Redstone Government Consulting Blog | Michael Steen (2)

As we again approach Halloween and the night of tricks or treats, we’ve been able to identify and report a number of the more popular Halloween costumes (or masks) among government agencies and/or (n one case) an ex-government “CEO”.  Some of these trending costumes include:

In late 2013, the BBA (Bipartisan Budget Act) significantly changed the FAR 31.205-6(p) regulatory cap for allowable contractor employee compensation.   In a highly politicized action, the Obama Administration convinced Congress to reduce allowable compensation to $487,000 for any contractor employee effective for contracts on or after June 24, 2014.  Additionally, Section 702 of the BBA prescribed the method for annual increases to the statutory cap (based upon the change in the Employment Cost Index for all workers as calculated by the BLS (Bureau of Labor Statistics).

As we near the end of calendar year 2017, many will be thinking of some resolutions for the upcoming “Year of the Dog” (the 2018 animal per the Chinese Calendar). In fact, we’ve discovered that Government agencies sometimes consider similar resolutions, and in the case of DCAA (Defense Contract Audit Agency), we’ve accidentally been copied on one of the unofficial versions of its 2018 New Year’s resolutions (which are three months late, given the government fiscal year started October 1, 2017).

As we (Redstone Government Consulting, Inc.) began to plan our September 21, 2017 Redstone Edge, we sought out speakers and potential attendees from government agencies, including those from DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency). In both cases, their potential speakers had a list of questions which seemed to be unnecessary, but related to OGE (Office of Government Ethics) regulations and interpretations, to identify and otherwise prohibit anything which might be an illegal (or at least unethical) gratuity. Although we might not be a “government contractor”, for those who are, there is another regulation in play; FAR 52.203-3 prohibits government contractors from offering gratuities to government employees.

Virtually all government contractors and anyone else hoping for regulatory relief from the new administration is aware of the Executive Order (EO) requiring a 2 for 1 reduction in agency regulations for each new regulation. In an effort to show that DCAA is politically savvy and much more positive and proactive than most agencies (who are less than enthusiastic about this EO), DCAA has begun to vet some “similar to” audit strategies. The following are some of the highlights of a DCAA Press Conference to announce a broad range of “2 for 1 reductions”.

To the uninformed, there may be little or no distinction between the three adjectives which could apply to a contractor (or potential contractor) accounting system. To those dealing with the terminology in government solicitations, there may appear to be no significant distinction because the words seem to be used interchangeably. For example, an Air Force solicitation may have a prerequisite for an adequate accounting system, in contrast to Navy solicitation which substitutes the words acceptable accounting system. Then a third alternative could be a solicitation which gives competing bidders points for approved systems; i.e. 500 points for having an approved accounting system. In most cases, the solicitation links the accounting system status (adequate, acceptable or approved) to an action (written opinion or written determination) by a federal government agency or, less frequently, an opinion by an independent third party such as a CPA or consultant. There is a fourth alternative, an accounting system which has never been reviewed by any independent party (government or otherwise). In this case, a contractor (or a potential contractor) may have an accounting system awaiting its first test, so to speak.

Although Redstone Government Consulting. Inc., makes every attempt to avoid blogs which are overtly political, we’ve taken note of a DHS OIG (Department of Homeland Security Office of Inspector General) “Management Alert” which coincidentally provides some indirect validation to the Executive Order which suspends US refugee intake for 120 days, and places a 90-day moratorium on citizens of seven countries (entering the United States).   As we all endure the divisive rhetoric directed at the Executive Order, it may or may not be coincidental that there has been no media mention of the DHS OIG Management Alert, dated January 19, 2017.

In the recently published ASBCA Nos 59508 and 59509, the ASBCA agreed with the contractor and dismissed the government claim (final decision) which had disallowed $116,789,631 (subcontractor costs as components of direct costs claimed by the prime contractor).   The premise for the (failed) final decision was DCAA’s assertion that the prime contractor had breached its contractual duty to “manage” the prime contractor’s subcontracts and subcontractors.   The reference is FAR 42.202(e)(2) which states that the prime contractor is responsible for managing its subcontracts. In context, that clause makes it clear that the government (Contracting Officer) is only responsible for administering the prime contract. In contrast, and only by implication and a legal theory created by a DCAA auditor, the prime contractor assumes certain FAR Part 42 responsibilities for subcontracts.

In 1897, a famous newspaper editorial contained a response to an 8-year old girl who raised the question of the validity of Santa Clause (Is there a Santa Clause).   The response and the editorial is considered the most famous newspaper editorial ever published, not only protecting the eight year old, but causing adults to re-think their own beliefs.   In the spirit of accepting that there just might be a Santa Clause, we’ve identified some of the most mythological statements extracted from the Federal Register (regulatory reporting burden) or the Office of Management and Budget (OMB) regarding the annual benefits and costs of Federal Rules and paperwork. No one reconciles the OMB summary with the individual estimates in the Federal Register, which is probably a good thing because believing in government assertions of regulatory benefits or regulatory burdens is analogous to believing in Santa Clause. As illustrated herein, “Yes, Virginia, there is a Santa Clause and he lives in the minds of those providing estimates for regulatory burdens and/or benefits”.

On September 30, 2016, DCAA issued the following MRD (Memorandum for Regional Directors): Update – Audit Guidance on the Impact of the National Defense Authorization Act on DCAA’s Audit Support to Non-Defense Agencies.   For the record, there isn’t anything captioned “the” National Defense Authorization Act; in this case, it happened to be referring to the 2016 Act, which was presumably “the” Act (to DCAA) because it included Section 893, which prohibits DCAA from providing audit support to non-defense agencies.