The Dreaded Incurred Cost Submission (ICS) Audit Backlog Receives Publicity Once Again
It is the same story played out over and over again at contractor sites, especially those considered “non-major” (less than $100 million in flexibly priced work), the dreaded open years of incurred cost submissions.
The Controllers “dream” about how they will have to pull data from seven or more years ago by digging through records of the organization that were prepared and filed in a “logical” manner by their predecessor to ultimately survive the audit. The dream is stressful with a constant search for the documentation to support an expense incurred in some cases seven years ago. The receipt is found stapled to the voucher but it has faded with age and is no longer readable. The audit starts and stops for months and years with auditors coming and going; either leaving the agency or being reassigned to another priority. With each new auditor and each delay in the work, inefficiency is the result not an audit report. I could write a book about the stories I have heard and experienced in my contractor base. The time and resources expanded preparing for such an audit are considerable even though contractors and the government have some of the same end goals; complete the audit, finalize the rates, close-out the year, and close out the old contracts! Continue reading »
Protests Increase for Sixth Consecutive Year
The General Accountability Office (GAO) has reported prospective bidders filed 2,475 protests in fiscal year 2012, a 5% increase over FY 2011. This is the sixth straight year that bid protests have increased and is a whopping 75% increase over FY 2007. 18.6% of the FY 2012 protests were sustained compared to 16% in FY 2011. Yet the effectiveness rate (sustained protests combined with corrective agency action) remained constant at 42%. A significant part of the GAO report was devoted to a disagreement between GAO and the Veterans Administration. The VA believes it has the right to use the Federal Supply Schedules without setting aside the procurement for veteran-owned small businesses. The GAO maintains that if 2 or more small veteran-owned firms can do the job, it should be set-aside. Continue reading »
Contractors Beware Of A Possible “Thanksgiving Surprise”
By McKenna Long & Aldridge LLP
Before leaving for a long Thanksgiving weekend, every contractor who has submitted a proposal for a government contract and is waiting for an agency announcement of contract award should take precautions to protect against a “Thanksgiving Surprise.”
Under the Competition In Contracting Act, a disappointed offeror has only ten calendar days after award or five calendar days after a required debriefing to file a bid protest at the Government Accountability Office (“GAO”) in order to obtain the statutory stay, which requires the agency to suspend contract performance. In recent public meetings, several government attorneys have acknowledged what has long been suspected; that procurement officials often look at the calendar to decide when to announce contract awards and provide debriefings. In particular, agencies may announce awards or provide debriefings on a Friday afternoon or before a federal holiday in order to discourage or even thwart bid protests. The Thanksgiving holiday provides a special opportunity for such agency actions. Continue reading »
DCAA Pulls Back the Curtains
DCAA auditors have been given the green light to access the internal audit reports of contractors. The Government Accountability Office (GAO) issued report GAO-12-88 in December 2011 stating that “DCAA’s access to and use of internal audit information from reports and workpapers is limited.” The GAO report recommended that “DCAA take steps to facilitate access to internal audits.”
As a result, the DCAA issued Memorandum for Regional Directors (MRD) 12-PPS-019(R) on August 14, 2012. The guidance sets forth criteria for accessing internal audit reports during audits of major and non-major contractors. For major contractors, the DCAA must establish “a central point of contact” to monitor the internal audit reports of the contractor and determine those that need to be reviewed. For non-major contractors, a formal tracking process and central point of contract is not mandatory. The revised audit procedures for DCAA auditors to follow have been updated and documented in DCAA Contract Audit Manual (CAM) Section 4-202. The criteria for major contractors is located in CAM 4-202c(1) and (2); and the criteria for non-major contractors is located in CAM 4-202c(3). It is important to note that for non-major contractors internal audit reports will be requested “when warranted by audit circumstances.”
Contractors should Continue reading »
DoD Contractors Perform Inherently Governmental Work
Almost everyone agrees that contractors should not be performing inherently governmental work (IGW). Disagreements about the definition of IGW aside, almost everyone also agrees that contractors are, in some cases, performing IGW. The problem is that DoD does not have a complete “inventory” of the services that have been outsourced. To rectify this, in 2008 Congress directed DoD to compile an annual inventory of services being performed by contractors. The initial government fiscal year 2009 inventory identified over 2,000 examples of contractors
GAO Report on DCAA Access to Company Internal Audit Reports
The Government Accountability Office (“GAO”) released a report on December 8, 2011 titled “DEFENSE CONTRACT AUDITS: Actions Needed to Improve DCAA’s Access to and Use of Defense Company Internal Audit Reports” (GAO-12-88). The GAO performed their study to assess whether defense contractors’ internal audit departments, and the reports they issue, should play a greater role in Defense Contract Audit Agency (“DCAA”) audits. The GAO study included seven (7) contractors, five (5) large and two (2) small. The GAO determined that approximately 46% of the internal audit reports of the companies related to work potentially being performed by the DCAA.
Some of the areas covered by the relevant internal audit reports are: Continue reading »
An Unexpected Model for Big Firms Looking to Bolster Computer Security
The State Department’s approach to cybersecurity is so innovative and effective that companies are clamoring to copy it. Although the GAO has identified a handful of issues with the State Department’s network security system, the initiative has been praised since the State Department has suffered several embarrassing information breaches in the recent past. For example, in 2010, the Department saw the release of thousands of sensitive diplomatic cables by WikiLeaks. This current step toward network security is expected to thwart such attacks. Continue reading
If at First You Don’t Succeed — Protest!
As was predicted by many industry analysts, including Aronson’s own Hope Lane, the relatively new found ability to protest task order awards combined with the austere procurement budgets of many agencies has resulted in more protests. 1,989 protests were filed with the Government Accountability Office (GAO) in fiscal year 2009 which represented a 20% increase from 2008. This was on top of a 17% increase in protests from 2007 to 2008.
Some commentators argue that the increase in protests has more to do with the increase in the number of procurements and is not attributable to a sense of desperation in the industry. However, as the government presumably starts to award fewer contracts disappointed bidders may not feel that they can just win the next one because there may not be a next one. Further, a contractor that does not win a seat on an agency’s multi-award IDIQ contracts may be effectively shut out of that market for years to come. Continue reading »
Protest Rules for Task Orders Change Again (Updated)
A General Accountability Office (GAO) protest decision dated June 14th, 2011 has reached a surprising conclusion regarding the ability of contractors to protest task order awards. Since the Federal Acquisition Streamlining Act of 1994, (FASA) task or delivery orders issued under multiple-award IDIQ contracts could only be protested if the order exceeded the scope, period or maximum value of the IDIQ contract. Thus there weren’t many protests which is one of the reasons IDIQ contracts became so popular with agencies. As long as the task order was in scope it was not protestable no matter how objectionable the award may have been. About three years ago FASA was changed to allow the award of any task or delivery order in excess of $10 million may be protested. GAO was given exclusive jurisdiction over these protests.
However, that law contained a “sunset” provision. The law was extended until 2016 for task or delivery orders issued by DoD but the authority Continue reading »
DCAA Takes More Scrutiny from Congress as Incurred Cost Audit Backlog Increases
Congressional scrutiny of the Defense Contract Audit Agency (DCAA) continues. For the last two+ years Congress and the GAO had DCAA under the microscope for its audit quality and its immense backlog of incurred cost audits. This trend continued on February 1, 2011, as the Senate Subcommittee on Contracting Oversight prodded the DCAA to finish more incurred cost audits and decrease its backlog. DCAA’s Director, Patrick Fitzgerald, stated that the backlog of incurred cost audits has quadrupled over the last 10 years, and it was noted that DCAA conducted $34 billion in incurred cost audits in FY 2010, while just two years earlier, DCAA conducted $138 billion in incurred cost audits in FY 2008. This decrease in the dollar amount of the audits completed, and resulting increase in the audit backlog, coincided with DCAA increasing their labor force by 500 new auditors over the last two years. Meanwhile contractors are waiting longer to close-out contracts and are unable to complete contract final billings for extended periods of time. Continue reading »
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- A Marriage of Inconvenience: GSA Schedule Contracts & The Contractor Code of Business Ethics & Conduct Clause
- Emerging Small Businesses: To Grow Your Business, You Must Plan For Growth
- Government Contracting: Look Before You Leap!
- GSA Schedules – Strategies for Success
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- Pay on Display – Understanding the Executive Compensation and Subcontractor Data Reporting Requirements & Ramifications
- The GSA Schedule: Your Ticket to the Federal Market (May 2010)
- The New FAR Codes of Conduct and Compliance Program Provisions
- The Seven Deadly Sins (of contract compliance)