Redstone Government Consulting Blog (76)

Contractor Agrees to Reimburse Employees for Back Wages after Cited SCA Violation

An investigation conducted by the U.S. Department of Labor’s (DOL) Wage and Hour Division for compliance with the McNamara-O’Hara Service Contract Act (SCA) and the Contract Work Hours and Safety Standards Act (CWHSSA) revealed that CH, Inc. violated the provisions of these two statutes by underpaying 35 employees $268,899 in fringe benefits and overtime which, under the statutes, those employees were entitled to receive.

As one more indication that DCAA is the puppeteer and the DAR Council are the puppets, the DFARS Final Rule (DFARS Case 2011-D042) requiring a proposal checklist was issued on March 28, 2013.  The proposed checklist and the substance of the final checklist were eerily similar to DCAA’s proposal checklist, which “was” an unconstrained embellishment of anything actually required in the regulations.  The checklist is form over substance and just one more unnecessary document solely to make life easy for DCAA (although not quite as bad as FAR requirements for contractors to provide DCAA with SEC filings as if DCAA auditors are incapable of retrieving these from the readily accessible internet).  The absurdity of the DFARS proposal adequacy checklist rule is self-evident in one public comment and the DAR Council response:

In 2012, DCAA reported to Congress that its 2011 average elapsed days for completing 349 Incurred Cost Proposal audits was 965 days.  As it relates to incurred cost proposal audits, DCAA’s FY2012 audit plan acknowledged its increasing backlog of unaudited incurred costs and also its use of dedicated audit resources (“virtual FAOs”) to reduce the unaudited incurred costs.

DCAA recently published its 2012 Year in Review which highlighted the fact that DCAA’s net savings was $4.2 billion (the highest in Agency history) and representing a ROI of $6.70 for every dollar “invested”.  The terminology and the 30 page report are written as if taxpayers are stockholders and DCAA is reporting to those stockholders.   For the record, DCAA’s net savings are unaudited as are every other statistic included in the report.

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.

The Department of Defense Inspector General(DOD IG) issued a March 7, 2013 report charging that the Defense Contract Audit Agency (DCAA) failed to “exercise sufficient professional judgment” while performing certain audits between 2006 and 2010 signaling another bump in the long road ahead for the Agency's return to compliance with GAGAS. 

DCMA reviewers and consultants alike used a years’ old guidance instruction for performing CPSRs (Contractor Purchasing System Reviews) in ascertaining if a contractor’s purchasing practices represent methods for achieving “best value” in purchasing of services and supplies.  This guidance, DCMA Instruction “Consent to Subcontract/Contractor Purchasing System Review (CPSR)” includes an Appendix B that was specifically used in the reconciliation of a contractor’s purchasing or procurement related policies and procedures.  That appendix in essence is a checklist with 55 far ranging questions from purely subcontract management issues to Affirmative Action and Standards of Conduct items, and effectively represents criteria and parameters for acceptable government contractor procurement practices in addition to preferred documented company policies and procedures. 

The first in a series of videos designed to give an overview of the incurred cost submission.  This video covers the basics of the Incurred Cost Submission, such as it's purpose, the regulation requiring the ICS and when the submission is due.  Be sure to attend our upcoming Incurred Cost Submission Webinar series for more information on preparing your Incurred Cost Submission, ensuring it's adequacy with the DCAA adequacy checklist and working with DCAA auditors during the audit of your ICS or contact us to see how we may be able to assist.  We'll be announcing the dates of the ICS Webinar series soon, so sign up below to receive a notification when the course dates have been posted.

The initial reductions in force and furloughs will likely focus on general and administrative functions that support programs directly impacted by sequestration. The Government leaves our customers no choice other than to take this approach.  Yes, there will be job losses and yes there will be loss of legacy corporate knowledge and intangible value that may never return to our customer base.  This is highly unfortunate and yet another outcome of the politics of sequestration and declining Federal budgets.  Reduction in force of Accounting, Compliance, Internal Audit, Procurement, Pricing and other administrative functions with legacy corporate knowledge cannot and will not be replaced with the same corporate value or knowledge and ability to maintain compliance.

The Defense Department on February 21 revoked a relatively new payment process that was designed to get cash in the hands of contractors and subcontractors quicker. This revocation of the “Quick Pay” initiative is due to sequestration activities and will cause payments to be delayed by at least 10 days but conceivably even more. Prior to the Quick Pay initiative, which began in 2011, DoD would hold a bill for 30 days to minimize the amount of cash it pays out. The Quick Pay initiative was instituted as a way to get payments to small businesses faster by assuring that small businesses were paid as soon as a bill was verified. The initiative was then expanded in July 2012 to prime contractors as a way to assist those companies’ small business subcontractors. Under the initiative, defense contractors were paid in about 15 to 18 days.