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: Compliant Accounting Infrastructure, Contracts Administration, Defense Contractors, DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, 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: Compliant Accounting Infrastructure, Cost and Pricing and Budgeting, Incurred Cost Proposal Submission (ICP/ICE), DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, 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: Compliant Accounting Infrastructure, Incurred Cost Proposal Submission (ICP/ICE), Contracts Administration, Defense Contractors, DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, Contractor Purchasing System Review (CPSR), Government Regulations, Federal Acquisition Regulation (FAR)

The Government Plays Gingerbread Man - You Can't Catch Me


The Government runs away to fight another day and another day.

What is this Groundhog Day?

L3 Technologies, Inc. (L3) takes the Government to task[1] for “challenging both indirect and direct costs paid to L3 on several government contracts for certain years.” During the long-drawn-out process of the litigation, “the government apparently thought better of its claims and withdrew them in toto[2] and represented it would make no further claims on the contract years in question.” L3 opposed, the dismissal seeking either summary judgment in its favor or that the Board “keep the appeals live so that it can obtain a victory that, it believes, would preclude its suffering similar government claims in other contract years.” No such luck, the Board granted the government’s motion and dismissed the appeals.

All we can hope is that someday the fox will get the gingerbread man (aka the Government) and this Groundhog Day nightmare will stop.

[1] Armed Services Board of Contract Appeals (ASBCA) Case Nos. 61811, 61813, and 61814

[2] Fancy Latin word for completely.

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

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: Compliant Accounting Infrastructure, DFARS Business Systems, DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

What's New with Paycheck Protection Program (PPP) Forgiveness


DCAA issued some guidance on PPP forgiveness treatment in the form of frequently asked questions (FAQs) to its auditors. The FAQs were not front and center on DCAA’s website but search on “PPP” did find them at: COVID FAQ for PWS 07142021 (dcaa.mil).

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Topics: Compliant Accounting Infrastructure, Incurred Cost Proposal Submission (ICP/ICE), Small Business Compliance, Contracts Administration, Defense Contractors, Cost-Type Contracts, DCAA Audit Support, Defense Procurement and Acquisition Policy (DPAP), Government Regulations, COVID-19, Paycheck Protection Program (PPP) Loans, Federal Acquisition Regulation (FAR)

Defective Pricing Audits? Time to Check that Your Procedures are in Order

DCAA has caught up on their incurred cost backlog and is concentrating effort on Truth in Negotiations Audits (i.e., Defective Pricing). The objective of the Truth in Negotiations audit is to determine whether a negotiated contract price was increased by a significant amount because a contractor did not submit or disclose current, accurate or complete cost or pricing data.

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Topics: Cost and Pricing and Budgeting, DFARS Business Systems, DCAA Audit Support, Government Regulations, Federal Acquisition Regulation (FAR)

More to Report if you have DoD Service Contracts

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.

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Topics: Compliant Accounting Infrastructure, Small Business Compliance, Contracts Administration, Defense Contractors, Government Compliance Training, DFARS Business Systems, Cost-Type Contracts, DCAA Audit Support, System Award Management (SAM), Government Regulations