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5 Ways to Prep for the Audit While Preparing the Incurred Cost Proposal

5 Ways to Prep for the Audit While Preparing the Incurred Cost Proposal

Jennifer Rettelle, Director of Operations | Capital Edge Consulting, Inc.

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 for your incurred cost audit? One of the major historical audit challenges is the delay, sometimes many years, between timely submission under FAR 52.216-7 and the actual audit. DCAA is now required to audit adequate final indirect cost rate proposals within one year, but only time will tell if they can meet that lofty goal. To help eliminate the future audit risk, Capital Edge has identified five ways to start preparing for the audit, while preparing the current annual incurred cost submission.

Document, Document, Document!

This point cannot be stressed enough. The backlog in incurred cost audits only further solidifies the likelihood that the people preparing the Incurred Cost Submission may not be available to support an audit or the data needed to support the audit is difficult to find. The likelihood of an ICS audit year occurring years after submission has historically been high. Be sure to document as much as possible in a way that someone unfamiliar with your organization will understand since you may be long gone by the time an auditor shows up.

  • While preparing the current ICS or in the course of performing your regular duties, you may receive information which impacts future incurred cost submissions.

For example:

  • Do you have new intermediate cost pools this year (i.e. new fringe, IT, facilities, etc.)?
  • Did the basis for the allocation of any of your cost pools change?
  • Are you aware of potential changes to home office allocations which could impact the current fiscal year or future years?
  • Is your company still able to track all data metrics needed for allocation (i.e. number of user licenses, headcount, square footage, etc.)?

We recommend keeping a list of these items so that the preparer of the next incurred cost submission has a head start. Maintaining such a record can also expedite the timeline for incorporating these changes into current or future submissions and provide some, if not all, of the information needed to document the change(s) in preparation for an audit. In addition, these changes may likely be considered a change in cost accounting practice, which has other compliance implications for CAS covered contracts that we won’t delve into here.

  • Did the purpose of a specific account change from the prior year? Are the costs previously accumulated in one account now captured in multiple accounts? Did the purpose of a particular cost center or department change? Be sure to keep clear notes on these changes year after year, as they may prove invaluable during an audit.
  • Save yourself the headache of scrambling to answer an auditor’s questions and be sure to keep all files used in the preparation of the ICS in a storage repository that is shared with multiple people and is routinely backed up. Keep the file structure simple and organized so that someone who is less familiar with the process can find documentation needed to support an audit.
  • Keep the original source data, including the trial balance, project ledgers, 941s, Statement of Indirect Expenses, contract list, invoices, and all other information used to populate and calculate the final rates in the ICS. Having a single and organized place to find this data will save time, effort, and sanity when the auditor is asking questions.
  • Were any assumptions, adjustments, or other information used to prepare the ICS? Be sure to document all of these including any applicable rationale that was used. This information can go a long way to support costs that are questioned by an auditor.

Spread the Knowledge Wealth

We recommend that contractors are careful to spread the wealth of knowledge of the inner workings of their Incurred Cost Submission and preparation methodology with others in the finance or accounting department. Such steps will reduce the risk of substantial knowledge loss in the event employees with major roles in the ICS preparation process move on to other positions before the audit occurs.

Prepare all the Supplemental Schedules

Although supplemental schedules are not required to be included with the ICS for adequacy determination purposes, they will likely be some of the first items requested at the beginning of an audit. The process to complete these schedules is more efficient when completed as part of the original ICS preparation and can help identify items which may be questioned by an auditor.

In addition, some of the supplemental schedules have other valuable uses to the company and to the ICS preparation process. For example, the set of Supplement Schedule A’s can be used to evaluate the year after year change in costs by account.

Large fluctuations in costs identified in these schedules can indicate a preparation error in the ICS or simply changes in company spending. These schedules can be used by management to see what is driving the change in rates for a deeper understanding of their business and they can also be used to identify areas where DCAA may focus their audits, especially if certain high-risk accounts such as travel, executive compensation, legal, consulting, etc. have increased significantly year after year.

Keep a “Working Copy” and a “Final Submission” version of the ICS

We recommend maintaining two copies of the ICS when it is completed:

  • The “Working Copy” includes all links to supporting schedules and workpapers so that each value on every schedule is easily traceable. The details in the working copy will significantly reduce the time spent answering questions during an audit and will also help those new to preparing an ICS understand the source of the amounts claimed and how the rates are calculated.
  • The “Final Submission” version contains only the schedules required for submission and contains no supporting schedules or links to supporting schedules or source data. This is the file which is submitted to the government.

These two files should be marked as FINAL and WORKING COPY in the file name and stored in a properly labeled folder.

Understand Audit Expectations

Understanding the expectations of your auditor will help facilitate a working relationship during the course of the audit. An auditor is likely to expect a turnaround time of three days or less for documentation and answers to questions. It is critical to set a clear understanding with DCAA of when you will be able to provide data and set yourself up for success by under-promising and over-delivering. Additionally, be sure to take a look at the supporting data that DCAA typically reviews and be sure it can be available upon audit initiation.

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.

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 for your incurred cost audit? One of the major historical audit challenges is the delay, sometimes many years, between timely submission under FAR 52.216-7 and the actual audit. DCAA is now required to audit adequate final indirect cost rate proposals within one year, but only time will tell if they can meet that lofty goal. To help eliminate the future audit risk, Capital Edge has identified five ways to start preparing for the audit, while preparing the current annual incurred cost submission.

Download your copy of 5 Ways to Prep for the Audit While Preparing the Incurred Cost Proposal below:

 

GAO Release: Recommendation to monitor and ensure contractor business system reviews are conducted in a timely fashion.

CONTRACTOR BUSINESS SYSTEMS: DOD Needs Better Information to Monitor and Assess Review Process

GAO-19-212: Published: Feb 7, 2019. Publicly Released: Feb 7, 2019.

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for Congress. Often called the “congressional watchdog,” GAO examines how taxpayer dollars are spent and provides Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently.

We have written a few times recently on the matter of government contractor business systems.  The government’s (DCAA and DCMA) review of the six contractor business systems is expected to rise significantly in the near term based on information we have received from the DCAA and DCMA.  This GAO report released today adds further reality to this renewed focus on contractor business system reviews.

Contractors are encouraged to take the time and make the investment now to perform proper due diligence to ready themselves for these government reviews.

Fast Facts

The Department of Defense uses data from contractors’ business systems—e.g., accounting or purchasing systems—to guard against fraud, waste, and abuse in DOD contracts. For example, reviewing data from a contractor’s accounting system can help keep the contractor from overcharging.

DOD must review contractors’ business systems to ensure that the data from them can be used. We’ve previously found that it was years behind on some of these reviews.

DOD has an ambitious plan to catch up on these reviews in 3 years but has no way to measure its progress. We recommended that DOD monitor and assess whether it’s completing these reviews as planned.

GAO Findings

Since 2011, the Department of Defense (DOD) has implemented several changes to its processes for reviewing contractor business systems—which include systems such as accounting, estimating, and purchasing. Among other changes, DOD clarified the roles and responsibilities of the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA)—the two agencies that are responsible for conducting the reviews; clarified timeframes for business system reviews and established criteria for business systems; and withheld payments from contractors that were found to have significant deficiencies in their business systems.

DOD does not have a mechanism to monitor and ensure that these reviews are being conducted in a timely manner. For its part, DCAA has conducted few business system audits since 2013, as it focused its efforts on other types of audits. DCAA plans to significantly increase the number of business system audits over the next 4 years, but its success in doing so depends on its ability to shift resources from other audits; to use public accounting firms to conduct other, non-business system audits; and DCAA staff’s ability to execute new audit plans in a timely manner.

GAO Chart Businss System Audit

DCMA relies on the three offices responsible for conducting DCMA-led reviews to manage the reviews, but DCMA does not formally monitor whether these reviews are being conducted consistent with policy nor does it monitor DCAA’s efforts to complete the audits for which it is responsible. DCMA is ultimately responsible for approving a contractor’s business systems. DCMA currently lacks a mechanism based on relevant and reliable information, such as the number of reviews that are outstanding and the resources available to conduct such reviews, to ensure reviews are being completed in a timely fashion. Such information could help inform more strategic oversight on whether the current review process is achieving its intended results, or whether additional changes to the timing of or criteria for conducting reviews are needed.

Why GAO Did This Study

Contractor business systems produce critical data that contracting officers use to help negotiate and manage defense contracts. These systems and their related internal controls act as important safeguards against fraud, waste, and abuse of federal funding. Federal and defense acquisition regulations and DOD policies require that DOD take steps to review the adequacy of certain business systems, but GAO and other oversight entities have raised questions about the sufficiency and consistency of DOD’s review process.

The National Defense Authorization Act for Fiscal Year 2018 contained a provision for GAO to evaluate how DOD implemented legislation intended to improve its business system review process. Among other things, this report examines (1) the changes DOD made to its review process and (2) the extent to which DOD is ensuring timely business system reviews.

GAO analyzed DOD acquisition regulations, policies, and procedures for conducting contractor business system reviews and analyzed data on reviews conducted between fiscal years 2013 and 2018.

Read more on this 

 

DCAA Audits of Government Contractor Business Systems

DCAA Audits of Government Contractor Business Systems – Key Risk Mitigation Strategies to Promote an Adequacy Determination

Craig Stetson, Partner | Capital Edge Consulting, Inc.

The Defense Contract Audit Agency (DCAA) recently indicated as a 2019 agency initiative a significant increase in their 2019 audit efforts around contractor business systems. The DCAA’s renewed focus on performing contractor business system audits, is largely the result of the DCAA’s recent reduction in its prior and long-standing backlog of incurred cost proposal audits. The DCAA is responsible for oversight of three of the six contractor business systems, including accounting, estimating, and material management and accounting. Under this 2019 initiative, the accounting system will be the primary focus with a planned audit activity of nearly 1,000 audits. Estimating and material management and accounting system audits also are planned to increase significantly from the 2018 activity, however, nothing near the planned accounting system amount noted prior.

The DCAA’s 2019 plan to significantly increase their audits of contractor business systems appears aggressive (considering the level of effort required to perform these audits and the level of available DCAA resources). Contractors should take seriously potential or pending business system audits by the DCAA as the consequences for a determination of inadequacy by the government may be significant and include – i) monetary withholds pursuant to DFARS clause 252.242-7005, ii) loss or delay of contract awards, iii) reduced proposal evaluation scores in accordance with solicitation evaluation criteria (for example, Request for Proposal Section M), iv) increased government oversight across multiple fronts, and v) government CPARS (Contractor Performance Assessment Reporting System) recording of detrimental past performance ratings.

The following five key strategies are critical risk mitigation measures to enhance the likelihood of the government determining contractors’ business systems adequate and reduce contractors’ related compliance risks.

 

1.Knowledge of Business System Requirements and DCAA Audit Objectives (Pre-audit phase)

The DCAA conducts business system audits utilizing specific standard audit programs and detailed audit guidance and procedures incorporated in their internal DCAA Contract Audit Manual (DCAM). The three business system specific standard audit programs and the DCAM are available for review on the DCAA website (www.dcaa.mil). The DCAA audit objectives, guidance, and corresponding procedures were developed for the purpose of a DCAA evaluation and corresponding audit opinion of a contractor’s compliance with the specific business system adequacy criteria incorporated in each of the applicable DFARS business system clauses – accounting (252.242-7006), estimating (252.215-7002), and material management and accounting (252.242-7004). A clean audit opinion will simply designate the contractor’s business system as adequate.

Contractors that do not perform under Department of Defense (DoD) contracts or do perform under DoD contracts not subject to the DFARS clauses noted above, are not contractually required to comply with the specific DFARS business system adequacy criteria. However, for business system audit purposes, the DCAA will nevertheless use these adequacy criteria as the baseline for their business system audit scope, objectives, and procedures. Simply stated, contractors are required to demonstrate and maintain compliance with the adequacy criteria and requirements of these clauses – whether or not the subject clauses actually are incorporated in contracts.

It is very important to understand the applicable audit scope, objectives and procedures that the DCAA will use to conduct their audit. Further, it is equally or more important for contractors to clearly identify and articulate their specific key internal controls that satisfy the corresponding audit objectives and procedures. Understanding the overall audit expectations and responsibilities, as well as existing internal business process capabilities will greatly assist with critical audit preparation, identification of required functional personnel, and gathering of applicable supporting information and documentation. Further, an adequate and working level understanding of the audit process should enhance its efficiency and effectiveness, while mitigating contractors’ compliance risk, potential misunderstandings with the DCAA and incorrect or inaccurate audit conclusions.

2. Due Diligence and Self-Assessment (Pre-audit phase)

Contractors are strongly encouraged to perform due diligence procedures in advance of a DCAA business system audit. The due diligence is commonly performed as an audit readiness measure and in the form of a business system self-assessment. This frequently is the most important aspect of the entire audit.

A meaningful self-assessment (mock audit) of a contractor’s business system entails a detailed analysis of the DCAA audit objectives and related business system adequacy criteria compared to the contractor’s current business system structure and capabilities. This two-phase (Phase I – adequacy of business system design; Phase II – business system operating effectiveness) gap analysis is critical for contractors to understand and identify potential compliance risks and areas of audit findings due to deficiencies noted related to the adequacy of the business system design and/or its operating effectiveness. A risk assessment approach may also be used where known elements of potential compliance risk may receive additional focus during the self-assessment.

The self-assessment approach and procedures should closely align with the actual DCAA audit. Contractors should utilize the DCAA audit program as a starting point for purposes of identifying required written documentation and existing key internal controls that will be required during the course of the audit. Another useful tool during the self-assessment phase are the business system specific internal control matrices. The DCAA created these matrices years ago and they provide a thorough analysis of the business system control objectives and anticipated DCAA audit procedures. These matrices are no longer posted on the DCAA’s website; however, are still around and are very useful for purposes of mapping written policy and procedure documentation and internal controls to the corresponding business system requirements and related control objectives. The overall self-assessment process should be clearly documented with i) an audit trail of the written internal control and business process mappings to the business system requirements (Phase I); and, ii) the scope and results of detailed transaction test plans or file reviews (Phase II). Deficiencies noted during the self-assessment should be reported to management and corrected and required and missing written policy and procedure documentation developed to demonstrate to the government that the contractor maintains an effective monitoring process as required in all the business systems.

Contractors should invest in the resources required to adequately perform the self-assessment and use the completed and documented self-assessment for business system demonstration purposes to the government.

3. Business System Demonstration (Audit planning and risk assessment phase)

The business system demonstration phase is another critical element of the overall audit process as it provides contractors an opportunity to communicate to the government the adequacy and operating effectiveness of their business systems. A well conducted demonstration should leave the government with a sense of confidence regarding a contractor’s overall state of compliance around the business system. This, in turn, may result in reduced audit scope or the government’s decision not to perform the audit at all, if the government determines the contractor to be low risk from an audit perspective.

During the demonstration, contractors should present a thorough overview of the applicable business system capabilities, relevant written policy and procedure documentation, key internal controls and business process flows. Furthermore, contractors should demonstrate effective and ongoing monitoring of programs as well as employee training requirements and initiatives.

Effective documents used during the demonstration should include:

  • An overview of the relevant business system written documentation; including policies, procedures, and process flows
  • A complete mapping of the contractor’s written internal controls and business processes to the DFARS business system clause requirements and the corresponding DCAA standard audit program (frequently included in and presented through a well documented internal control matrix)
  • Evidence of ongoing monitoring activities (transaction testing or file reviews) and corresponding corrective actions and reporting to management, as applicable

Contractors should invest in the time required to gather the critical documents to be used during the business system demonstration and allow adequate preparation to enhance the likelihood of an effective outcome.

4. Documentation and Access to Records (Audit fieldwork phase)

Sufficient documentation is the single most important factor for contractors to achieve an adequate business system determination from the government. Sufficient documentation comes in two forms – i) written internal controls and business processes (policies and procedures) and ii) audit evidence related to transaction testing or file reviews.

Use of electronic formats of original documents for record keeping and audit purposes is an acceptable procedure provided certain document imaging requirements are adhered to in accordance with Federal Acquisition Regulation (FAR) Part 4.

Contractors should maintain a complete list of requested and provided documents throughout the audit. This list should also describe, in adequate detail, the nature and content of what was requested and provided, who provided it, and when. Likely, this list would be maintained by the contractor’s designated internal point of contact. This procedure is important for obvious reasons, however, should during the course of the audit, the DCAA challenge the sufficiency or completeness of the documentation provided it will be helpful to review this list to demonstrate to the DCAA that the documentation was provided and is adequate. Additionally, a complete list of interviews or discussions between the government and contractor personnel should be maintained – again, likely by the internal point of contact.

Contractors should ensure during the due diligence and self-assessment phase that sufficient documentation exists to support an audit. Simple verbal acknowledgement during an audit that a procedure was performed, for example, likely will not be deemed as adequate to the DCAA and may result in adverse audit conclusions or noted deficiencies in the business system.

5. Communication Protocols (Pre-audit, audit, and post-audit phases)

A DCAA business system audit is frequently intense and of an extended duration. These audits may be active for a few months to more than one year. Effective communication is critical during these audits to minimize misunderstandings and inaccurate audit conclusions.

Unfavorable or inaccurate audit conclusions are frequently the result of poor communication between the DCAA and the contractor. To reduce the risk of information being  “lost in translation”, it is highly recommended that communication procedures and schedules (at least in a tentative sense) be developed where both parties can actively and effectively communicate audit objectives, challenges, progress and results. Participation in these communications and status briefings should be agreed upon up front and adhered to by both parties. The DCAA is required to conduct an entrance conference and are also encouraged to provide interim and exit conferences pursuant to their audit guidance (DCAM 4-300). If effective communication protocols are enacted, the likelihood of audit “surprise findings” should be greatly reduced or become nonexistent.

  • Entrance Conference – Contractors should insist on a thorough entrance conference to obtain an understanding of the audit objectives, scope and procedures; anticipated timeline; internal resources required; types of data and information required; and any foreseen challenges known at that time e.g., unavailable personnel, remote site access or visits, availability and retrieval of records, etc. The audit scope and focus areas should be clearly identified with discrete elements or items for which the DCAA will have access and the contractor responsibility to support.
  • Interim Conferences – Interim conferences are also very important as they provide an exchange of information between the DCAA and the contractor regarding progress of the audit, problems or challenges encountered, findings and issues, open items, and remaining effort and completion requirements. The DCAA should provide initial audit findings and contractors should be privy to the DCAA’s rationale to allow internal assessment as to the merit of the findings.
  • Exit Conference – Contractors should insist on a thorough exit conference to discuss and understand all audit findings. Contractor management and applicable functional personnel and the DCAA supervisor should attend the exit conference. Prior to the meeting, contractors should carefully review the draft report and seek clarifications or corrections as needed.

To reduce the risk of misunderstanding, misinterpretation, and memory loss it is very important to document all formal communications, status meetings, conferences, etc. This documentation should be developed by a single source within the contractor and summarized in a meeting minutes format and subsequently provided to all in attendance.

Download your copy of Key Risk Mitigation Strategies to Promote an Adequacy Determination below:

 

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

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

Craig Stetson, Partner with Capital Edge Consulting, Inc.

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.

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

  1. Cost Accounting Standards Exemption for Acquisition of Commercial Items

Synopsis – The OFPP, Cost Accounting Standards Board, issued a final rule July 17, 2018, effective August 16, 2018, clarifying that all contracts for the acquisition of commercial items are exempt from coverage under the Cost Accounting Standards (CAS). The final rule seeks to harmonize and eliminate inconsistencies regarding the specific types of commercial item contracts referenced in Federal Acquisition Regulation (FAR) 12.207 and 48 CFR 9903.201-1(b)(6). Key provisions of this final rule include:

  • Reference to include as commercial item time-and-material and labor-hour contracts in accordance with previous regulatory revisions;
  • Reference to include as commercial item certain firm fixed-price incentive (performance or delivery) contracts in accordance with previous regulatory provisions;
  • Acknowledgement, in response to public comments received regarding CAS applicability under hybrid and indefinite-delivery-indefinite-quantity type contracts, albeit outside the scope of this final rule-making process, by the CAS Board its intention to further review these contract types to determine if clarifying language is required for implementation into the CAS rules – (it’s about time).

Takeaway – Contractors should identify now outstanding proposals in response to solicitations received regarding acquisition of commercial items under any contract type meeting the FAR 12.207 commercial item definition. Solicitations containing any CAS clauses should be identified and addressed with the issuer of the solicitation for removal. Existing contracts awarded prior to August 16, 2018 will retain their CAS-coverage status at the time of initial award. Contracts awarded on or after August 16, 2018 are exempt.

  1. Cost Accounting Standards and Certified Cost or Pricing Data Thresholds

Synopsis – The DoD, GSA, and NASA separately issued agency class deviations on May 31, 2018, May 3, 2018, and July 1, 2018, respectively, directing agency contracting officers to use the $2,000,000 threshold as mandated by Section 811 of the National Defense Authorization Act (NDAA) for fiscal year 2018, in all applicable contracts awarded on or after July 1, 2018. Key provisions of these agency class deviations include:

  • Prime contracts awarded prior to July 1, 2018, remain at the prior threshold of $750,000;
  • Subcontracts awarded on or after July 1, 2018 under prime contracts awarded prior to July 1, 2018, remain at $750,000 however, the prime contractor must request from the government a contract modification to incorporate the FAR clauses that deal with subcontractor certified cost or pricing data requirements (52.215-12 or 52.215-13);
  • The $2,000,000 threshold also applies for CAS-coverage purposes, as pursuant to the OFPP June 14, 2007, final rule. The thresholds for both CAS-coverage and submission of certified cost or pricing data are the same.

Takeaway – Contractors should assess now potential purchasing system implications and subcontractor flow-down requirements resulting from the revised $2,000,000 threshold. When appropriate, prime contractors may seek contract modifications (contracts awarded prior to July 1, 2018) to incorporate the increased threshold applicable to future subcontract awards.

  1. Definition of Adequate Price Competition

Synopsis – The DoD, GSA, and NASA issued a proposed rule June 12, 2018, to amend the FAR at 15.403-1(c)(1) to add a separate standard redefining adequate price competition. The proposed revised definition, arising from Section 822 of the NDAA for fiscal year 2017, would apply to the DoD, GSA, and Coast Guard. Public comments were due August 13, 2018. Key provisions of this proposed rule include:

  • Elimination of the longstanding reasonable expectation standard;
  • For adequacy purposes – i.e., was there adequate price competition and thus, an exemption to submission of certified cost or pricing data? – at least two responsive and viable bids must be received;
  • If at least two responsive and viable bids are not received the competition is deemed not adequate and requires submission of certified cost or pricing data.

Takeaway – Contractors should be aware and ready to provide certified cost data related to price proposals that traditionally would be exempt in a public solicitation situation. That is, an additional layer of price and cost diligence may be prudent to avoid surprises when a specific contractor ends up as the sole offeror. Similar procedures may be necessary when analyzing subcontractor price proposals received to avoid potential downstream purchasing system deficiencies.

  1. Voluntary Disclosure of Post-Award Defective Pricing

Synopsis – The DoD issued a final rule May 4, 2018, effective same date, to amend the Defense Federal Acquisition Regulation Supplement (DFARS) at 215.407-1(c)(i) to eliminate the requirement that all contractor voluntary defective pricing disclosures are subject to audit. Rather, in the interests of promoting contractor voluntary disclosure, contracting officers now have discretion to seek a Defense Contract Audit Agency (DCAA) audit. Key provisions of this final rule include:

  • Requirement for contracting officers to discuss with the DCAA contractor voluntary defective pricing disclosures;
  • DCAA discussions shall focus on the completeness and accuracy of the contractor voluntary disclosure as well as the potential impact on other contracts, task, or delivery orders, and outstanding price proposals;
  • DCAA discussions may be used to determine the DCAA’s involvement including, a limited-scope audit, a full-scope audit, or technical assistance.

Takeaway – Contractors should assess and coordinate with legal counsel the nature of potential voluntary defective pricing matters. Attention should be focused on the type of cost(s) subject to the possible defective pricing disclosure as well as the relevant fact pattern(s) associated with the initial pricing.

Consideration of existing contractor – government relationships should be addressed to assess the likelihood of a favorable outcome.

  1. Miscellany

Synopsis – The DoD issued two class deviations during the second quarter – both effective on the date issued – and the OFPP revised the executive compensation limits:

  • Micro-purchase and Simplified Acquisition Thresholds (April 13, 2018)
    • Micro-purchase – generally $5,000; exceptions apply to limited situations;
    • Simplified acquisition – generally $250,000; exceptions apply to limited situations.
  • Contract close-outs (May 4, 2018)
    • Accelerated close-out of selected completed contracts entered into at least 17 years prior to the current fiscal year and not otherwise subject to traditional reconciliation procedures.
  • Executive compensation limits
    • Calendar year 2016 – $500,000
    • Calendar year 2017 – $512,000
    • Calendar year 2018 – $525,000

 

Download your copy of Compliance Roundup below

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2018 Government Contract Accounting and Regulatory Update October 17-18, 2018

The Capital Edge Team invites you to the 2 for 1 Registration – 2018 Government Contract Accounting and Regulatory Update October 17-18. Register online and bring a colleague free. Reference promo code 2FOR1ARU2018. 

October 17-18, 2018
The Westin Washington D.C. City Center
Washington, DC
$495 for two registrations!!!!
*Register now and bring a colleague at no charge. Reference promo code 2FOR1ARU2018. 

A professional seminar on government contractor finance management, contracting accounting and audit issue year in review and outlook.

This 1.5-day conference will address the emerging issues related to government contract finance, accounting, compliance, and regulations.  You will have the opportunity to hear from leading financial executives, Defense Contract Audit Agency representatives, Defense Contract Management Agency representatives, practicing attorneys and consultants. Topics will include:

  • Cost, accounting, pricing, estimate audit and regulatory issues
  • Update on Section 809 Panel related to CAS
  • Cybersecurity regulations – current state and how companies address the compliance strategies
  • M&A and due diligence
  • Government contract ERP issues
  • Legal issues and case law updates (CAS, cost allowability, statute of limitation, and more)
  • DCMA review update
  • Third party audits
  • Federal Supply Schedule (GSA Schedule) update
  • DCAA Matters (presented by representatives from DCAA HQ)
  • and much more.

Who Should Attend?
This seminar is intended for professionals from large, medium and small government contractors, financial and consulting organizations, federal agencies and non-profits:

  • CFOs/CEOs/Presidents
  • VPs of Finance, Accounting, Compliance
  • Directors of Finance, Compliance, Business
  • Development, Procurement & Acquisitions
  • Financial Analysts & Accounting Professionals
  • Legal Professionals

The 2018 Government Contract Accounting and Regulatory Update is co-chaired and sponsored by Capital Edge Consulting.

Capital Edge consultants combine their unique backgrounds and experience in consulting, public accounting, industry, and DCAA to provide you with unmatched government contracting expertise. Learn more at capitaledgeconsulting.com.

 

GovCon Compliance Outlook: Sponsored Lunch and Learn Series

Join the Capital Edge Consulting GovCon Experts for the JAMIS Software sponsored GovCon Lunch and Learn Series.

Participants will explore current regulatory updates and challenges confronting government contractors.

With a new year and administration, come new opportunities as well as challenges. In the government contract regulatory compliance environment, transparency of the contracting process has gained considerable importance and visibility. Join Industry experts from Capital Edge Consulting, Inc. as they review the compliance changes and obstacles that could directly affect government contractors’ compliance programs which may impact multiple areas of the business, including:

  • Cost accounting and allocation practices
  • Determination of allowable costs
  • Estimating and pricing practices
  • Business systems documentation and internal controls
  • Purchasing and supply chain management practices
  • Contract administration and financial reporting practices

This Seminar is intended for professionals in the areas of: 

  • Accounting or Finance
  • Compliance or Internal Audit
  • Program or Contract Management
  • In-house Counsel

Following the compliance and regulatory update, will be a live demo of JAMIS Prime ERP. During this demo, you will learn more about a system designed specifically for service-based government contractors. Prime ERP is proven to help even the most complex organizations comply with the time-consuming process of a DCAA audit.

Agenda

  • Complimentary Lunch
  • Introductions
  • Compliance Overview
  • JAMIS Prime ERP Demo
  • Q&A
  • Closing Remarks

Register for one of the JAMIS Software upcoming events by clicking the links below:

This seminar is part of an ongoing Lunch & Learn series provided to you by JAMIS Software and is eligible for CPE credits. 

JAMIS Software Partners with Capital Edge Consulting to Bring Complimentary GovCon Lunch and Learn Events to the Greater Boston and New York Areas

JAMIS Software and Capital Edge Consulting partner to bring Federal Contracting lunch and learn series to the greater Boston and New York areas on May 23 and 25

The May lunch and learn series will explore current DCAA audit updates and regulatory changes directly affecting the government contracting industry. Attendees will receive a complimentary lunch, while they hear from industry experts and sit in on an educational discussion of recent legislative, regulatory and DCAA audit guidance actions affecting compliance. Upon completion of this seminar, all participants will be eligible to earn CPE credits.

Managing Director at Capital Edge Consulting, Inc., Bill Keating will be presenting at the May events in Boston and New York.

Bill’s areas of expertise include the Cost Accounting Standards (CAS), Federal Acquisition Regulations (FAR), agency supplement regulations, contractor accounting, purchasing, estimating, MMAS and EVM Business Systems, Truth in Negotiations Act, government accounting requirements, incurred cost submissions (ICS), DCAA Audits support and preparation, other regulatory non-compliance support, terminations, requests for equitable adjustment (REA), ERP systems and risk mitigation.

Seminar participants will also have an opportunity network with each other and learn more about an ERP system designed specifically for service-based government contractors and federally funded not-for-profit enterprises. JAMIS Prime ERP system is proven to help even the most complex organizations comply with the time-consuming process of a DCAA audit.

“Establishing best-of-breed business practices and processes requires a highly specialized and productive software,” said Steve Brander, VP of Sales and Business Development, JAMIS Software. “Our goal is to educate attendees on the complexities of DCAA requirements and provide them with a solution that will ensure they can conquer an audit with ease.”

JAMIS’s lunch and learn events are hosted across the country and explore a wide variety of educational topics as well as provide expert insights into the government contracting industry best practices. Additionally, these events will provide networking opportunities for attendees and a chance to talk directly with industry experts. To learn more about lunch and learn events coming to your area, visit our website at: https://jamis.com/govcon-events/

About Capital Edge Consulting

Capital Edge Consulting combines unique backgrounds and experience in consulting, public accounting, industry, DCAA and DCMA to provide clients with unmatched government contracting expertise. This breadth of specialized experience enables them to provide the exact services and level of expertise federal government contractors need to succeed. Capital Edge Consulting provides custom-tailored consulting solutions to government contractors ranging in size from startup to Fortune 100 companies in industries such as manufacturing, nuclear energy, professional services, biotech/pharmaceuticals, defense, and information technology. To learn more about Capital Edge Consulting, please visit: http://www.CapitalEdgeConsulting.com

About JAMIS Software Corporation
JAMIS Software Corporation is a leading provider of ERP software solutions designed specifically for government contractors and other project-focused organizations. JAMIS delivers comprehensive, intuitive, innovative, and cost-effective solutions for the most respected names in government contracting. Companies large and small rely on JAMIS to provide detailed visibility into all of their projects, as well as provide the foundation for DCAA and other regulatory compliance. JAMIS helps companies connect with customers, partners, and employees in entirely new ways to foster new levels of collaboration and drive profitability and growth.

To learn more about JAMIS, visit JAMIS.com

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 2017PDF Download for CEC

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 below.

  1. Fair Pay and Safe Workplaces Executive Order

Synopsis – The FAR Council and the DOL issued a final rule August 25, 2016, effective October 25, 2016, implementing Executive Order 13673.  The final rule requires, among other things, for contractors to report to the government labor law violations under 14 specific labor laws.  Key provisions of this final rule include:

  • Applicability limited to the legal entity responsible for performing the contract
  • Effective dates to be on a phased-in schedule starting October 25, 2016 and initially limited to a one-year look back
  • For the one-year period beginning October 25, 2016, disclosures of labor law violations will be required only for prime contractors – subcontractor disclosures will not be required until October 25, 2017 and subcontractors are obligated to report directly to the DOL, not the prime contractor
  • For the first six months after October 25, 2016, the requirement for prime contractors to disclose labor law violations will apply only under solicitations valued at $50 million or more; starting April 25, 2017, solicitations valued at or above $500,000 will be covered
  • Starting September 12, 2016, the DOL will offer a “pre-assessment” process, which will allow contractors to come forward to the DOL “to discuss their history of compliance with labor laws” and secure guidance on whether “additional compliance measures are necessary.”

As a result of a lawsuit filed October 7, 2016 by the Associated Builders and Contractors of Southeast Texas, a federal judge sitting in the U.S. District Court for the Eastern District of Texas issued a preliminary (not permanent) injunction October 24, 2016, one day before the effective date of the related final rule, staying implementation of most of the requirements contained in the Executive Order. The only portion of the Executive Order that was not enjoined by the government and was allowed to proceed relates to the paycheck transparency provisions.

Takeaway– It is too early to tell what the downstream consequences of the preliminary injunction may be. Likely, the government will challenge the judge’s recent decision and further litigation will ensue. Further, contractors should not accept related clauses or representation requirements that may be contained in new solicitations, excluding paycheck transparency requirements.

Nonetheless, contractors should assess now, internal business system processes and capabilities to monitor, track, and report applicable violations. Ideally, other processes or internal controls exist and are operating effectively to avoid a violation to begin with. Some form of supply chain oversight, perhaps a representation from the subcontractor, should also be considered. Labor law compliance and related systems of internal controls currently are, for the moment, outside the DCAA’s purview and are not addressed in related audit programs or internal control matrices. However, that may change. Consequences for violations vary, and may include, adverse FAR Part 9 responsibility determinations, termination of contracts, and suspension or debarment considerations. For now, though, these risks are significantly mitigated based on the October 24, 2016 decision. However, the risk posture may change pending the ultimate resolution of this matter.

  1. Paid Sick Leave

Synopsis – The DOL issued a final rule September 29, 2016 implementing Executive Order 13706. The final rule is applicable to covered solicitations issued on or after January 1, 2017 and entitle applicable employees to accrue one hour of sick leave for every thirty hours worked with a minimum annual accrued amount of 56 hours per calendar year. Specifically, the final rule applies to solicitations and resulting covered contracts defined as follows:

  • Procurement contracts for construction covered by the Davis-Bacon Act
  • Contracts for services covered by the Service Contract Act
  • Contracts for concessions
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public

Takeaway– From a cost accounting perspective, implementation of the final rule may result in adverse cost impacts to contractors applicable to certain contracts subject to coverage under the Cost Accounting Standards (CAS).The potential adverse cost impacts, assumed to be the direct result from the implementation of the final rule, will likely require contractors to change their existing cost accounting practices (from cash basis to accrual basis) to conform with the new requirement. The change in cost accounting practices should be deemed by the government as a mandatory change for which increased costs under applicable CAS-covered contracts is permitted.

Contractors should assess now existing cost accounting practices and determine if a change in practice is required. If a change is required, communicate with contracting officers early and notify them of potential requests for equitable adjustment to allow recovery of increased costs due to the mandatory change in cost accounting practice.

  1. Federal Tax Delinquency and Felony Convictions

Synopsis – The FAR Council issued a final rule September 30, 2016, effective immediately. The final rule adds to current FAR Part 9 responsibility criteria and requires any corporation responding to applicable federal solicitations, to make a representation pertaining to unpaid federal tax liabilities and felony convictions for violations of any federal law. Key provisions of this final rule include:

  • Contractor representations whether it has any unpaid federal tax liability that has been assessed and is not being appealed or paid in a timely manner, or a felony conviction for a violation under any federal law within the preceding 24 months
  • These representations are required under all federal solicitations pursuant to FAR 9.104-7(d), including – commercial items, commercially available off-the-shelf items, and procurements under the simplified acquisition threshold (currently $150,000)
  • The final rule and implementing FAR clause are silent on exceptions due to materiality or significance of the unpaid tax liability, so assume there is no exemption for insignificant or immaterial amounts
  • Affirmative contractor responses to either unpaid tax liability or recent felony convictions will require the government to not award a contract to that corporation and notify the agency suspension and debarment official to review the matter and make a determination if further action (suspension or debarment) is necessary to protect the government’s interests.

Takeaway – Contractors should assess now internal business system processes and capabilities, ethics and compliance programs, and disclosure practices to enhance and demonstrate FAR Part 9 responsibility requirements, and engage early with the government to make such demonstrations, when applicable.

  1. Counterfeit Electronic Parts

Synopsis – The DoD issued a final rule August 30, 2016, effective same date, revising the previously issued proposed rule of March 25, 2016. The final rule, to include commercial item acquisitions and procurements less than the simplified acquisition threshold (currently $150,000), clarifies the allowability criteria of costs incurred and associated with counterfeit electronic parts, including suspect counterfeit electronic parts and rework or corrective action required to remedy the use or inclusion of such parts. Initially, these costs were unallowable unless the subject parts were sourced as government furnished property. These costs may now be allowable pursuant to the final rule if the following criteria are met:

  • Contractors maintain an operational system to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts that had been reviewed and approved by the DoD
  • Contractors be made aware of counterfeit electronic parts or suspect counterfeit electronic parts and provide timely (i.e., within 60 days after the contractor becomes aware) notice to the Government.

Takeaway – Contractors that receive and use electronic parts for ultimate sale to the DoD need to maintain robust systems to detect and avoid use of counterfeit parts. Maintenance of adequate and effective business systems will not only limit the risk of not detecting counterfeit parts, but will also be helpful when demonstrating the operational system requirement noted above to support cost recovery opportunities.

Additionally, it is likely only a matter of time before these rules are extended to all, or other, parts and not simply limited to only electronic parts. So, take the time now to assess business systems and supply chain capabilities to reduce procurement risks.

  1. Transactional Data Reporting under GSA Contracts

Synopsis – The GSA issued a final rule June 23, 2016, effective same date, requiring contractors report transactional data from orders placed against certain Federal Supply Schedule (FSS) contracts, Governmentwide Acquisition Contracts (GWACs), and Governmentwide Indefinite-Delivery, Indefinite-Quantity (IDIQ) contracts. A primary objective of the final rule is to “provide business intelligence to strengthen “best value” decision-making by ordering activities, which will allow customers to take full advantage of the wide variety and complexity of products and services offered by Schedule Partners and pass on savings to the taxpayer”. Key provisions of this final rule include:

  • Mandatory reporting for new offers received after implementation of the final rule and optional for existing schedule holders; i.e., mass contract modifications are anticipated to incorporate these new requirements into existing contracts; however, contractors have the option to accept these modifications
  • Monthly electronic reporting of up to 11 specific transactional sales data items related to applicable contracts
  • Reporting requirements to be implemented on a phased-in approach with a planned start date of August 2016
  • Contract modifications under the new rule will no longer require commercial sales practices (Form CSP-1) reporting nor most favored customer and sales/discounting tracking (formally the Price Reduction clause);
  • Industrial Funding Fee payments will now be received only electronically
  • Schedules and Special Item Numbers affected during the Roll-Out (in order) are – 581, 72, 03FAC, 51V, 75, 73, 70 and 00CORP.

Takeaway – Contractors should assess now existing information system capabilities regarding capture and reporting of up to 11 specific data elements. Contractors should also perform a risk assessment of overall GSA sales and volume as a consideration when deciding to accept the contract modification(s).

Further, as this reporting requirement is new and being implemented on a pilot and phased-in basis, it is unknown how the government will use the data for purposes of subsequent price reasonableness determinations and related negotiations.

  1. SBA Mentor-Protégé Program

Synopsis – The SBA issued a final rule July 25, 2016, effective August 24, 2016, expanding the classes of small businesses eligible to participate in the program. The current program limits mentor protégé arrangements only to certified 8(a) small disadvantaged businesses. The revised plan under the final rule will expand to now include service-disabled veteran owned small businesses (SDVOSB), HUBZone small businesses, women-owned small businesses (WOSB) and small businesses generally. The SBA will begin October 1, 2016 receiving applications from eligible small businesses to participate in the program.

Separately, the SBA issued a proposed rule in September 2016 revising several elements of the current mentor-protégé program. Key provisions of this proposed rule include:

  • Expansion of mentor participation to large businesses not currently operating under an approved subcontracting plan
  • Expansion of protégé participation to include:
    • entities owned and controlled by Native Hawaiian Organizations or Indian tribes
    • non-traditional defense contractors
    • entities providing goods or services in the private sector that are critical to enhancing the capabilities of the defense supplier base
  • Limitation of protégé participation to only one mentor agreement at a time and for five years from initiation of the first agreement
  • Requirement that protégés’ size must be less than half the SBA size limit for the primary NAICS code

Takeaway– Both the proposed and final rules provide increased opportunities for large and small businesses to participate in the mentor-protégé program and further expand opportunities to seek federal government contracts. As always, for contractors new to government contracting, some form of due diligence regarding government contract compliance requirements and corresponding internal capabilities is recommended to limit down-stream risk during performance.

  1. Small Business Subcontracting Plans

Synopsis – The FAR Council issued a final rule July 14, 2016, effective November 1, 2016, adding various criteria and requirements associated with administration of small business subcontracting plans. These statutory amendments will affect prime contractor responsibilities on how they deal with subcontractors and report to the government. Key provisions of this final rule include:

  • Requires prime contractors to make good faith efforts to utilize their proposed small business subcontractors during performance of a contract to the same degree the prime contractor relied on the small business in preparing and submitting its bid or proposal
  • To the extent a prime contractor is unable to make a good faith effort to utilize its small business subcontractors as described above, requires the prime contractor to explain, in writing, within 30 days of contract completion, to the contracting officer the reasons why it was unable to do so
  • Authorizes contracting officers to calculate subcontracting goals in terms of total contract dollars in addition to the required goals in terms of total subcontracted dollars
  • Requires subcontracting plans, including modifications under the subcontracting plan threshold, if said modifications would cause the contract to exceed the plan threshold
  • Requires prime contractors with subcontracting plans on task and delivery order contracts to report order level subcontracting information after November 2017.

Takeaway – Prime contractors should review now existing business system processes and capabilities to address these requirements to avoid potential compliance risks – including, for example, CPSR inadequacy and negative past performance evaluation.

  1. Thresholds and Submission of Certified Cost or Pricing Data

Synopsis – The DoD issued a Defense Procurement and Acquisition Policy (DPAP) memo June 21, 2016 to the Army, Navy, and Air Force encouraging participation in the pilot program allowed under the 2016 National Defense Authorization Act (NDAA) to assess the impacts and risks associated with raising the threshold requiring submission of certified cost or pricing data (commonly known as the Truth in Negotiations Act ([TINA]) on selected procurements from $750,000 to $5,000,000. The DPAP memo requests each of the buying commands to select a candidate acquisition for participation in the pilot program and submit to the Director, DPAP for approval.

Separately, the DoD issued a proposed rule August 30, 2016 to implement provisions of the 2016 National Defense Authorization Act allowing exemptions to submission of certified cost or pricing data related to acquisitions valued at less than $7,500,000 and applicable to small businesses or nontraditional defense contractors responding to solicitations utilizing a technical, merit-based selection procedure (e.g., broad agency announcement) or the Small Business Innovation Research (SBIR) Program.

Takeaway – With the issuance of the DPAP memo and separate proposed DoD rule, three possible thresholds may ultimately exist related to certified cost or pricing data submission requirements. The combined objectives of the pertinent provisions of the 2016 NDAA and the DoD proposed rule appear to focus on streamlining the acquisition process using a risk-based framework and increasing the government’s access to industry’s research and innovation technology capabilities. It is currently unknown how, or if, the pilot program may ultimately affect the current submission requirement threshold of $750,000.

Contractors will now need to understand and document these additional exemptions for purposes of monitoring submission of certified cost or pricing data as well as flow-down requirements to subcontractors. Additionally, it will be confusing as the thresholds for coverage under the CAS no longer align in all situations; i.e., the CAS and TINA requirements may no longer be the same at $750,000.

  1. The DCAA’s Selected Areas of Cost Guidebook

Synopsis – The DCAA released on the DCAA web site (http//dcaa.mil) in September 2016 new internal audit guidance entitled ‘Selected Areas of Cost Guidebook’. The new guidance in not complete and is in process; however, 13 areas of cost have been revised from the prior guidance in Chapter 7 of the DCAA’s Contract Audit Manual (CAM).

The subject guidance replaces Chapter 7 of the CAM and currently is structured to include 75 chapters, many of which will be revised as progress continues on its completion. Many of the chapters are somewhat narrow in focus and address specific elements of cost for which a corresponding cost principle (FAR Subpart 31.2) does not exist; e.g., banked vacations costs, mentor-protégé costs, no cost storage contracts, weather related closure and Workforce Investment Act.

Takeaway – It is too early to assess the effects or implications of this guidance as it is very recent and incomplete. However, as the Guidebook appears to be the new DCAA audit guidance, take the time now during its formation to understand the DCAA audit objectives and areas of focus.

  1. Selected DCAA Memorandums for Regional Directors (MRDs)

Synopsis – The DCAA issued six MRDs on their website thus far in 2016.  MRDs of note include:

  • Audit Guidance on the Impact of the National Defense Authorization Act on DCAA’s Audit Support to Non-Defense Agencies (9/30/16)
  • Audit Guidance on Revised Policy and Procedures for Low-Risk Incurred Cost Proposal Less Than $250 Million in ADV (5/27/16)
  • Audit Alert on DCMA Implementation Guidance on Blended Compensation Caps (2/19/16)
  • Updated Audit Guidance on the Treatment of Overdue Indirect Rate Proposals (2/11/16)

Takeaway – Knowing the DCAA’s internal audit guidance, i.e., MRDs, audit programs, internal control matrices, checklists, and the CAM, is critical to enhance the likelihood of an effective audit and successful outcome. MRDs are issued periodically and several are posted on the DCAA website. Public access to this internal guidance may become scarce though, as the DCAA’s development and use of VIPER (intranet portal not publicly available) progresses.

 

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Capital Edge Consulting Obtains Astero Consulting’s Senior Talent in Government Contracts

Industry Experts Bill Keating and John Van Meter Strengthen and Expand One of the Largest Government Contracting Consulting Firms

Reston, VA, August 30, 2016 –Capital Edge Consulting, Inc., a nationwide consulting firm that specializes in helping federal government contractors solve complex business challenges, announces that Astero Consulting’s founders and senior executives, Bill Keating and John Van Meter, have combined their business with Capital Edge Consulting.

Collectively, Bill and John bring nearly seven decades of consulting experience, and previously, each was the Partner-in-Charge of KPMG’s Government Contractor Advisory Services Practice. Both gentlemen bring Government, Commercial and International advisory expertise in business sectors such as aerospace and defense, construction and engineering, and information technology products and services.

Bill and John have significant expertise in the multiple rules of government contracts, including the Federal Acquisition Regulation (FAR), Federal Agency FAR Supplements, Cost Accounting Standards (CAS), and Federal Supply Schedules. They have advised organizations on government audits, procurement and other business systems compliance, claims preparation, contract disputes and investigations. They possess extensive knowledge of cost accounting matters for government contractors, including: systems requirements definitions, indirect rate structures, annual incurred cost submissions, CAS cost impact proposals, and CAS disclosure statements. At Capital Edge Consulting, they will focus on these regulatory and compliance matters for clients seeking to enhance accounting and business practices and manage risk. The two will work out of McLean, VA and San Jose, CA, respectively.

Also joining Capital Edge from Astero is Jean Labadini, a leading expert in Contractor Purchasing System Reviews (CPSR). Jean retired after 35 years with the Defense Contract Management Agency (DCMA) – her last role was as the Director of the CPSR Group. She has also served as an Administrative Contracting Officer (ACO), a Divisional Administrative Contracting Officer (DACO), and a Systems Administrative Contracting Officer (SACO). During her time at DCMA, Jean was a certified DCMA trainer and delivered Agency training on Advance Payments, Progress Payments, Performance Based Payments, Public Vouchers, and Commercial Item Financing. Jean will provide leadership within the Procurement and CPSR Consulting Practice of Capital Edge Consulting.

“Bill, John and Jean have a successful track record of helping clients navigate the complex government contracting environment, enhance their regulatory and compliance capabilities, and improve business performance,” said Chad Braley, CEO of Capital Edge Consulting. “They bring a wealth of knowledge and experience to the team and will help to further expand our capabilities, experience, and market presence. We are proud to welcome them to Capital Edge.” 

About Capital Edge Consulting

Capital Edge Consultants combine their unique backgrounds and experience in consulting, public accounting, industry, and DCAA to provide clients with unmatched government contracting expertise. This breadth of specialized experience enables Capital Edge to provide the exact services and level of expertise federal government contractors need to succeed. Capital Edge has provided custom-tailored consulting solutions to government contractors ranging in size, from startup to Fortune 100 companies in industries such as manufacturing, nuclear energy, professional services, biotech/pharmaceuticals, defense, and software.

To learn more about Capital Edge Consulting, visit www.CapitalEdgeConsulting.com

Acquisition Thresholds – Inflationary Adjustments

The-FAR

Reminder that various thresholds will change Thursday (October 1).  These changes are the result of a DoD, NASA and GSA final rule issued in July.  Changes include:

•  The micro-purchase base threshold of $3,000 (FAR 2.101) is increased to $3,500.
•  The cost or pricing data threshold (FAR 15.403-4) and the statutorily equivalent Cost Accounting Standard threshold are raised from $700,000 to $750,000.
•  The prime contractor subcontracting plan (FAR 19.702) floor is raised from $650,000 to $700,000, and the construction threshold of $1,500,000 stays the same.
•  The threshold for reporting first-tier subcontract information including executive compensation will increase from $25,000 to $30,000 (FAR subpart 4.14 and section 52.204-10).

The simplified acquisition threshold of $150,000 is unchanged.

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