audit | Georgia Tech Procurement Assistance Center

Waiting for the final government audit may be too late

July 23, 2018 By cs

In a case of first impression, a Court of Appeals has held that a government subcontractor’s claim for reimbursement of its actual indirect costs was time-barred.

Fluor Fed’l Solns. LLC v. PAE Applied Techs, LLC, No. 17-1468, 2018 WL 1768233 (4th Cir. Apr. 12, 2018) (per curiam) (unpublished). It is the first case to directly address the interplay between the Allowable Cost and Payment Clause of the Federal Acquisition Regulation (FAR), 48 C.F.R. § 52.216-7, and a statute of limitations. It highlights the risks government subcontractors face when they choose to wait for a Government audit rather than litigate promptly after a payment dispute arises.

This case involved a long-term subcontract and a long-delayed government audit. In 2002, Fluor and PAE entered into a federal government subcontract that ultimately spanned a 15-year performance period. The subcontract incorporated, with minor changes, the FAR Allowable Cost and Payment Clause, 48 C.F.R. § 52.216-7, found in most cost-reimbursable federal government contracts and subcontracts. That clause requires the Government (or, in this case, the prime contractor, PAE), to pay Fluor’s “anticipated final” indirect rates in accordance with the contract terms, subject to retroactive adjustments once a government audit establishes the subcontractor’s final indirect rates applicable to the contract. 48 C.F.R. § 52.216-7(e)–7(g).

Keep reading this article at: https://www.insidegovernmentcontracts.com/2018/07/waiting-final-government-audit-may-late/

DoD must work harder to include small business contractors, audit says

June 6, 2018 By cs

An audit of two Army Contracting Command centers in Redstone, Alabama and Warren, Michigan, revealed The Department of Defense (DoD) must increase its efforts in order to meet small business subcontracting goals.

The DoD Inspector General Audit was carried out in three different branches. One audit was performed on the Army, and two each on the Marine Corps and the Air Force. According to the audit, small businesses may have lost opportunities because protocols were not followed which could have encouraged more small businesses to be part of the federal marketplace.

Small businesses have been specifically included in the federal contract bidding process to both support and encourage growth in communities across the country. Head of the House Small Business Committee U.S. Rep. Sam Graves (R-Missouri) announced in Nov. 2017 his desire to raise the federal government’s contracting goal for small businesses to 25 percent, a two percent increase from the current 23 percent target for contracts to be awarded to small businesses today.

Keep reading this article at: https://smallbiztrends.com/2018/05/defense-contracts-for-small-businesses.html

DCAA guidance clarifies cost or price analysis requirements for subcontractor proposals

November 1, 2017 By cs

The Defense Contract Audit Agency (DCAA) recently published a Memorandum for Regional Directors (MRD), titled “Audit Alert on Requirement for Prime Contractor Cost and Price Analyses,” that provides answers to frequently asked auditor questions regarding cost and price analyses to establish the reasonableness of proposed subcontract prices.

Importantly, the MRD states that DCAA auditors should proceed with subcontract proposal audits even if contractor cost or price analyses are not yet available. This should help mitigate what has been a continuing problem for prime contractors—long waits for DCAA audits of subcontractor proposals—and expedite contract price negotiations.

FAR 15.404-3(b) requires a prime contractor or subcontractor to establish the reasonableness of proposed subcontract prices and to provide supporting cost or price analyses in the proposal. In certain circumstances, a prime contractor may not be able to complete the cost or price analyses by the time it submits a proposal. In such cases, the prime contractor may include a matrix in the proposal identifying the dates by which it expects to receive subcontractor proposals. The MRD states that this type of matrix does not satisfy the requirement to submit supporting cost or price analyses in the proposal, and a DCAA auditor would mark the proposal as inadequate on grounds of incomplete cost or price analyses.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=640002

Auditors criticize SBA’s management of small business programs

July 5, 2017 By cs

In a report released on June 30, 2017, the Government Accountability Office (GAO) reaffirmed “long-standing management challenges” within the Small Business Administration’s operation of several small business contracting activities “resulting in inefficient program operations.”

The programs impacted include small businesses in the socioeconomic categories of small disadvantaged businesses (SDB), women-owned small businesses (WOSB), service disabled veteran-owned small businesses (SDVOSB), and historically underutilized business zone (HUBZone) small businesses.

For three of the small business programs, GAO specifically found:

HUBZone Program

There is no specific guidance or criteria for making requests for supporting documentation in connection with applications made as a part of the HUBZone certification process.
Because of shortcomings in the recertification process, there is not reasonable assurance that only qualified firms are allowed to continue in the HUBZone program.
Despite some automation put in place by the SBA, there is a backlog of firms in the recertification pipeline, required within a three-year time frame.

8(a) Program

There is an open issue involving the need to “clearly document [SBA’s] justification for approving or denying applicants into the 8(a) program, particularly when those decisions differed from lower-level recommendations.” The SBA’s Office of Inspector General (OIG) intends to continue to flag this issue “until this practice is documented in an SOP or desk guide for the program.”
The OIG reports that it has received documentation on thirty 8(a)-certified firms that it earlier found did not meet all of the eligibility requirements, and plans to issue an analysis of that documentation in a forthcoming report.

WOSB Program

SBA validated an earlier OIG report by agreeing that 40 percent of the WOSB concerns that the OIG questioned were not, in fact, eligible to receive contracts under the WOSB program at the time of award.
While the FY15 National Defense Authorization Act (NDAA) eliminated SBA’s self-certification process for the WOSB program, the SBA has not yet implemented a process to eliminate self-certification.
“As a result of inadequate monitoring and controls, such as not implementing a full certification program, potentially ineligible businesses may continue to incorrectly certify themselves as WOSBs, increasing the risk that they may receive contracts for which they are not eligible.”
Until a new certification program required by the FY15 NDAA is implemented, “oversight of third-party certifiers and enhancing examinations of WOSB firms are needed to help ensure that only eligible businesses participate in the WOSB program.”

GAO’s complete report can be seen at: http://www.gao.gov/assets/690/685569.pdf.

Here is a list of earlier GAO audits of SBA’s small business programs, linked to the full reports:

A message to employers who aren’t in a current OFCCP audit

May 4, 2017 By cs

If your company was one of the 375 government contractors or subcontractors who recently received a Scheduling Letter from the Office of Federal Contractor Compliance Programs (OFCCP), you’re probably not reading this post. You’re too busy scrambling to pull together responses to the 22 items in the Scheduling Letter and Itemized Listing and making sure your affirmative action plans are up to date.

But if you didn’t receive a scheduling order … read on.

Now is a perfect time to check up on your company’s compliance with the various requirements imposed on federal contractors and subcontractors, so that you’re ready when you do receive notice of an OFCCP audit. Every contractor knows that it must maintain affirmative action plans for minorities and women and for the disabled and protected veterans and that it must file EEO-1 and VETS-4212 forms once a year. But are you confident that you’re complying with all the other OFCCP obligations on federal contractors? Here is a quick checklist you can use to make sure your company is in compliance.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=586128

DCAA says hiring freeze may stall its effort to clear backlog

May 1, 2017 By cs

President Donald Trump’s federal hiring freeze may have derailed the Defense Contract Audit Agency’s goal to clear its audit backlog by 2018, the DCAA said in an otherwise glowing annual report to Congress made available recently.

The DCAA boasted $3.6 billion in savings from its audit activity during the 2016 fiscal year in its report, but the Pentagon’s primary bean counter for the acquisition community also said that Trump’s 90-day hiring freeze signed in late January may affect its ability to clear a 17.6-month audit backlog by next year.

“Until the recent 2017 hiring freeze, I was confident that we would meet our target of eliminating the backlog by the close of 2018,” DCAA Director Anita Bales, an Obama-era appointee, told congressional defense committees in the March 31 report made available last week. “However, we are currently reassessing our projections to determine how the new hiring freeze will impact our ability to meet our target date.”

Keep reading this article at: https://www.law360.com/publicpolicy/articles/916477/dcaa-says-hiring-freeze-may-stall-its-effort-to-clear-backlog

DoD reassures major contractors it’s not returning to old IR&D practices, but significant questions still remain

January 20, 2017 By cs

AT&L On January 4, 2017, the Department of Defense’s top acquisition official issued a memorandum further clarifying the implementation of a November 2016 final rule concerning the reimbursement of major contractors’ Independent Research & Development (“IR&D”) costs. In a move likely intended to reassure major defense contractors, Undersecretary of Defense for Acquisition, Technology & Logistics, Frank Kendall, stressed that the recent final rule “merely codifies a long standing practice” used by contractors. Mr. Kendall also emphasized that DoD does not require major contractors to obtain formal or “de facto” approval of IR&D projects before incurring such costs.

But while DoD’s efforts to comfort industry are commendable, some key questions remain, including most prominently: whether and how DoD auditors will utilize the results of pre-IR&D “technical interchange” meetings to question the allowability of IR&D costs.

The memorandum is just the latest in a series of communications from DoD on the allowability of IR&D costs. As previously discussed here, DoD issued a white paper in August 2015 signaling that a significant overhaul of the IR&D regulations may be on the horizon. The white paper established a goal of requiring that contractors engage with “appropriate technical operational staff” prior to incurring IR&D costs. Moreover, and perhaps most alarming for contractors, the white paper indicated that the Defense Contract Management Agency (DCMA) and the Defense Contract Auditing Agency (DCAA) would use information shared during the required “technical interchange” meetings to make allowability determinations for IR&D costs. The views expressed in the white paper harkened back to the Technical Evaluation Group and Tri-Service Negotiation Group approval process of the 1980s – when these groups assessed the quality, reasonableness, and potential military relationship of each IR&D project before the project costs could be considered allowable. This process was abandoned in the late 1990s in favor of increased autonomy for contractors in choosing IR&D projects.

Keep reading this article at: https://www.insidegovernmentcontracts.com/2017/01/dod-reassures-major-contractors-not-returning-old-ird-practices-significant-questions-still-remain/

5 things you must do after winning a contract

September 26, 2016 By cs

DCAA_Emblem The recent limitation imposed on the Defense Contract Audit Agency to perform audits means private sector accounting firms now have the opportunity to work more closely with federal agencies to help assess proposals, indirect rates, and business systems of qualifying government contractors.

This change has elevated the need for accountants specializing in government contracting who fully understand the criteria federal agencies use to select and retain contractors.

Compliance and efficiency are paramount to not only achieving the government’s goals, but also for contractors to maximize their own opportunities afforded by a federal contract. With that in mind, we’ve identified the top five areas government contractors need to shore up to ensure their services are efficient and profitable.

Keep reading this article at: https://washingtontechnology.com/articles/2016/09/12/insights-williamson-after-winning.aspx

Responding to a scheduling letter from the OFCCP: Little things matter

September 23, 2015 By cs

It is the Tuesday after a long holiday weekend, and you are faithfully going through the pile of mail on your desk when you spy an envelope from the United States Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP).

affYou open the envelope and, sure enough, your facility has been selected for a compliance review under Executive Order 11246, the Vietnam Era Veterans’ Readjustment Assistance Act, and Section 503 of the Rehabilitation Act. Which of the following most accurately describes your response?

Hot dog! I finally get to do something with those affirmative action plans I have been patiently preparing for years!
Story of my life . . . any time I take a long weekend, I always return to bad news.
An OFCCP audit? Someone turn off the lights so I can curl up and cry in the corner.

Regardless of which response you chose, before you respond to the OFCCP, there are several things you should do to increase your chances of a successful audit outcome.

Read the six things you should do at: http://www.mondaq.com/article.asp?articleid=425852

Defense Contract Audit Agency training seminar to be held in Warner Robins on Sept. 16

September 2, 2015 By cs

All clients of the Georgia Tech Procurement Assistance Center (GTPAC) are invited to attend a free training seminar being conducted by the Defense Contract Audit Agency (DCAA).

This training event is being held at Central Georgia Technical College, Warner Robins Campus, Auditorium, Building A, 80 Cohen Walker Drive, Warner Robins, GA 31088.

The training will be conducted from 8:30 a.m. to 12:30 p.m. and is sponsored by the Georgia Tech Procurement Assistance Center (GTPAC).

Cost: There is no fee to attend. but you must register in advance to reserve a seat.

Registration: Please visit http://gtpac.ecenterdirect.com/ConferenceDetail.action?ID=8034 and click on the SIGN UP button to register for this event.

Agenda

8:30 to 9:00 a.m.

Training Part 1 – Introduction & DCAA Overview (30 Mins) This training presentation will provide an overview of the Defense Contract Audit Agency including its responsibilities and duties. The types of DCAA audits that can be performed throughout the various phases of a contract will be discussed. Finally, participants will learn about DCAA Internet resources and available presentations.

9:00 to 11:00 a.m.

Training Part 2 – Accounting System Requirements (2 Hrs) This training presentation will provide an overview of the pre-award accounting system design review process. Participants will learn what occurs prior to the award of a cost-type contract, what is contained in the SF 1408, and what the applicable DFARS regulations say with regard to what comprises an acceptable accounting system. Total contract costs, including direct costs and indirect costs will be discussed. Examples of typically seen indirect rates will be provided along with a discussion of selecting a proper allocation base. Participants will learn about the FAR Part 31 clauses that cover allowability, allocability, and reasonableness as well as concepts such as Contract Terms, Accounting for Contract Costs, Labor System, Timekeeping, Unallowable Costs, Cost by Contract Line Item, Billings, Cost Accounting Information, and Management Reviews/Internal Audits along with the applicable DFARS clauses. Finally, some common deficiencies will be discussed

11:00 to 11:15 a.m.

Break (15 minutes)

11:15 to 11:45 a.m.

Training Part 3 – Provisional Billing (30 minutes) This training presentation will provide an overview of provisional billing rates (PBR). The purpose of PBR’s will be discussed along with the procedures for establishing the rates. Participants will learn when PBR’s should be submitted and the types of information that should be included in the PBR proposal. The importance of billing rate monitoring will be emphasized along with common deficiencies that can occur when utilizing provisional rates. The presentation will also cover example procedures that DCAA may perform when reviewing the rates.

11:45 a.m. to 12:15 p.m.

Training Part 4- Public Vouchers (30 minutes) This training presentation will provide an overview of Public Vouchers. Contractor responsibilities for voucher preparation will be discussed along with the criteria for an adequate billing system. Participants will learn about the Department of Defense’s Wide Area Workflow (WAWF) electronic payment system and resources that are available to assist with utilizing the system. Additionally, common deficiencies found during DCAA voucher reviews will be discussed.

12:15 to 12:30 p.m.

Closing, Q & A (15 minutes)

Speakers include Ms. Jonnette Porter, DCAA Financial Liaison Advisor, Mr. David Van Dingenen, DCAA Supervisory Auditor.

Ms. Jonnette Porter is a Financial Liaison Advisor (FLA) under the Audit Liaison Division (OAL) with the Defense Contract Audit Agency (DCAA) and is located at Robins Air Force Base in Warner Robins, GA. She is one of six FLAs on the Air Force Team. Ms. Porter advises Robins’ procurement personnel on accounting and financial matters in areas of DCAA responsibility. This includes advising procurement personnel on types of DCAA audit services and facilitating audit services with cognizant Field Audit Offices (FAOs).
Mr. David Van Dingenen is a FAO Supervisory Auditor under the DCAA Atlanta Branch Office, located in Smyrna, Georgia. In this capacity, he serves as the supervisory auditor responsible for the supervision of a team of professional auditors and the audit cognizance of multiple contractors in the State of Georgia in order to meet agency mission requirements.