million of ADV that have not been audited in the last 3 years are also automatically selected for audit. ADV is determined by the amount of cost reimbursable, i.e. cost type and T&M, contract revenue for the fiscal year.
Contractors subject to FAR 52.216-7, “Allowable Cost and Payment” clause are required to submit, to the cognizant contracting officer and DCAA auditor, an electronic final indirect cost rate proposal in accordance with FAR 42.705-1(b)(1) within six months after the end of the contractor’s fiscal period. This final indirect cost rate submission will primarily be used to establish final indirect rates; however, it has evolved to also serve the purpose of establishing total allowable (direct and indirect) contract costs. DCAA has recently released a new version of the ICE Model, which is the electronic version of the “Model Incurred Cost Proposal” which provides contractors with a standard ICE submission for preparing adequate incurred cost proposals in accordance with FAR 52.216-7, “Allowable Cost and Payment.” This version, 2.0.1f (released in October 2016), may be downloaded from the DCAA website. There were no computational changes to the newly released version; only minor changes to headings and abbreviations. The following are the changes:
As if you haven’t noticed, this year has been the year of bid proposals for government contractors. My team at Redstone Government Consulting has been working the last six months straight supporting various government contractors in the development and pricing of cost volume proposals. Fortunately for us, we have a team of consultants that can provide support for cost volume proposals and are 100% dedicated to the effort, without the distraction of other projects or responsibilities. Most small business contractors, however, do not have that luxury and the employees working the bid proposal efforts must also continue to complete their daily responsibilities associated with their already busy, “day” job.
DCAA has recently released a new version of the ICE Model, which is the electronic version of the “Model Incurred Cost Proposal” that provides contractors with a standard ICE submission for preparing adequate incurred cost proposals in accordance with FAR 52.216-7, “Allowable Cost and Payment.” This version 2.0.1e released in December 2015, may be downloaded from DCAA website. There were no computational changes to the newly released version, however, additional information will be required for Schedule J. Schedule J provides DCAA with the Subcontract Information such as contact information, subcontract value, period of performance, costs incurred for each subcontractor, and award type. In the 2.0.1e version, additional information such as prime contract value and subcontractor’s duns number has been added to the required information for this schedule. This is the second version of the ICE Model released this year. ICE Version 2.0.1d released in August 2015, had no computational or functional changes to the previous Version 2.0.1c (June 2012).