Compliance Roundup – What Government Contractors Should Know – Compliance Updates to be aware of now and through 2018

Various federal agencies during the first half of 2018 have issued final and proposed rules or agency direction related to regulatory compliance requirements associated with U.S. federal government contracts. Specifically, the Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), the General Services Administration (GSA), and the Office of Federal Procurement Policy (OFPP) have all issued specific Agency rules pertaining to performance and compliance under government contracts.

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12 Essentials to a Successful DCMA Contractor Purchasing System Review

12 Essentials to a Successful DCMA Contractor Purchasing System Review
By Stephen ‘Chase’ Kunk, J.D. – Vice President, Contracts & Procurement

Chase Kunk of Capital Edge Consulting has considerable industry and consulting experience in supporting organizations through the CPSR process. His approach to purchasing system compliance has always been “one size does not fit all;” rather, make the public laws and regulatory requirements work for your business model and processes. This practical approach has become the cornerstone of his reputation and yields positive results for contractors.

With the benefit of his experience, he has identified 12 purchasing system essentials that every company must consider as they evaluate their system and prepare for their next CPSR. 

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Common Preparation Pitfalls with the Final Indirect Cost Rate Proposal

Common Preparation Pitfalls with the Final Indirect Cost Rate Proposal

Each year, Capital Edge works with numerous companies either developing, assisting with, or reviewing their final indirect cost rate proposals. The requirement to submit a final indirect cost rate proposal, more commonly referred to as the “ Incurred Cost Proposal or Incurred Cost Submission (ICS) is contained in FAR clause 52.216-7(d)(2)(i) – Allowable Cost and Payment, which states, “The contractor shall submit an adequate final indirect cost rate proposal to the contracting officer (or cognizant federal agency official) and auditor within the 6-month period following the expiration of each of its fiscal years.” Are you ready? Capital Edge has identified the major preparation pitfalls contractors face when developing their annual Incurred Cost Submission (ICS).

Get your copy of Common Preparation Pitfalls with the Final Indirect Cost Rate Proposal- Download below!

 

Getting a late start.  Depending on the size of the organization, incurred cost submissions may take a long time to prepare. If the submission is drafted in-house, the finance or accounting staff responsible with preparation have other daily and monthly responsibilities which require their attention in addition to this submission. Plan ahead and get an early start! Extra preparation time means more time to research issues or resolve challenges which may arise. Remember, the ICS requires input from various groups within an organization and is not a “pure” accounting and finance responsibility.

Using a format which does not reflect the FAR requirements or auditor expectations.  FAR 52.216-7(d)(2)(iii) specifically identifies all the information required. In addition, DCAA regularly updates their Incurred Cost Electronic (ICE) Model, as well as the Adequacy Checklist, and these items should be reviewed as part of the preparation process to ensure the submission will meet auditor expectations. Keep in mind that utilizing the “ICE” model is not required, but the content of the individual schedules are required by 52.216-7. The ICE model has a number of limitations related to the number of intermediate and final overhead pools that the model can support, so it is imperative that you understand whether your business may be too complex for ICE. We don’t like the model, but it may work well for you.

Not having current and accurate contract briefs.  Contract briefs identify items such as contract type, indirect rate caps, funding ceilings, or other contractual limitations that need to be accounted for in the submission. Briefs should be updated as contract modifications are issued which change funding, add CLINs, modify contract terms and conditions, etc.

Inaccurate identification of contract types.  Many contractors struggle with having full, accurate, and complete contract lists with accurate contract types. Contracts may be entered into the accounting system and identified with a contract type other than what the contract specifies due to accounting system limitations or unique contract requirements. Not having an accurate identification of contract type for each contract or task can cause numerous challenges when preparing the ICS, including the misidentification of contracts in the actual submission.

Incorrect contract billings.  Contractors sometimes realize that a contract or task has been billed incorrectly. For example, when a cost-reimbursable contract is billed as a time-and-material contract, or cost reimbursement CLINs within FFP contracts are not appropriately identified. These types of errors cause major headaches when preparing the ICS and can lead to large over/under billings and/or additional audits. Properly identifying the contract type in a contract billing brief, contracts list, and the accounting system is essential. Most important, getting an early start provides adequate time to resolve these issues rather than trying to make these decisions at the last minute.

Identifying and removing unallowable costs.  Unallowable costs need to be excluded from claimed costs in the ICS and that is, in fact, the intent of the certification ensuring you have excluded all expressly unallowable costs. Explanatory notes should be utilized to reference the specific FAR clause which is applicable (31.205 – Selected Costs) and special care should be given to review accounts considered high-risk for inclusion of expressly unallowable costs that would be subject to Penalties under the provisions of FAR 42.709 Penalties for Unallowable Cost.

Involving key players too late in the process.  To provide timely information required for submission, it is important to involve key players early in the preparation process. For example, contracts/subcontracts personnel are routinely tasked with providing information on subcontract agreements very late in the preparation process, which oftentimes leaves contractors scrambling to finalize the proposal.

Performing a thorough review.  Each ICS should receive a thorough review ideally by individuals not directly involved in the detailed preparation. This review should include checking all formulas, links, ensuring the costs captured reconcile to the trial balance, and that the final submission complies with DCAA’s adequacy checklist.

Maintaining supporting documentation and work papers.  Preparation of the Incurred Cost Submission often requires input from various personnel across a wide range of functional areas. Employee turnover and the lapse of time between submission and audit can often lead to gaps in information and historical knowledge required to support claimed costs during an audit. Whenever possible, we recommend creating a repository for work papers and supporting documentation to memorialize knowledge gained during preparation of the submission and to assist in meeting the requirements of FAR 31.201-2(d) Determining Allowability.

For many contractors, the deadline for the next Incurred Cost Proposal is June 30th. We recommend getting started soon, to be sure that you have adequate time to prepare the submission. Capital Edge has a wealth of resources available to support contractors with preparation and review of their ICS. Whether your organization is large, small, or somewhere in between, we can help take the stress out of this requirement.

FY 2018 NDAA – House Section 874 (Engrossed)

The House version of the National Defense Authorization Act (NDAA) for fiscal year 2018 contains a provision (Section 874) to repeal contractors’ ability to utilize commercial auditors for purposes of auditing their annual incurred cost proposals.  Specifically, Section 874 of the 2018 NDAA would strike in its entirety subsection (f) of Section 820 of the 2017 NDAA previously passed by Congress and signed by the President.

Get your copy of FY 2018 NDAA – House Section 874: Download below!

FY 2018 NDAA – Title VIII — Acquisition Policy, Acquisition Management, and Related Matters

December 12, 2017 President Trump signed the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2018. This signed legislation contains several notable provisions to introduce new or modify existing U.S. federal government contracting compliance requirements. Summarized below are some of the pertinent compliance requirements anticipated for change in the near term:

Performance of Incurred Cost Audits (SEC. 803) – Directs the Department of Defense (DoD) to use qualified private auditors to perform a sufficient number of incurred cost audits to eliminate by October 1, 2020 any backlog of such audits of the Defense Contract Audit Agency (DCAA), and complete audits no later than one year from receipt of a qualified incurred cost proposal.

Get your copy of FY 2018 NDAA – Title VIII — Acquisition Policy, Acquisition Management, and Related Matters: Download below!

FY 2018 NDAA Change to Procurement Thresholds

On December 12, 2017, the 2018 National Defense Authorization Act (NDAA) was signed into law by President Trump. Title VIII of the NDAA contains many provisions designed to reduce burdensome regulation and improve the procurement process. Section 805, 806, and 811 would increase the Micro-Purchase Threshold (MPT) from $3,500 to $10,000, Simplified Acquisition Threshold (SAT) from $150,000 to $250,000, and Truthful Cost or Pricing Data (aka “TINA”) threshold from $750,000 to $2,000,000. The Cost Accounting Standards (CAS) threshold for contract awards would also increase to $2,000,000 since it is tied to the TINA threshold…..

 

Read more: get your copy of FY 2018 NDAA Change to Procurement Thresholds: Download below!

Q1: Executive Actions and Regulatory Compliance Requirements Update

Executive Actions and Regulatory Compliance Requirements Update for Q1 2017

Craig Stetson, Managing Director, Capital Edge Consulting, Inc.

The government has issued several rules (final, interim, and proposed) within the last few months, related to a variety of regulatory compliance requirements associated with U.S. federal government contracts. The Federal Acquisition Regulation Council (FAR Council) – defined to include the Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), and the General Services Administration (GSA), issued the majority of these rules. The Department of Homeland Security (DHS), the Small Business Administration (SBA), and the DoD issued rules as well. Lastly, the new administration has issued executive actions that may directly affect government contractors.

Further discussion of recent and noteworthy government contract compliance requirements and guidance items are summarized below.

Get your copy of Q1 Quarterly Updates below!

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CPSR 360: Part Two–Newsworthy CPSR Updates

By: Chase Kunk, Vice President, Contracts & Procurement and Michael Carter, Senior Consultant

In December 2016, we released CPSR 360: Part One – Insights from Our Recent CPSR Experiences, which outlined several high-risk procurement file documentation areas we continue to see are a challenge for contractors. As expected, DCMA CPSR teams have been detecting these same documentation noncompliances in their reviews, capturing these deficiencies in CPSR Reports and ultimately triggering DCMA-issued corrective action requests to contractors.

In Part Two, we are exploring some noteworthy changes out of DCMA’s CPSR Group. These changes have been implemented throughout calendar year 2016, with some being revisited and refined by DCMA, and affect all contractors who may be subject to a CPSR.

Get your copy of Part Two –Newsworthy CPSR Updates below!

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CPSR 360: Part One of a Two-Part Series 

Part One – Insights from Our Recent CPSR Experiences

Part Two (Coming Soon!) – Other Newsworthy CPSR Updates

By: Chase Kunk, Vice President, Contracts & Procurement and Michael Carter, Senior Consultant

The Defense Contract Management Agency’s (DCMA) Contractor Purchasing System Review (CPSR) Group continues to remain highly active in their ongoing pursuit of evaluating the efficiency and effectiveness of contractors’ purchasing practices, and compliance with applicable laws, regulations and contract requirements. According to DCMA, the CPSR Group scheduled 134 CPSRs in the government fiscal year 2015 (ending September 30) and completed 121.

Get your copy of Part One – Insights from Our Recent CPSR Experiences below!

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10 Regulatory Compliance and DCAA Guidance Updates to be Aware of Now and Heading into 2017

What Government Contractors Should Know – 10 Regulatory Compliance and DCAA Guidance Updates to be Aware of Now and Heading into 2017

Craig Stetson, Managing Director, Capital Edge Consulting, Inc.

The government has been busy in 2016 issuing final and proposed rules related to an array of regulatory compliance requirements associated with U.S. federal government contracts. Specifically, the Federal Acquisition Regulation Council (FAR Council) – defined to include the Department of Defense (DoD), the National Aeronautics and Space Administration (NASA), and the General Services Administration (GSA), plus, the Department of Labor (DOL), the DoD, the GSA, and the Small Business Administration (SBA) all have issued specific Agency rules pertaining to performance and compliance under government contracts.

Additionally, the Defense Contract Audit Agency (DCAA) has issued recent internal guidance in 2016 that contractors should be knowledgeable of as well.

Further discussion of 10 recent and noteworthy government contract compliance requirements and guidance items are summarized in the Thought Leadership Piece-download below

Get your copy of 10 Regulatory Compliance and DCAA Guidance Updates to be Aware of Now and Heading into 2017 below!

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