Redstone Government Consulting Blog | DFARS Business Systems (8)

Whistleblower claims are on the rise with alleged violations of health and safety laws as well as fraud and abuse under the CARES Act due to the pandemic. Employers need to ensure they are familiar with the whistleblower laws and their responsibilities under government contracts.

The DFARS requires contractors to maintain compliant systems for Material Management and Accounting System (MMAS). This video and article will help you understand the requirements of a compliant Material Management and Accounting System.

What is FAR 52.204-10 – Reporting Executive Compensation and First-Tier Subcontract Awards?

FAR 52.204-10 requires the contractor to report executive compensation of first-tier subcontracts with a value of $30,000 unless an exemption applies. Contracting Officers are required to include the FAR clause 52.204-10, Reporting Executive Compensation and First-Tier Subcontract Awards, in all solicitations and contracts of $30,000 or more. A first-tier subcontract is a subcontract awarded directly by the contractor for the purpose of acquiring supplies or services for performance of a prime contract. This does not include long term arrangements between the prime and first-tier subcontractors for material or supplies that benefit multiple contracts.

Where does DCAA’s View of the Contractor and their Role in Acquisition Come From?

DCAA Auditor Training

DCAA website provides that new auditors receive in-depth professional training from DCAA’s Defense Contract Audit Institute (DCAI), along with on-the-job training at their assigned field audit office. DCAI is located in Atlanta, GA and provides auditors with an excellent basis on which to start their careers in contract audit. Many at Redstone GCI can speak from personal experience that, once you get past the exciting MARTA ride from the airport, the instructors at DCAI provide a good hands-on learning environment. However, we are not sure if it is a subliminal message piped into the classroom or local indoctrination at assigned field offices, but the auditors are coming away with the impression that no contractors can be trusted, and a good audit opinion has to include questioned cost.

DCAA/DCMA Viewpoint

If you look through the DCAA audit guidance and the DCMA Contractor Purchasing System Review guidance, you would think that the Government is only concerned with a Commercial Item Determination when the purchase value exceeds $2M. This is all based on commerciality being an exception to the requirement for certified cost or pricing data at FAR 15.403-1(b)(3) & (c)(3).

DCAA’s Authority for Interim Vouchers

DCAA is given the authority under DFARS 242.803(b) to approve interim vouchers for DoD. DFARS 242.803(b) states DCAA will approve interim vouchers using sampling methodology for provisional payment after a prepayment review. This also includes reviewing completion/final vouchers and issuing a DCAA Form 1, Notice of Contracts Costs Suspended and/or Disapproved when DCAA questions the allowability of costs.

Prime contractors must award contracts to responsible subcontractors. One of the required flowdowns from a prime to a subcontract is FAR 52.209-6, Protecting the Government's Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment. This flowdown is required when the solicitation or contract exceeds $35,000 but is not required when purchasing commercially available off the shelf (COTS) items. The purpose of the clause is to protect the government. A contractor that is debarred or suspended is referred to as an excluded contractor.

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.

Here are the Details

DoD issued DFARs Final Rule D2019-D029 – Treatment of Commingled Items Under $10K, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change relative to the treatment of commingled items purchased by a contractor. The final rule is applicable to all solicitations and contracts, including solicitations and contracts using FAR Part 12 procedures for the acquisition of commercial items and solicitations and contracts valued at or below the simplified acquisition threshold.

Here are the Details

DoD issued a DFARs Final Rule D2019-D029 – Services Provided by Nontraditional Defense Contractors, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change related to services provided by nontraditional defense contractors as commercial items.