Defense Contract Audit Agency Current Initiatives€¦ · Monitoring Subcontracts Proposal Adequacy...

DCAA 1965-2015: Celebrating 50 Years of Excellence DCAA 1965-2015: Celebrating 50 Years of Excellence

Defense Contract Audit Agency

Current Initiatives July 2015

Mr. Gordon A. Eeten Regional Special Programs Manager

Central Region

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One Agency – One Mission

DCAA Overview

Priorities and Better Buying Power

Small Business Outreach

Available Checklists & Tools

Subcontract Management Responsibilities

Contractor Support

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DCAA Overview

Conduct contract audits and related financial

advisory services

Assist in determining whether contract costs are

allowable, allocable, and reasonable

Examine and review contractor accounts,

records, and business systems

Provide recommendations and advice to

government officials responsible for acquisition

and government contract administration

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Staffing

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4,179

4,328

4,725

4,851

5,160

4,907

5,108

4,708

4,057 4,126

4,471

4,712

4,938 4,891

4,806

4,913

4,000

4,200

4,400

4,600

4,800

5,000

5,200

5,400

2008 2009 2010 2011 2012 2013 2014 Est 2015

End Strength Workyears


2015 Priorities

Incurred costs audits

High-risk, time-sensitive labor and material reviews

Forward Pricing proposal and rate audits

Disclosure statement audits

Contractor billings - provisional billing rates, pre- and post-payment reviews

Other high-risk and time-sensitive requests - i.e. terminations/claims

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DCAA Commitment to Better Buying Power

Achieve Affordable Programs: Should Cost Teams

Establish baseline - “what it does cost today”

Participate on should cost teams - providing expertise on contractor business systems and historical practices at contractor locations

Leverage findings and recommendations

Improve Tradecraft in the Acquisition of Services:

Increase Small Business Participation Increase Outreach to Small Business

Provide Educational Seminars

Industry Group presentations

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DCAA Commitment to Better Buying Power

Incentivize Productivity & Innovation: Dedicated and increased audit resources for:

Contract Closeout

Pre-award Audits

Reduce backlog of DCAA Audits without compromising effectiveness:

Incurred Cost Initiative

Low-Risk Sampling

Risk Based Approach – Forward Pricing

Tailoring audits to focus resources on higher risk/priority audits

Improving Proposal Adequacy and Timeliness

Continue to work closely with DCMA to align processes to ensure work is complementary

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Incurred Cost Strategy

Eliminating the Incurred Cost Backlog is an

initiative under DoD’s Better Buying Power 2.0

Developed a multi-pronged approach to working

down backlog in an effective manner

Dedicated audit teams

Multi-year audit techniques

Increased staffing dedicated to Incurred Cost

Implemented a low-risk sampling approach to

performing incurred cost audits

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DCAA is Making Progress - Completed Incurred Cost Years By Fiscal Year

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654 487

4,088

8,636

11,101

0

2,000

4,000

6,000

8,000

10,000

12,000

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014


Incurred Cost - Looking to the Future

DCAA has put in place the policies, training and

infrastructure to effectively address the incurred

cost backlog

DCAA completed more than 11,000 incurred

cost years in FY 2014

The Agency receives about 4,500 incurred cost

submissions each year

The Agency is currently completing about 2 years

worth of incurred cost inventory every year

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DCAA Small Business Outreach

Instituted a Small Business Focal Point

Implemented Small Business Outreach Program Seminars offered through various DoD Small Business Offices

Designed to facilitate understanding of DCAA and compliance with regulations and contract terms

Local DCAA audit office Supervisor or Branch Manager will attend and assist facilitators at these seminars

NDIA/SBTC joint DCAA/DCMA Committee

Improved Guidance and Audit Processes

Focused Training for all Auditors on Small Business Audits

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Available DCAA Seminars

On DCAA webpage (www.DCAA.mil) – click on “Help for Small Business”

Accounting System Requirements

Contract Briefs

Incurred Cost Submissions

Monitoring Subcontracts

Proposal Adequacy

Provisional Billing Rates

Public Vouchers

Real-time Labor Evaluations

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Checklists & Tools Available Audit Process Overview – Information for Contractors Manual - A helpful guide that provides an overview of the types of audits DCAA conducts and what you can expect in a DCAA audit Preaward Accounting System Checklist - assesses whether the requirements for an adequate accounting system have been met. This checklist is used for contractors new to government contracting that have cost reimbursement contracts, or for contractors that are receiving progress payments based on cost DoD Contract Pricing Proposal Adequacy Checklist - assesses the adequacy of proposal and supporting cost or pricing data. This checklist is used for assessing the adequacy of a contract price proposal in accordance with the FAR Incurred Cost Submission Adequacy Checklist - assesses the adequacy of final direct and indirect incurred costs to ensure compliance with the contractual requirements under FAR Incurred Cost Electronically (ICE) Model - The ICE model (the electronic version of "Model Incurred Cost Proposal") assists Contractors in preparing adequate Incurred Cost Proposals

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Subcontract Award Responsibilities

The prime contractor has a responsibility to

provide proper management of its subcontracts

The prime contractor must ensure and support

that the:

price proposed by the subcontractor is fair and

reasonable;

subcontractor is a reputable source; and

subcontractor provides a value-added enhancement

to the product or contract

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Price Reasonableness

In establishing price reasonableness of

subcontracts (FAR 15.404-3), the prime

contractor needs to

conduct appropriate cost or price analyses to

establish the reasonableness of proposed prices;

include the results with the prime price proposal; and

when required submit subcontractor certified cost or

pricing data to the Government as part of its own

certified cost or pricing data

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Competition

FAR Part 6.1 establishes a clear preference for

promoting and providing for full and open

competition including underlying subcontracts

Using competitive procedures to the fullest extent

possible in awarding subcontracts will control costs

and obtain the best possible pricing in meeting

Government requirements

The prime contractor should have detailed

procedures for competing requirements to ensure it

maintains the integrity of the competitive bid process

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Support for Commercial

Determinations and Prices

Prime contractors need to adequately document

and support both the commercial determination

and price reasonableness

The prime contractor needs to obtain sufficient

information (market sales data or if necessary

cost data) to justify its decisions

If there are any difficulties obtaining necessary

data from the subcontractor, the prime contractor

should immediately notify the contracting officer

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Subcontract Administration

Responsibilities

After subcontract award, prime contractors still maintain

responsibility for all necessary subcontract management

actions through completion of subcontract performance

monitoring,

auditing,

administering, and

closing of each subcontract

In order to perform these responsibilities, prime

contractors shall establish and maintain effective

subcontract management policies and procedures (FAR

52.244-2 and DFARS 252.244-7001)

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Common Procedures

Review adequacy of subcontractor incurred cost proposals

and supporting data and billings prior to making payment

Make payments to the subcontractor determined to be

allowable in accordance with FAR 31.2 and contract terms

Ensure the subcontractor submits timely final invoice or

voucher and indirect rate adjustments to reflect the claimed

year-end indirect cost rates

The prime contract final invoice or voucher shall include

settled subcontract amounts and rates. FAR 4.804-5(a)(9)

provides that the Government cannot closeout a prime

contract until all of the subcontracts are settled.

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Business Systems

Both prime contractors and subcontractors have the

responsibility for establishing and maintaining acceptable

business systems for Government contracting

It is incumbent upon prime contractors to ensure their

subcontractors maintain acceptable business systems by

performing procedures to determine if the subcontractor’s

business systems (e.g., estimating, accounting, and purchasing

systems) are adequate before award; and

monitoring the adequacy of the subcontractor’s systems during

subcontract performance

The DFARS clauses describe the criteria for acceptable

business systems

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Common Issues Areas Where DCAA Questions Costs

Material Costs – Issues Proposed costs are inflated over purchase history Contractors do not consider cash or quantity discounts Contractors do not determine if proposed materials are in surplus inventory Contractors do not consider decrement on material costs that are based on quotes

Subcontracts – Prime contractors are not performing the required cost and price analysis of their subcontractors

Commercial Items – DCAA is challenging Contractors on their proposed commercial items. Proposed commercial items often do not meet the FAR definition

Escalation – Contractors propose escalation on both material and labor costs. This can be a significant cost for Army procurements because of the long performance periods

Contractors propose escalation that are not supported by historical rates or are based on estimates DCAA uses commodity and labor specific escalation factors for out years

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Contractor Support

Adequate contractor proposal submissions and

assertions – facilitate effective and timely audits

Effective walk-throughs of contractor assertions

Identification of internal reviews performed by the

contractor that can be leveraged by DCAA to reduce

the resource impact on the contractor

Adequate supporting data in a timely manner and

timely access to key contractor personnel responsible

for the data or activity

Real-time DCAA access to contractor systems

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Defense Contract Audit Agency

Additional information on DCAA and Points

of Contact available at

www.dcaa.mil

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http://www.army.mil/article/100247/Army_researches_small_device_to_reduce_female_UTIs/

Defense Contract Audit Agency Current Initiatives€¦ · Monitoring Subcontracts Proposal Adequacy...

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