Buckle Up, Contractors! The intensity of the ride is looking to get bumpier; DCAA Issues Guidance on Expressly Unallowable Costs.

Bill Walter is a Partner in DHG’s Government Contract Advisory practice. He has over three decades of experience in the government contracting industry. DCAA recently issued two pieces of guidance to its auditors likely foretelling the next big challenge between contractors and DCAA auditors.  The guidance focuses on the identification of expressly unallowable costs and the recovery of penalties on those questioned costs. On December 18, 2014, the Agency issued MRD14-PAC-021(R), Audit Alert Distributing a Listing of Cost Principles That Identify Expressly Unallowable Costs.  The guidance contains over 32 pages of cost principle excerpts and directs the DCAA auditor to question “costs based on a cost principle that is on the list” and “treat the questioned costs as expressly unallowable and subject to penalties.” On January 7, … Continue reading

I’M NOT DEAD YET (or A Brief Look At The Future Of The Price Reductions Clause In Light Of GSA’s Proposed Transactional Data Reporting Rule)

Not enough Government Contracts blogs incorporate movie trivia. So here’s my contribution to fill this obvious gap in the procurement blogosphere: Is the following quotation (a) from a famous Monty Python skit or (b) from a conversation between two Government auditors discussing GSA’s recently-proposed effort to do away with (at least in part) the Price Reductions Clause? “It’s not dead!” “‘Ere, he says it’s not dead.” “Yes it is.” “It’s not.” “It isn’t.” “Well, it will be soon, it’s very ill.” “It’s getting better.” “No it’s not, it’ll be stone dead in a moment.” “Well, I can’t take it like that. It’s against regulations . . . .”   Before giving you the answer, let me offer a bit of context for those who aren’t … Continue reading

CAA Issues a Delinquency List and Guidance Regarding the Assessment of Unilateral Rate Determinations for Overdue Indirect Rate Proposals

To learn more about this topic, sign up for the April 14 Financial Forum Webinar: Preparing and Defending Your ICS and Avoiding the Deficiency List, Disallowances and Penalties.  The Defense Contract Audit Agency (“DCAA”) recently issued a Memorandum for Regional Directors (“MRD”) which accompanies a “delinquency list” and guidance regarding the steps that DCAA and the Defense Contract Management Agency (“DCMA”) will take this year in connection with certain outstanding final indirect rate proposals.  The MRD indicates that DCMA may unilaterally establish contract costs in mid-2015 for hundreds of contractors that allegedly have not timely submitted such rate proposals.  FAR 42.703-2(c) and FAR 42.705(c) permit unilateral rate determinations in limited circumstances.  Even where such a determination is authorized, however, the unilateral rate must bear some reasonable … Continue reading

Proposed Business System Rule Withdrawn

 Mark Burroughs is a partner at Dixon Hughes Goodman . He has over 20 years of experience in providing auditing and consulting services to government contractors. With little fanfare, the DAR Council has withdrawn the Proposed Business System Rule (79 FR 41172, July 15, 2014).  The proposed rule would have required that contractors subject to the business system rule to incur costs to perform annual self-evaluations of their Accounting, Estimating and Material Management Accounting Systems (MMAS).  In addition, for DOD contractors with contracts awarded based on certified cost or pricing data totaling $50 million or more, the additional cost of a triennial “CPA Audit” of 3 separate business systems would be required.  On top of the proposed requirements the rule would have provided DCAA with … Continue reading

Tenth Commandment: Thou Shalt Not Stereotype Thine Opponent

*This post is the tenth in the ten part series, “A Government Contractor’s Ten Commandments”.*       One of the most dangerous things that can happen to us in our business career is to make the mistake of stereotyping our adversary.  In the world of Government contracting, the two most common stereotypes are (1) all Government employees are stupid and lazy and (2) all contractor employees are thieves and liars who are out to bamboozle the Government.  There are several problems with both of those statements, of course, but the most obvious is how absurd these stereotypes become when the two sides sit down at a table to negotiate: half the Government team used to work for industry, where presumably they were thieves, and half … Continue reading

CAS 403 – Allocation of Home Office Expenses to Segments (Part 3 of 3)

*This is Part 3 of a 3-part blog.  Each part addresses the fundamental requirements and techniques for application related to the standard, and provides specific examples. Part 1 addressed the basic requirements/techniques for allocating home office expenses to segments. Part 2 addressed the requirements/techniques for allocating home office residual expenses to segments. This Part 3 will addresses special allocations of home office expenses to segments.   Background:  To provide criteria for allocating home office expenses to the segments of an organization based on the beneficial or causal relationships between the expenses and the receiving segments (CAS 403-20(a)). Special Allocations of Home Office Expenses to Segments   In accordance with CAS 403‑40(c)(3) and CAS 403-50(d), where a particular segment receives significantly more or less benefit from residual expenses … Continue reading

Organizational Conflict of Interest Challenges

Thirty-Nine in a Row! During the past two-and-a-half years, 40 Organizational Conflict of Interest (OCI) challenges have been raised in protests before the Government Accountability Office (GAO).  And – with the exception of one protest where the agency waived a potential OCI at the last minute, after receiving an unfavorable ADR “outcome prediction” – in every case the contracting officer determined that there was no disqualifying OCI, and in every case GAO upheld the contracting officer’s decision.[1]  Every single time!  Even Stephen Strasburg doesn’t strike out everybody.  (Alas, especially this year) It might even be said that OCI reversals have become as rare as leap days, since the last sustained OCI protest was Niksoft, issued on February 29, 2012.  And in that protest, unlike the … Continue reading

Fred’s FAR Fact or Fiction: Negotiation with the Government is a Zero-Sum Game

**We are giving our readers the opportunity to vote on what this series should be called. If you want to chime in please use the poll below. Thank you!** Fiction/Fallacy: “Negotiation with the Government is a zero-sum game.  My contracting officer’s job is to keep the Government’s costs down, no matter what.  He/she doesn’t care whether I go bankrupt in the process.” Fact: Unfortunately, whether due to inexperience, improper training, or budget pressures, these situations have occurred. But it’s not in a contracting officer’s “job description.” True, the FAR repeatedly admonishes the contracting officer to do what is in the best interests of the United States.  But the FAR doesn’t tell the contracting officer to be a one-sided advocate whose only goal is to win, … Continue reading

“Do You Know” what to do when your contracting officer is too busy to answer your calls and wants to delegate authority to a contracting specialist?

Consider this scenario.  Your Contracting Officer tells you that he is too busy to manage your specific contract and suggests that, instead of calling him, you should speak to and get guidance from the assigned Contract Specialist about any problems that you may have under the contract.  Can you rely upon the directions and guidance that you receive from the contract specialist; especially if the direction you are given may cause you to incur additional costs? My advice is to be very careful in this situation.  Although not common in the federal contracting sector, some Contracting Specialists do possess a certain amount of warrant authority. I always remind my students to review Section G of their contract when trying to determine who has authority to … Continue reading

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

Written by Mary Karen Wills, Sajeev Malaveetil,  and Ryan D. Byrd at the Berkeley Research Group To learn more about this topic, sign up for our OMB SuperCircular 2 CFR Part 200 Webinar on July 15, 2014. On December 26, 2013, the Office of Management and Budget (OMB) released its final “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” This guidance is applicable to grants and cooperative agreements and represents a comprehensive consolidation and revision of OMB Circulars currently governing Federal awards to non-Federal entities. The guidance combines A-110 and A-102 into a single set of administrative rules; combines A-21, A-87, and A-122 into a single set of consolidated cost principles with entity-specific appendices describing indirect rate guidance for government, higher education, and … Continue reading