Are Adjusting Billings to Final Year-End Rates Really That Important?


Yes, they are! Did your company make it through its year-end and closing of last year’s books? If so, hooray! But is it really over for those that have Government cost-type contract billings? Not really. OK, as the Federal Acquisition Regulation (FAR) 42.704, Billing rates, allows interim payments through contract performance with the intent of making the contracting officer or contract auditor approved provisional billings rates as close as possible to the expected final indirect rates. This allows you to bill your costs throughout the year of your cost-type Government contract billings. Now that you know what the year-end indirect rates really are, there is one more thing to do: adjust the provisional indirect billing rates to actual rates in a Public Voucher (Standard Form 1034). Those year-end indirect rates should be net of any unallowable costs in FAR Part 31, Contract Cost Principles and Procedures. Sounds easy. It really should not be that difficult.

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Topics: Business Systems Review, Compliant Accounting Infrastructure, Contracts Administration, Defense Contractors, DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, Accounting & Billing System, Government Regulations, Federal Acquisition Regulation (FAR)

Limitation on Pass-Through Charges in Government Contracts


Does the Total of All Proposed Subcontract Costs Exceed 70% of the Total Contract Costs?

Is your company submitting a proposal to the government/prime contractor that includes a total of all subcontract costs exceeding 70 percent of the total costs proposed? If so, you must identify “added value” in your proposal so the government/auditor does not classify the indirect cost applied to the total subcontract cost as “excessive pass-through charges.”  The government considers indirect costs and profit/fee that a contractor applies to subcontract costs that exceed 70 percent of the contract to be “pass through costs.” This applies to lower tier subcontract costs also. If there is no negligible value added by the contractor, the government or auditor will question the indirect costs and profit/fee applied to the subcontract costs as unallowable excessive pass through under FAR 31.203(i).

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Topics: Business Systems Review, Cost and Pricing and Budgeting, Incurred Cost Submission, DFARS Business Systems, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, Accounting & Billing System, Contractor Purchasing System Review (CPSR), Government Regulations

Does Micro-Purchase Threshold Apply to Government Contractors?


Government Contractor Purchases below the Micro-Purchase Threshold Require NO Documentation

This is a common misconception within the GOVCON community. While the expectations are clearly less documentation and effort are required than that of a larger dollar value purchase, there is not a magic threshold at which NO documentation of the fair and reasonable price is allowed.

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Topics: Incurred Cost Submission, Contracts Administration, Defense Contractors, DFARS Business Systems, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, Accounting & Billing System, Contractor Purchasing System Review (CPSR), Government Regulations, Federal Acquisition Regulation (FAR)

The Impact of Fly American Act


Lockheed Martin raised a great question to the ASBCA as to “whether the Fly America Act, 49 U.S.C. § 40118 (FAA) and Federal Acquisition Regulation (FAR) 52.247-63 only apply to direct personnel performing direct work on covered contracts, or also applies to indirect personnel or indirect travel.”[1] The Board declined to hear the case as there was no “live dispute” at hand.

[1] Armed Services Board of Contract Appeals Case No. 62377

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Topics: Incurred Cost Submission, Contracts Administration, Defense Contractors, Incurred Cost Proposals, Cost-Type Contracts, DCAA Audit Support, Accounting & Billing System, Government Regulations, Federal Acquisition Regulation (FAR)

DCAA Trying to Stretch FAR Yet Again


At the end of each of the DCAA audit programs for contractor business systems, DCAA discusses what it refers to as “Less Severe Significant Deficiencies.” These are clearly deficiencies which do not meet the DFARS definition of a “Significant deficiency.”[1] As a result, the withhold requirement provided for in DFARS 252.242-7005 cannot be applied.

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Topics: Business Systems Review, Compliant Accounting Infrastructure, Contracts Administration, Defense Contractors, DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, Accounting & Billing System, Contractor Purchasing System Review (CPSR), Government Regulations, Federal Acquisition Regulation (FAR)

DCAA Approved Accounting System: QuickBooks Online vs. QuickBooks Desktop


In my last blog post, I discussed whether you could have a DCAA Approved Accounting System with QuickBooks. If you read it, then you know the answer is definitely – yes. This begs the next question though: QuickBooks Online (QBO) or QuickBooks Desktop? One might think that they’re essentially the same with one just being a cloud version and the other a local install. That could not be further from the truth. The two products are actually very different in terms of functionality and capabilities. A couple of years ago, I would have told you that QBO was just not an option for a government contractor. Appropriate job costing just couldn’t be done. In recent years though, Intuit has focused a lot of their internal development on QBO, and the product has come a long way. In this article we’ll go over some of the key differences between the two QB options, and hopefully help you decide which is right for you. Note that this is NOT a fully comprehensive comparison of all the different features, but rather a focus on some of the primary differences that are most relevant for government contractors.

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Topics: Small Business Compliance, Quickbooks, Accounting & Billing System

Intercompany Transaction Cost Restrictions and Allowability for Government Contractors


As more and more companies are acquiring companies or being acquired, a predominant question that arises is can I do work with my new or existing affiliates. The simple answer is yes, but there are specific requirements in the FAR on how transactions are performed between affiliates. The requirements of intercompany transactions are found in two primary cost principles FAR 31.205-26 – Materials Costs and FAR 31.205-36 Rental Costs.

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Topics: Business Systems Review, DCAA Audit Support, Accounting & Billing System, Government Regulations, Federal Acquisition Regulation (FAR)

Is Your Estimate at Completion on a Progress Payment Higher than the Contract Price?


This is the third blog in a three-part series on progress payments for Government contractors. In this blog we will discuss the estimate to complete, and the adjustments needed when there is a projected loss on a contract.

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Topics: Business Systems Review, Contracts Administration, DFARS Business Systems, Accounting & Billing System, Government Regulations, Federal Acquisition Regulation (FAR), Progress Payments

Software Options for a DCAA Approved Accounting System


I talk with business owners all the time that are either just starting their business, or just getting their existing business into government contracting, and one of the questions we address almost weekly is – Which accounting software built for government contractors should I go with? The answer is, maybe none of them. While the popular govcon accounting software solutions are a really good option for many government contractors, you certainly aren’t limited to those. If you’re a relatively small government contractor, then other products such as QuickBooks might be a better software solution.

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Topics: Small Business Compliance, Quickbooks, Accounting & Billing System

Aren’t All Incurred Cost on My Contract Eligible for Reimbursement on My Progress Payment?


This is the second blog in a three-part series on progress payments. This blog addresses Line 5, Contract Price and Line 11, Total eligible costs on the SF1443 Contractor’s Request for Progress Payment Form.

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Topics: Business Systems Review, Contracts Administration, DFARS Business Systems, Accounting & Billing System, Government Regulations, Federal Acquisition Regulation (FAR)