Redstone Government Consulting Blog | Contracts & Subcontracts Administration (11)

In 2017 Congress directed through the National Defense Authorization Act (NDAA) that changes be made to the treatment of independent research and development (IR&D) costs and required the Defense Contract Audit Agency to provide as part of its annual report to Congress both independent research and development and bid and proposal (B&P) costs expended by DoD contractors. Congress intended this change to apply to indirect costs incurred on or after October 1, 2017. The Defense Acquisition Regulation (DAR) Council must have read over that part.

On July 9th, 2021, the Department of Defense (DoD)issued a final rule in the Federal Register to implement 10 U.S.C. 2330a which requires the DoD to establish a data collection system to provide certain management information about an awarded contract or task order that is valued in excess of $3 million. This new rule is applicable for the following service acquisition portfolio groups:

• logistics management services
• equipment-related services
• knowledge-based services
• electronics and communications services

You may read the entire rule here.

The Finding of Concern –

While the decision in the case (ASBCA, 21-1 BCA ¶37,823 Hollymatic Corporation, Armed Services Board of Contract Appeals, (Mar. 22, 2021)) did not specifically rest on this finding; the board stated:

“Our reading of the solicitation is also supported by the fact this was a commercial acquisition pursuant to FAR Part 12 and the definition of a commercial item (product) in FAR 2.101, paragraph 1, requires the item to have been “sold, leased, or licensed to the general public; or has been offered for sale, lease, or license to the general public” (i.e., to presently exist in the market) (finding 2)”

A selective review and reference to this case by DCAA or DCMA could lead to the impression that for a product (i.e., item) to meet the FAR 2.101 definition of a commercial item the product must be completely developed and currently offered for sale in the commercial marketplace.

What are the circumstances necessitating the use of a letter contract which is also referred to as an undefinitized contract? The main circumstance is the government’s interests demand that the contractor immediately begin work and negotiating the final contract price (definitized) isn’t possible in order to meet the needs of the buying activity. Letter contracts should only be used when the work needs to immediately begin and there isn’t sufficient time to agree on the final terms and conditions. The government and prime contractors use letter contracts to immediately start work and then set a schedule to work towards negotiating to the finish line.

DoD-IG Goes After DCMA for not Supporting DCAA Findings

On February 26, 2021, the DoD-IG issued an audit report raising significant concern about the actions taken by DCMA Administrative Contracting Officers (ACOs) in relation to DCAA audit findings. The Finding section of the DoD-IG report found that out of 30 DCAA audit reports at two of the largest DoD contractors, 14 were not properly addressed per Federal Acquisition Regulation requirements by the cognizant ACO. Our guess and POGO believes the large DoD contractors are Lockheed Martin and Boeing – but this is only our guess. The DoD-IG report goes on to state that: “As a result, DCMA contracting officer actions on the eight audit reports may have resulted in improperly reimbursing DoD contractors up to $97 million in unallowable costs on Government contracts. In addition, because DCMA contracting officers did not take timely action on six audit reports, they delayed the correction of CAS noncompliances and the recovery of any increased costs due to the Government.” The report goes on to state that: “The Defense Contract Management Agency Director agreed with all five recommendations,” including reviewing ACO decisions to “Disallow and recoup any unallowable costs not previously disallowed.” (Evaluation of Defense Contract Management Agency Actions Taken on Defense Contract Audit Agency Report Findings Involving Two of the Largest Department of Defense Contractors – DoD-IG-2021-056, Dated February 26, 2021)

Need some simple suggestions for basic contract management? This is a follow on to the previously published blog, Simple but Effective Subcontract Management Suggestions. Below are a few suggestions to consider when initiating and managing your prime contract within your contracts group.

This article is under review as a result of EO 141713, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, signed by President Trump on January 21, 2025. As we await further information from OFCCP and the courts, please reference this article for current status and action items.

You’re probably not feeling quite like THIS about training, but we do want to remind you of a few topics that you, as a federal government contractor, need to address with your workforce on a fairly regular basis. We can’t hit them all, but this is a list of those that should be on the radar of your Human Resources staff and are relevant to most contractors.

Need some simple suggestions for basic contract management? Setting aside regulations in government contracting and all the complexities, there are a few steps you can take which reduce some of the workload and stress upon contract award. Below are a few suggestions to consider within your infrastructure.

What’s New in this Long-Standing Area?

The FAR Council at long last issues final rule to implement the Trump Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials. Only a few days later a Biden Executive Order 14005, Ensuring Future of America is Made in America by all of America’s Workers, hit the streets.

System for Award Management is a GSA managed application. Businesses desiring to do business with the federal government must ensure they are registered in SAM with accurate information about their business and current representations and certifications.