RGCI-Who is my Government Official Over Cost Issues

In days gone by, knowing which contract administration office you needed to work with was as easy as finding your local Defense Contract Management Agency (DCMA) Office.  DCMA used to accept and administrate pretty much all contracts, even other Federal Agencies with reimbursement of its services (e.g., NASA contracts).  This is no longer the case; Over the last few years, DCMA has made a significant effort to stay focused on what it refers to as its core business – basically research, development, engineering, test, production, and spares for major acquisition programs.  This leaves the administration of low value/low risk contracts, management and professional services contracts, architect-engineer services contracts, and many others to the buying command that issued them.

Contract Administration Delegation—DCMA Passing the Buck?

FAR 42.302(a) lists a total of 71 functions that are normally delegated to a contract administration office to facilitate efficient and effective contract performance after award, and FAR 42.302(b) lists an additional 11 functions that can be selectively delegated.

PCO Responsibility

It’s important to remember that delegation of contract administration is a decision the procurement contracting officer (PCO) should make prior to awarding the contract.  The PCO should coordinate with the cognizant contract administration office listed in the Federal Directory of Contract Administration Services Components (At the time of this blog the Internet site at was not working and we could find no other way to search for Contract Administration Offices, even SAM records had the DODAAC field blank for the records we searched).  The awarded contract is required to include the finalized agreement on delegation and specifically identify the contract administration office.  If the contract does not identify a contract administration office, the PCO should perform all contract administration functions, except 4 functions specifically assigned to the contract administration office, unless the contract administration office assigned these 4 functions to a PCO.  The four functions are:

  • (5) Negotiate forward pricing rate agreements.
  • (9) Establish final indirect cost rates and billing rates.
  • (11) Determine compliance with Cost Accounting Standards (CAS) and negotiate price adjustments.
  • (12) Determine the adequacy of the contractor’s accounting system.

Contract by Contract Functions

These are clearly functions which the Government would not want performed on a contract by contract basis.  While many of the remaining functions are contract specific (e.g., engineering surveillance to assess compliance with contractual terms for schedule, cost, and technical performance in the areas of design, development, and production), there are several that you would think would not be efficiently or effectively accomplished on a contract by contract basis.  Just a few examples include:

  • (1) Review the contractor’s compensation structure.
  • (2) Review the contractor’s insurance plans.
  • (17) Monitor the contractor’s financial condition.
  • (26) Process and execute novation and change of name agreements.
  • (34) Monitor contractor industrial labor relations matters.
  • (50) Review, approve or disapprove, and maintain surveillance of the contractor’s purchasing system.

Contracting Officers—Step Up

The FAR makes it clear that a single contracting officer (or federal agency) shall be responsible for establishing final indirect cost rates (FAR 42.703-1(a)) and for performing CAS administration (FAR 30.201-7 – 48 CFR 9903.201-7).  The problem is getting one of several contracting officers to raise his/her hand and say, “that’s me.”  As mentioned above, if you are a manufacturing contractor with DoD contracts this is likely to be a non-issue.  However, for the numerous service and IT contractors it is much more complex.

For the most part, the contracting officer (FAR states agency) with the largest dollar amount of negotiated contracts, including options, is the cognizant Federal official for making decisions impacting multiple contracts, such as final indirect rates and CAS.  If that contracting officer has not made him/herself known to you, you should determine which contracting officer/agency you believe it should be and send them a written notification of your determination.  This puts the Government on notice of whom you plan to work with as the deciding official for most contract administration issues impacting more than one contract, including final indirect rates and CAS.

DCAA-Hands Off?

Historically, DCAA was the clearing house for all final indirect rate submissions.  FAR 42.101(b) states:

Normally … Defense Contract Audit Agency (DCAA) is the responsible Government audit agency.  However, there may be instances where an agency other than DCAA desires cognizance of a particular contractor.  In those instances, the two agencies shall agree on the most efficient and economical approach to meet contract audit requirements.

However, the FY 2016 NDAA, prohibited DCAA “from providing audit support to non-DoD agencies.”  As a result, many agencies have moved away from using DCAA even though the prohibition has ended.  So now there is no intermediary to assist in getting to a Government deciding official for many contractors without DoD contracts.

Subcontracts Only?

If you really want to be out on an island, be a contractor with only subcontracts.  Due to the Government’s lack of privity of contract with the subcontractor, there is no clear regulatory guidance as to whom functions as the Cognizant Federal Agency Official (CFAO) for CAS administration and determination of final indirect rates.  This is an issue we see quite often.  If you need a decision from the Government, we suggest you bring it up during negotiations with the prime contractor on a significant subcontract pricing.  The prime can bring the PCO into the discussion.  If—for example—a CAS change will benefit the PCO’s current contract pricing, he/she may step in as the deciding official for the Government or at least make a big enough fuss on the Government side that someone steps up.

For more information or assistance with this topic or other government contracting topics, we are here to help.  Redstone GCI assists contractors throughout the U.S. and internationally with navigating the current rough waters of contract compliance and administration.

 

Whitepaper: Audit World's Biggest Myths Download Now

Written by John C. Shire

John C. Shire John is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to the DFARS business systems, CAS Disclosure Statements, and DCAA/DCMA compliance preparation, advisory, and defense. Prior to joining Redstone Government Consulting, John served in a number of capacities with DCAA/DCMA for more than 30 years. Upon his retirement, he was based in Texas as an SES-level Corporate Audit Director for DCAA, managing a staff of 300 auditors at one of the largest DOD programs. Professional Experience John began his career in the late 80s working in the Clearwater, FL audit office and over the next three decades he progressed through a number of positions within both DCAA and DCMA with career highlights as DCAA Program Manager at Ft. Belvoir, Chief of Technical Programs Division, Deputy Assistant Director-Policy, Director of the DCMA Cost and Pricing Center, the SES-level Lockheed Martin Corporate Audit Director, and Director of Integrity and Quality Assurance. John’s three decades of experience in performing and leading DCAA auditors and DCMA reviewers provides a wealth of expertise to our clients. John’s role, not only in the performance of audits, but also in the development of audit policy affords him unique insights into the defense of audit findings and the linkage of audit program steps to the underlying regulatory framework. He is an expert in FAR, DFARS, and other agency acquisition regulation, as well as a subject matter expert in the Cost Accounting Standards having reviewed and provided audit feedback on many of the largest and most complex cost accounting practices during his tenure with the DCAA. John’s tenure with DCAA and DCMA came at a critical time during each agency’s history where a number of changes were occurring such as the response to the ICS backlog, development of audit approaches to the DFARS Business Systems and implementation of new audit initiatives as a result of Congressional oversight through the NDAA process. John’s leadership at the DCMA Cost & Pricing center saw oversight of all major DOD pricing actions, leadership of should cost review teams, the Commercial Pricing group and many other areas of strategic value to our clients. His involvement in these and other Agency initiatives is of great value to our clients due to his in depth understanding of DCAA and DCMA’s internal policy directives. Education John holds a Master of Business Administration and a B.A. in Accounting from the University of South Florida. Certifications Certified Information Systems Auditor

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Contracts Administration, DCAA Audit Support