DPAP (Defense Procurement and Acquisition Policy) recently issued a class deviation—Prohibition on the Use of Cost-Type Contracts for Production of Major Defense Acquisition Programs. The “prohibition” actually provides for exceptions including certifications (provided to congressional defense committees) of the need which justifies a cost-type contract and steps to limit cost type pricing to portions of the contract which require this contract type. The class deviation, by reference to a DOD Instruction, defines certain key terms including a major defense acquisition.
This action by DPAP, which is effective for contracts entered into after October 1, 2014, implemented Section 811 of the 2013 NDAA; hence, the action was essentially “non-negotiable.” In most respects, this does not substantially change anything in terms of government expectations given that the current administration had previously issued its directions for DOD to migrate from cost-type contracts to fixed-price incentive contracts on production contracts. This is all about shifting perceived risk from the Government to defense contractors as if cost type contracts were somehow without risk to the contractor. Apparently no one in Congress or the Executive Branch has any firsthand knowledge of contractor risk as a by-product of aggressive incurred cost audits (DCAA) where it’s all about maximizing questioned costs to protect the taxpayer.
A copy of the memo can be obtained at the NDIA website.
Mike Steen is a Emeritus Advisor with Redstone Government Consulting, Inc. and a specialist in complex compliance issues to include major contractor cost accounting & business system regulations, financial compliance, resolution of DCAA audit issues, Cost Accounting Standards application, litigation support, and claims preparation. Prior to joining Redstone Government Consulting, Mike served in a number of capacities with DCAA for over thirty years, and upon his retirement, he was one of the top seven senior executives with DCAA. Mike Served as a Regional Director for two DCAA regions, and during that time was responsible for audits of approximately $25B and 800 employees. In October 2001, he was selected for the Senior Executive Service and in 2006 he received the Presidential Rank Award. During Mike’s tenure with DCAA, he was involved in conducting or managing a variety of compliance audits, to include cost proposals, billing systems, Cost Accounting Standards, claims, defective pricing, and then-evolving programs such as restructuring, financial capability and agreed-upon procedures. He directly supported the government litigation team on significant contract disputes and has prepared and presented various lectures and seminars to DCAA staff and business community leaders. Since joining Redstone Government Consulting in June 2007, Mike has developed and presented training and seminars on Government Contracts Compliance to NCMA, Federal Publications Seminars and various clients. Mike also is a prolific contributor of written articles to government contracting publications, as well as to our own Government Insights Newsletter. Mike also serves as the director of our training service offerings, with responsibilities for preparing and developing course content as well as instructing our seminars to clients and general audiences throughout the U.S. Mike also serves as a faculty instructor for the Federal Publications Seminars organization. Education Mike has a BS Degree in Business Administration from Wichita State University. He is also a graduate of the DCAA Director’s Fellowship Program in Management, and has a Masters Degree in Administration from Central Michigan University. Mr. Steen also completed a number of OPM’s management and executive development courses.