Redstone Government Consulting Blog | DCAA Audit Support (14)

The FAR establishes that when contracting by negotiation with the Government, the contractor should have an acceptable estimating system.  FAR 15.407-5 provides that due to the benefits to both the Government and the contractor in reducing the scope of individual proposal reviews at contractors with an acceptable estimating system, the auditor (likely DCAA) should survey the system and provide a report to all contracting offices and contract administration offices doing substantial pricing activity with the contractor.  This is a very open-ended requirement/expectation; therefore, DoD established a structure in the DFARS.

With a renewed focus on DCAA Estimating System Audits, we share some advice on successfully navigating the process.

For those of you who may have thought there could be a silver lining to coronavirus restrictions from reduced audit effort, think again! Actual postponement of audits will be rare.

UPDATE:  On May 5th, SBA added FAQ #43 extending the safe harbor to May 14, 2020 and stating “SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.”

In days gone by, knowing which contract administration office you needed to work with was as easy as finding your local Defense Contract Management Agency (DCMA) Office.  DCMA used to accept and administrate pretty much all contracts, even other Federal Agencies with reimbursement of its services (e.g., NASA contracts).  This is no longer the case; Over the last few years, DCMA has made a significant effort to stay focused on what it refers to as its core business – basically research, development, engineering, test, production, and spares for major acquisition programs.  This leaves the administration of low value/low risk contracts, management and professional services contracts, architect-engineer services contracts, and many others to the buying command that issued them.

Although the COVID-19 Pandemic and its impact on everyone is absolutely serious business, the nature of this “special day” blog is not necessarily serious business.   At times like these we hope that an element of levity will be accepted for what it is and not be misinterpreted as diminishing the serious nature of the pandemic. We also hope that everyone reading this is safe, healthy and adhering to the federal guidelines to limit the spread of COVID-19.

UPDATED – June 18, 2024

As we outlined in Applicability of DFARS Business System Rules to Small Businesses, small businesses are exempt from Cost Accounting Standards and therefore are not subject to the business system rules, based on the requirements for inclusion in the Business System Clauses as set out in DFARS.  DFARS Case 2009-D038 – Defense Federal Acquisition Regulation Supplement; Business Systems-Definition and Administration, final rule issue February 24, 2013 in the Federal Register specifically stated: “DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because contracts and subcontracts with small businesses are exempt from Cost Accounting Standards (CAS) requirements.”

In 1948 the Armed Services Procurement Regulations (ASPR) was issued as a result of the Armed Services Procurement Act, remaining in place until 1978.  ASPR defined direct cost as “any cost that is specifically identified with a particular final cost objective, but not necessarily limited to items that are incorporated in the end product as material or labor.”  This is a fairly broad definition and clearly establishes that direct cost includes more than direct material and direct labor.  The APSR also discussed Other Direct Costs (ODC), which were costs that were not material nor labor and provided examples, such as “travel and subsistence, consultants, telephone, computer costs and report reproduction.” 

Believe it or not, getting DCAA to show up and complete a “Paid Voucher Review” is “Good News.”

To understand where I’m coming from with this statement, let’s start with a little history.  The way DCAA dug itself out of its incurred cost backlog hole was with low risk sampling, provided for under FAR Class Deviation (2012-O0013) – DCAA Policy and Procedure for Sampling Low-Risk Incurred Cost Proposals, issued July 24, 2012.