Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing requirements that apply to Government contractors. This is the third article in a multi-part series on the Federal Acquisition Regulation (“FAR”) Cost Principles applicable to contracts with commercial organizations. The first article in the series addressed the criteria for determining the allowability of costs. The second addressed the allocation of direct and indirect costs. This Cost Corner focuses accounting for unallowable costs. The applicable Cost Principle is FAR 31.201-6, Accounting for Unallowable Costs. Among other requirements, FAR 31.201-6 incorporates by reference the practices for accounting for, and presentation of, unallowable costs provided in Cost Accounting Standard (“CAS”) 405, also titled “Accounting for Unallowable Costs.” We will address both the FAR and the CAS requirements.Continue Reading Government Contracts Cost and Pricing: Accounting for Unallowable Costs

Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing requirements that apply to Government contractors. This is the second article in a multi-part series on the Federal Acquisition Regulation (FAR) Cost Principles applicable to contracts with commercial organizations. The previous Cost Corner addressed the applicability of the Cost Principles and their general criteria for determining the allowability of costs. This Cost Corner focuses on the allocation of direct and indirect costs. We will address the applicable Cost Principles (FAR 31.202 and FAR 31.203) as well as the overlapping provisions of the Cost Accounting Standards (CAS) (CAS 402 and CAS 418), which include closely related but significantly more detailed (burdensome) requirements for CAS-covered contractors.Continue Reading Government Contracts Cost and Pricing: Allocation of Direct and Indirect Costs

Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing requirements that apply to Government contractors. The March 2023 Cost Corner introduced the three principle categories of Government contracts cost and pricing requirements: (1) the Truthful Cost or Pricing Data Statute, also known as the Truth in Negotiations Act (TINA), which defines a contractor’s obligation to disclose cost or pricing data to the Government; (2) the Federal Acquisition Regulation (FAR) Cost Principles, which prescribe principles and procedures for determining the allowability of costs; and (3) the Cost Accounting Standards (CAS), which provide standards to ensure uniformity and consistency in the measurement, assignment, and allocation of costs. The September 2023 Cost Corner concluded a three-part series on TINA. We now move on to the FAR Cost Principles, specifically FAR Subpart 31.2, which applies to contracts with commercial organizations. This article addresses the applicability of the FAR Cost Principles and their general criteria for determining the allowability of costs. Subsequent articles will address the allowability of selected items of cost.Continue Reading Government Contracts Cost and Pricing: Introduction to the Federal Acquisition Regulation Cost Principles (Part 1)

Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing requirements that apply to Government Contractors. We just completed two articles on the Truth in Negotiations Act (TINA) [1] and, before that, two articles on Defense Contract Audit Agency (DCAA) audits. This issue of the Cost Corner concludes our coverage of TINA by addressing DCAA Truth in Negotiations (TIN) compliance audits (defective pricing audits) and identifying best practices for contractors to mitigate defective pricing risk.Continue Reading Government Contracts Cost and Pricing: The Truth in Negotiations Act, or Whatever the Kids Are Calling It These Days (Part 3)

Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing compliance issues facing Government contractors. This is the second installment of a two-part article on Defense Contract Audit Agency (DCAA) audits. DCAA’s mission is to conduct contract audits and to provide accounting and financial advisory services to all Department of Defense (DoD) components responsible for procurement and contract administration. Part 1 of this article provided an overview of DCAA’s mission, organization, and audit rights, as well as the types of audits conducted by DCAA. Part 2 focuses on DCAA’s standard audit procedures across audit types and identifies best practices for contractors dealing with DCAA audits.Continue Reading Government Contracts Cost and Pricing – DCAA Audits (Part 2)

Summer is here and we’re back with another edition of the Cost Corner, where we provide practical insight into the complex cost and pricing requirements that apply to Government contractors. We just completed a two-part series on the Truthful Cost or Pricing Data Statute, commonly known as the Truth in Negotiations Act (TINA).[1] We will return to TINA in a few months to address the Defense Contract Audit Agency’s (DCAA) playbook for defective pricing audits. But first, we embark on a two-part series regarding DCAA audits generally. Part 1 (this article) provides an overview of DCAA’s mission, organization, audit guidance, and audit rights. We also address the types of audits DCAA conducts and recent DCAA audit statistics. Part 2 (our next article) will focus on DCAA’s audit guidance, audit procedures, and best practices for contractors dealing with DCAA audits.Continue Reading The Cost Corner: Government Contracts Cost and Pricing – DCAA Audits

Welcome back to the Cost Corner, where we provide practical insight into the complex cost and pricing regulations that apply to Government contractors. This is the second installment of a two-part article on the Truthful Cost or Pricing Data Statute, commonly known by its former name, the Truth in Negotiations Act (TINA).[1] As a reminder, TINA is a procurement statute that requires contractors: (1) to disclose information – known as cost or pricing data – when negotiating certain types of contracts, subcontracts, and modifications; (2) to certify that those data were accurate, complete, and current as of the date of agreement on price or other date agreed to by the parties (the “relevant date”); and (3) to agree to a contract clause entitling the Government to a price reduction if the contractor furnishes cost or pricing data that are defective, i.e., inaccurate, incomplete, or not current.[2]Continue Reading Government Contracts Cost and Pricing – The Truth in Negotiations Act … or Whatever the Kids Are Calling It These Days (Part 2)

Welcome back to the Cost Corner, where we address the complex cost and pricing regulations that apply to Government contractors. The last edition of the Cost Corner provided an overview of the regulatory framework for Government contracts cost and pricing, including the Truthful Cost or Pricing Data Statute,[1] the Federal Acquisition Regulation (FAR) Cost Principles,[2] and the Cost Accounting Standards (CAS).[3] This edition of the Cost Corner takes a closer look at the Truthful Cost or Pricing Data Statute, commonly referred to by its former name, the Truth in Negotiations Act (TINA).Continue Reading Government Contracts Cost and Pricing – The Truth in Negotiations Act … or Whatever the Kids Are Calling It These Days (Part 1)

Welcome to the Cost Corner. This is the first in a series of articles exploring the complex cost and pricing regulations that apply to government contractors. This article provides an overview of the regulatory framework and its rationale. Subsequent articles will explain specific aspects of the regulations in further detail and provide periodic updates on new developments.Continue Reading Government Contracts Cost and Pricing – A Brief Overview of the Regulatory Landscape

Volume X – Accounting for the Cost of Business Combinations Under Government Contracts

Mergers and acquisitions create additional costs and complex accounting issues for government contractors.  There are fees for accounting, legal, and business consultants.  There may be restructuring costs associated with combining business operations.  Segments may be closed and retirement plans may be terminated.  Golden handcuffs and golden parachutes are also common.  Assets may be revalued, goodwill may be created, and there may be changes in cost accounting practices.Continue Reading What You Need to Know About Mergers and Acquisitions Involving Government Contractors and Their Suppliers

The Department of Defense (“DoD”) recently proposed to make specified costs allowable that are associated with discovering and correcting counterfeit or suspect counterfeit electronic parts.  DoD’s proposed rule would amend the Defense Federal Acquisition Regulation Supplement (“DFARS”) to implement the National Defense Authorization Act (“NDAA”) for Fiscal Year 2016.
Continue Reading DoD Proposes Cost Allowability Rule for Correcting Counterfeit Electronic Parts