Category Archives: Cost

Subscribe to Cost RSS Feed

Smash & Grab Redux – Congress Seems to Give DCAA Permission But Forgets to Give It Authority

By David Gallacher  Last month we wrote about a provision in the proposed 2013 National Defense Authorization Act (“NDAA”) that would have given the Defense Contract Audit Agency (“DCAA”) statutory authority to demand a company’s internal audit reports in order to audit the efficacy of a company’s internal business systems. Surprisingly, the authorization, as originally … Continue Reading

Smash & Grab – DCAA Poised to Gain Access to Contractor Internal Audit Reports

By David Gallacher  The Defense Contract Audit Agency (“DCAA”) has long sought access to contractors’ internal audit reports in connection with the routine audit of contractors’ business systems. Contractors have, in most cases, successfully resisted requests for such access on the grounds that DCAA has no statutory authority to request such documents. But that may … Continue Reading

Final Rule for IR&D Reports Fails to Address Most Serious Questions

By David S. Gallacher and Kerry O’Neill Last April, we wrote about proposed changes to Department of Defense ("DoD") reporting requirements for independent research and development ("IR&D"), raising concerns about how the proposed change would tie recoverability of IR&D costs to new reporting and disclosure requirements. Recently, Defense Federal Acquisition Regulation Supplement ("DFARS") 231.205-18(c) was … Continue Reading

Terrorism and Taxes – Proposed FAR Rule Imposes 2% Tax on Foreign Offers to Fund 9/11 Relief Fund

By David Gallacher and John Bonn On January 2, 2011, the President signed the James Zadroga 9/11 Health and Compensation Act of 2010, Pub. L. No. 111-347, which set up a relief fund for victims, first responders, and construction workers who were injured in the September 11 terrorist attacks in New York City. To pay … Continue Reading

“Bah! Humbug!” – 3% Withholding and the Ghost of Christmas Future

By: David S. Gallacher Just in time for the end-of-year push to fund the Government and to "create more jobs," members of Congress and President Obama had a rare moment of consensus when they unanimously(!) repealed an extremely unpopular withholding requirement that has been haunting recipients of federal funds since 2005. The "3% Withholding Repeal … Continue Reading

The Times They Are A Changin’ – Independent Research and Development May Not Be So “Independent” Any More

By David S. Gallacher Those familiar with Government contracting know at least a little bit about the elusive and fickle regulatory requirements for Independent Research and Development (“IR&D” or “IRAD”) costs. IR&D is a means by which the U.S. Government supports a Contractor’s independent R&D efforts. By reimbursing a Contractor’s independent R&D costs, the Government long has … Continue Reading

Rush To Judgment – FAR Councils Propose Daily Compounding Of Interest For TINA Violations

By: John W. Chierichella and W. Bruce Shirk We previously noted DCAA’s hasty implementation of the Court of Appeals for the Federal Circuit’s (“CAFC’s”) decision in Gates v. Raytheon Co., 584 F.3d 1062 (Fed. Cir. 2009), requiring daily compounding of interest on adjustments made to rectify Cost Accounting Standards (“CAS”) noncompliances. DCAA Implements Federal Circuit Decision … Continue Reading

Redefining Cost Or Pricing Data

By Alexander W. Major Effective October 1, 2010, the final rule amending FAR subpart 15.4 expands government contracting officers’ ability to obtain cost or price-related data for all contracts, including currently exempted commercial-items contracts. The amended rule is intended to clarify the FAR’s definition of “cost or pricing data” and to make the definition consistent with … Continue Reading

Administration Actively Solicits Higher Costs From Bidders – Is Its “High Road Procurement Policy” Headed Off a Cliff?

The Obama Administration is now planning yet another spending plan, this time in the form of a policy that actively encourages federal contractors either to increase the pay and benefits extended to their workforces, or to face an evaluative disadvantage in competing for federal contracts. This so-called "High Road Procurement Policy" includes an evaluative reward for … Continue Reading

Federal Circuit Affirms, Requires Showing of Benefit to the Government for Allocability of Development Costs

In Teknowledge Corp. v. U.S., Fed. Cir., No. 2009-5053, 11/03/09, the U.S. Court of Appeals for the Federal Circuit affirmed a decision by the Court of Federal Claims (COFC) that software development costs were not allocable to the Government because the Government did not receive a benefit from the costs.  Earlier this year we wrote … Continue Reading

FAR Councils Issue Interim Rule Limiting Excessive Pass-Through Charges

Based on their view that contractors who subcontract the majority of the work to subcontractors add little or no value, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (FAR Councils) issued an interim rule on October 14, 2009 that limits excessive pass-through charges by contractors and subcontractors.  See 74 Fed. Reg. 52,853 (October … Continue Reading

Reining in Use of “Of A Type” Commercial Service Contracting

The FAR Councils issued an interim rule, effective October 14, 2009, revising the circumstances under which services not offered and sold commercially can still qualify as commercial services. This is important for a couple of reasons, but probably most importantly, because commerciality can eliminate the requirement for the submission of cost or pricing data and can … Continue Reading

FAR Councils Issue Interim Rule Taking Aim at the Use of Award-Fee Contracts

On October 14, 2009, the Civilian Acquisition Council and the Defense Acquisition Regulation Council issued an interim rule that limits the use of award-fee contracts, modifies how a contractor earns an award fee, and prohibits the rollover of unearned award fees. The interim rule implements § 814 of the John Warner National Defense Authorization Act (NDAA) … Continue Reading

The Allocability of IR&D — A Fork in the Road?

With the elimination of the IR&D and B&P ceiling a decade or so ago and the recognition of “dual use” technologies as appropriate subjects of IR&D, contractors have tended to place questions relating to the allocability of IR&D on the back burner. True, the old concurrency issue remained, but allocability seemed to be relatively non-controversial. Based upon … Continue Reading

Working Like a Highway Road Crew — Government Finally Amends SF 1443 to Eliminate References to “Paid Cost Rule,” a Mere Seven Years After the Fact

In November 2002, the FAR Councils eliminated the so-called "paid cost" rule from the FAR, which had previously prevented federal prime contractors other than small businesses from recognizing incurred subcontractor costs for purposes of progress billing until "payment by cash, check, or other form of actual payment" had actually been made. See 67 Federal Register 70520 … Continue Reading

Federal Circuit Casts Cloud on Future Recovery of Settlement Costs in Non-Fraud-Related Cases

On May 19, 2009, the Federal Circuit in Secretary of the Army v. Tecom upheld the contracting officer’s disallowance of a contractor’s legal costs and settlement expenses in a sexual harassment and retaliation action brought under Title VII. The opinion is sweeping, and appears to extend the holding in Boeing North American, Inc. v. Roche, 298 F.3d … Continue Reading

New DCAA Guidelines Severely Restrict Auditor Authority To Exercise Judgment In Audit Of Internal Controls

On December 19, 2008 DCAA issued new guidance for audit of and reporting on internal controls that — in two short pages of sometimes cryptic text – (a) redefines the agency’s approach to the critical concepts of "significant deficiency" and "material weakness" in internal controls and (b) establishes new criteria for auditor reports of deficiencies in … Continue Reading

Contract Debts

Effective October 17, 2008, the Cost FAR Councils will implement revisions to the policies and procedures for contract debts under FAR Subpart 32.6.  The changes cover all contract debts to the Government resulting from contractor’s compliance or failure to comply with contract terms, and irrespective of how, or by whom, the debt is identified.  The … Continue Reading
LexBlog