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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

Section 820 of the National Defense Authorization Act for Fiscal Year 2017 (“NDAA”) establishes a new Defense Cost Accounting Standards Board (“D-CASB”) to oversee the application of the Cost Accounting Standards (“CAS”) to defense contracts. The amendments made by Section 820 shall take effect on October 1, 2018.
Continue Reading Defense Contractors to Face New Cost Accounting Oversight with Creation of Defense Cost Accounting Standards Board

The Inspector General Act of 1978 aimed to “consolidate existing auditing and investigative resources to more effectively combat fraud, abuse, waste and mismanagement in the programs and operations of [the executive branch].” To fulfill this mandate, the Act created the Offices of Inspector General (“OIG”) in various executive departments and agencies, including the Department of Defense (“DOD”), and authorized them to conduct and supervise audits and investigations to prevent and detect fraud, waste, and abuse. The DOD OIG’s primary investigative weapon has been the subpoena. More recently, however, the DOD OIG has subtly expanded its investigative arsenal by calling upon the Defense Contract Audit Agency (“DCAA”) to step up its fraud inquiries and by conducting more “Quality Assessments” and “Audits” without sounding the warning shot of the subpoena.
Continue Reading OIG Investigations (Without Subpoena Bells and Whistles) Coming to a Program Near You

By Louis Victorino and Jonathan Aronie (originally published in the San Diego Business Journal)

It has been noted, the more things change, the more they stay the same. In the world of Government Contracts Law, however, the more things change, the more the phone rings. And while we’re only a few weeks into 2013, the phone has been ringing off the hook. Here are a few of the reasons why.…

Continue Reading What Does 2013 Have In Store for Government Contractors and Their Lawyers?

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 proposed, was modified in the final legislation. While Congress directed DCAA to issue new guidance regarding auditor access to internal audit reports, Congress stopped short of giving DCAA actual authority to demand such reports. As such, contractors will remain at loggerheads with DCAA auditors who try to exceed their statutory authority.…

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

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 soon change. Section 843 of the Senate version of the 2013 National Defense Authorization Act (S. 3254) would grant DCAA broad access to contractor internal audit information.…

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

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 finalized, with changes. See 77 Fed. Reg. 4632 (Jan. 30, 2012). This final rule is a mixed bag that got some things right, but also leaves some of the most serious issues unresolved.…

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

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 hoped to advance the state of the art without stifling a contractor’s innovation under the weight of a federal bureaucracy, while simultaneously banking on the fact that the U.S. Government also will benefit from the technology advancements. But two recent developments may change the essential nature of IR&D, making it less “independent” and more “dependent” on Government rights and oversight. To quote Bob Dylan – “the times they are a changin’.” 
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Continue Reading The Times They Are A Changin’ – Independent Research and Development May Not Be So “Independent” Any More

By John W. Chierichella and Ryan E. Roberts

On January 11, 2011, Ronald Youngs, Acting Executive Director, Contracts, Defense Contract Management Agency (“DCMA”), issued Information Memorandum No. 11-108 regarding Forward Pricing Rate Recommendations (“FPRR”). This memorandum implemented a mandate included in the September 14, 2010 memorandum of Ashton B. Carter, Under Secretary of Defense for Acquisition, Technology & Logistics, entitled “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending.” In an attempt to reduce the overlap between DCMA and the Defense Contract Audit Agency (“DCAA”), Mr. Carter directed that “where DCAA has completed an audit of a particular contractor’s [Forward Pricing Rate Proposal (“FPRP”)], DCMA shall adopt the DCAA recommended rates as the Department’s position regarding those rates.”
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Continue Reading DCMA Updates Forward Pricing Rate Recommendation Policy