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Final Indirect Rates are Final

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With very few exceptions, once a contractor and the cognizant Administrative Contracting Officer execute a final indirect cost rate agreement, the indirect rates are then final. (We wrote about one exception here.) Those agreed-to final rates are to be applied to active contracts and to physically complete contracts, in accordance with the requirements of FAR contract clause 52.216-7.

In a recent case at the Court of Federal Claims, it seems one contractor wanted a do-over of the final indirect cost rates it had agreed to.

The case goes back to cost-type contracts that were active in the 1980s. Yes, here we are, more than 30 years later, still discussing those cases. Sometimes justice moves slowly. In this case, one of the delays was because Information Systems & Networks (ISN) didn’t submit some of its claims to a contracting officer first, so its appeal had to be put on hold while it did so (which then created something that could be appealed.) Anyway …

In 2004 ISN filed a claim with a contracting officer involving seven assertions associated with its indirect cost rates, as allocated to nineteen contracts. A couple of months later, the contracting officer “issued a final decision on ISN’s final indirect cost rates claim, disallowing some costs and determining final fringe and overhead indirect cost rates applicable to ‘all Government flexibly price[d] contracts and subcontracts’ for FY 1987-1995, as well as interim general and administrative (G&A) indirect cost rates for FY 1987-1995.” (As Judge Firestone noted, final G&A rates could not be determined “because those rates were the subject of pending litigation at the time.” Subsequently, ISN lost at the Federal Circuit on its appeal of exclusion of the S Corporation’s owner’s personal income taxes in its G&A rate calculation.)

A bit more than a year later “the ACO addressed ISN’s remaining six claims, involving allegedly unpaid contract amounts, costs over contract ceilings, lost profits and unabsorbed overhead, interest, and attorneys’ fees. In this decision, the ACO determined that for eleven contracts over which he had authority, the government had overpaid ISN by a total of $280,241.” (Internal notes and citations omitted; emphasis in original.) Note the issues listed. Several of them (if not all of them) have little if anything to do with calculations of indirect rates. For example, “costs over contract ceilings” pertains to the application of final direct and indirect costs against estimated cost values or against funded amounts; it does not relate to how indirect rates are calculated. Regardless, ISN filed a claim.

ISN and the government resolved that claim by agreeing that certain allowances for “office rent and equipment rent” in ISN’s final rates for the years 1987 through 1995. According to the settlement agreement—

ISN also agreed to release: all claims, known or unknown, including all claims for monetary and declaratory relief, against the United States . . . arising out of, set forth, related to, or otherwise involved in Case No. 06-99C, including but not limited to, any claims for costs, expenses, attorney fees, and damages of any sort, with the exception of claims for payment resulting from the Government’s calculation of final indirect cost rates that ISN might present to the agencies with which it contracted.

Subsequently, the government provided ISN the indirect rates calculated in accordance with the settlement agreement in February 2011. Thus, as of February 2011, ISN purportedly had final indirect rates for all years 1987 through 1995, and could then close out physically complete contracts. But not quite, because ISN had filed a separate appeal of the contracting officer’s decision that ISN owed the government $280K; that matter had been put on hold (but not dismissed) while the first appeal was being worked on.

In the second appeal, ISN challenged the government’s calculation of its indirect rates (the ones it had agreed to in the settlement of the first appeal.) “According to ISN, these calculations contained errors, and as a result, ISN conducted its own indirect cost rate calculations, adding and reallocating costs, as part of its claim for damages in case No. 06-387C.” As part of ISN’s recalculations, it added costs for “Other Compensation” and reallocated corporate allocations. Based on its newly calculated final indirect rates, instead of owing the government $280K, ISN asserted that the government owed it $3.7 million.

In deciding the parties’ motions for summary judgment, Judge Firestone decided that ISN’s rates were addressed in the original settlement agreement (except for G&A). She wrote “The plain terms of the settlement agreement preclude ISN from making any claims for additional costs and re-allocations for purposes of calculating the final indirect cost rates for those years. … the plain language of the exception does not give ISN the right to challenge, once again, the costs and allocations agreed to by the parties in the settlement agreement.”

There was more to the decision. For instance, ISN argued that its CFO lacked authority to execute final indirect rate agreements for 1996 and 1997. Judge Firestone discussed the doctrine of “apparent authority” and also noted “ISN’s seventeen years of silence after the agreements were signed also affirms Mr. Bonuccelli’s apparent authority to sign them.” In other words, if the CFO didn’t have authority to execute the agreements, then waiting 17 years after execution to make that argument was going to support the government’s contention that, even if the CFO didn’t have the actual authority, he had the apparent authority and the government reasonably relied on that authority.

Judge Firestone found that some issues (including calculations of the final G&A rates) needed to be resolved. However, ISN’s chief arguments were not accepted. The company’s final indirect rates were indeed its final rates for the years covered by the various agreements.

Speaking more broadly, the time to worry about indirect rates is when the indirect costs are being incurred, to make sure your company is spending money in accordance with budgets (budgets that hopefully tie to the indirect rates you are bidding and billing). The time to worry about indirect rates is when you look at projected year-end costs (and associated rates) and then see what those rates do to your projects' costs, and then see how your projects are going to comply with Limitation of Cost or Limitation of Funds clause requirements (as applicable). The time to worry about indirect rates is when you get a DCAA audit report, and you look at how questioned costs (if any) will impact contract costs. The time to worry about indirect rates is when you execute a final indirect cost rate agreement, and now have to submit interim adjustment vouchers (for active contracts) or final vouchers (for physically completed contracts).

It is too late to worry about indirect rates more than a decade later, when you decide you don’t like the results. If you had been looking at the rates and the impacts all along (as suggested above), you would have known the results, whether they were good or ill.

Last Updated on Monday, 01 June 2020 19:19

Defective Pricing Making a Comeback

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Readers may already know that DCAA has reemphasized performance of audits intended to detect instances of “defective pricing.” Formerly known by the innocuous description “post-award audits,” they are now called “Truth in Negotiations audits,” because the Truth-in-Negotiations Act (TINA) was renamed the “Truthful Cost or Pricing Data Act” about six years ago. Regardless of what you call them, these audits (assignment 42000) are coming back; and for some contractors they are coming back big-time.

Simply put, “defective pricing” means a contract price that was negotiated on the basis of cost or pricing data that was not accurate, complete, or current as of the date of the price agreement, even though the contractor certified that its cost or pricing data was accurate, complete, and current as of the date of price agreement. Sounds simple, but it’s really not simple at all. There are myriad nuances and exceptions that have to be addressed in a “defective pricing” situation. Even though FAR 2.101 defines “cost or pricing data” and “certified cost or pricing data,” and even though FAR 15.407-1 discusses the situation in detail, and even though there are several solicitation and contract clauses that also discuss the situation in great detail, it’s a complicated matter that really should be addressed by people who know a lot about it, rather than your generic government contract compliance representative.

We came across a recent case at the ASBCA that illustrates some of the nuances involved in “defective pricing” matters and we thought we should discuss it here, if only to (a) provide a refresher on defective pricing, or (b) to illustrate why it’s not for the uninitiated. Of course, all we can do is summarize the case; if you want all the details, you need to read it carefully.

In 2004, Alloy Surfaces Company was awarded an ID/IQ contract for the production of M211 infrared countermeasure decoy flares. In 2006, the Army customer requested a proposal for a large number of additional flares (essentially tripling the required output), which was awarded as Delivery Order #14 (DO 14). DO 14 was negotiated and awarded in August, 2006. Previous Delivery Orders—including DO 13—had been Produced in Alloy’s “Plant 1.” However, in its proposal, Alloy was clear that it wouldn’t be producing DO 14 flares in Plant 1; instead, Alloy stated that it would add substantial amounts of equipment, including expanding Plant 2, starting production at Plant 3, and hiring 234 new employees.

DO 13 flares, produced in Plant 1, were manufactured using new and more efficient means. The manufacturing process for DO 13 included the use of auto-loaders, the one-step bake, and the auto epoxy processes. When combined, these processes produced efficiencies in labor usage and material usage. The Army was aware of these production improvements. Indeed, the Army “reviewed and approved each step of the automated production process” used in Plant 1.

Obviously, the pricing of DO 14 production was challenging, because DO 14 involved production from two new plants that had never produced flares before, using new equipment, by new employees who would have various levels of training and experience. Also obviously, the Plant 1 production efficiencies would be carried over into Plant 2 and Plant 3 production; but was the actual DO 13 cost experience in Plant 1 a good indication as to the expected production cost of DO 14 in Plants 2 and 3? Alloy thought not. In Alloy’s view, “the ramp-up associated with DO 14 would require Alloy to obtain permitting and expand M211 operations to two new plants; pass first article testing; qualify and install new equipment; and hire and train new employees.” Those variables were different from DO 13, and therefore made DO 13 an unsuitable basis for use in pricing DO 14.

Alloy provided historical data to the Army technical evaluators and negotiators; however, there was disagreement as to whether the data provided was representative of the newer, more efficient production methods Alloy was using on DO 13. Alloy also proposed a negative 10 percent “learning curve” for direct labor, because of the new equipment and new employees. Importantly, Alloy did not submit Work-in-Process cost reports for DO 13 production to the Army. Alloy had never provided WIP cost data to the Army in the past. Data was only provided after the flares had been inspected and accepted (via DD250). The DO 14 negotiation was no exception. Even though Alloy had WIP reports (in particular, the dispute was focus on month-end September 2006 WIP reports), and even though the Army requested WIP reports, Alloy declined to provide them, as it had previously declined to provide them during negotiations of earlier Delivery Orders.

After about six weeks of negotiations, the parties agreed on a price and DO 14 was awarded. Alloy’s Certificate of Current Cost or Pricing Data stated that it certified its cost or pricing data was accurate, complete, and current as of September 25, 2006.

In 2011 (five years after the events just recounted) DCAA performed a defective pricing audit, noticed that DO 13 WIP reports had not been provided, and issued an audit report in February, 2012 alleging defective pricing. The cognizant contracting officer issued a Contracting Officer Final Decision (COFD) in July, 2014, demanding repayment of $15.9 million. (Interestingly, the COFD was based on a position other than the one in DCAA’s audit report. The DCAA report used a weighted average of prior DO cost experience but the COFD used only DO 13 cost experience. DCAA later concurred with the contracting officer’s audit approach.) Alloy appealed that COFD to the ASBCA.

As Judge Woodrow, writing for the Board, noted:

The government has the burden of proof in a defective pricing claim. As a general matter, this entails proving three elements by a preponderance of the evidence. First, the government must establish that the information at issue is ‘cost or pricing data’ within the meaning of TINA. Second, the government must show that the cost or pricing data was either not disclosed or not meaningfully disclosed to a proper government representative. Third, it must demonstrate detrimental reliance on the defective data.

As we noted above, the disputed centered on DO 13 WIP cost reports. The government argued that those WIP cost reports were “cost or pricing data” because they contained factual cost information; however, Alloy argued that considerable judgement went into those WIP reports and they were never final before the end of production. For example, Alloy’s production control department made manual allocations of certain batch costs to units of production, and that allocation was largely judgmental in nature. Because they were judgmental (at that point) rather than factual, they were not cost or pricing data. The Board agreed with Alloy, likening the WIP sheets to Internal Operating Controls (IOC) reports in another defective pricing case involving Aerojet Ordnance Tennessee, writing—

WIP sheets, like the Internal Operating Controls (IOC) reports in Aerojet, are management tools based on an individual manager’s judgment, not a cost accounting process relying on precision. In Aerojet, we concluded that, although the data in IOC reports may be accurate for management purposes and may even be close to accounting reports, the IOC reports do not possess the requisite degree of certainty necessary for providing certified cost and data to the government. By the same token, Alloy’s WIP sheets are management tools and do not possess the requisite degree of certainty necessary for providing certified cost and data to the government.

Further, the Board found that the DO 13 WIP sheets in question had not been finalized until after the parties reached price agreement (despite the dates on the WIP sheets). In addition, the Board found that there was no evidence that, even if the Army had the DO 13 WIP sheets, it would have changed its negotiation strategy and/or negotiated a different price.

Judge Woodward wrote:

… because the DO 13 data was from Plant 1, the data would not have shed any light on the inefficiencies associated with starting and ramping-up production at the two new manufacturing plants. Although the Army could quantify the projected efficiency resulting from the increased use of automation, it was forced to speculate about the effect of ramping-up production at two new plants. Indeed, the fundamental problem with the government’s position is that the DO 13 data sheds no light on the actual effect of ramp-up inefficiency on manufacturing in Plants 2 and 3.

Thus, because the Army could not prove reliance on the missing DO 13 WIP reports, and because those WIP reports had not been finalized and made available to Alloy management prior to the conclusion of price negotiations, and because those DO 13 WIP reports contained significant amounts of judgment prior to the end of the production run, the Board found that no defective pricing had taken place.

This ASBCA case illustrates some of the complexities involved in defective pricing matters. As we said at the beginning of this article, when you are faced with an allegation of defective pricing, you really want knowledgeable and experienced people on your side. In this multi-million-dollar matter, Alloy was ably represented by the law firm of Crowell & Moring.

Last Updated on Friday, 29 May 2020 06:43

CAS and COVID-19 and DCAA

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One thing’s for sure. You can’t believe the hit counts on our website. I mean, yes, they provide an indication of the popularity of each article, primarily in terms of who came to the article after it left the front page or who printed it or downloaded it. But it’s an indication only. The exact number of hits can be very misleading. Some of the hit counts have been inflated by hackers trying to get into the site. I mean, really inflated. Big time. And obviously the older the article, the more hits it would be expected to receive. We don't use the hit counts for anything more than an indication of popularity.

Still, the indications are that the three most popular topics are (1) DCAA stuff, (2) CAS stuff and—more recently—(3) COVID-19 stuff. We thought “what if we combine all three of those popular topics into one article? Yeah, that will be huge.”

So here it is.

As many readers know, the CARES Act—especially Section 3610—authorizes Federal agencies to reimburse contractors for impacts related to COVID-19 in certain circumstances. Importantly, it does not mandate reimbursement; it simply authorizes it.

Many may be wondering why anybody needed specific statutory authorization. After all, the cost principle at 31.205-13 already made reasonable costs associated with efforts to maintain employee well-being allowable. It is hard to imagine some auditor or contracting officer (or, perhaps, a judge) finding that costs incurred to protect worker health and safety during the pandemic were somehow unallowable. Especially if a contractor has DPAS-rated contracts. At a bare minimum, contractors are expected to take actions to mitigate cost and schedule impacts to their government contracts.

What’s the deal then?

The deal is that Section 3610 seemingly permits a contractor to deviate from its standard practices—and its disclosed or established cost accounting practices—with respect to some of its COVID-19-related costs.

Let’s quote Section 3610 so you can see what we’re talking about.

FEDERAL CONTRACTOR AUTHORITY. Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond September 30, 2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government, including a federally-owned or leased facility or site, due to facility closures or other restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020 for COVID–19: Provided, That the maximum reimbursement authorized by this section shall be reduced by the amount of credit a contractor is allowed pursuant to division G of Public Law 116–127 and any applicable credits a contractor is allowed under this Act.

Let’s break that down a bit.

  1. Applies to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal government, including a Federally-owned or leased facility or site because of a facility closure or other restrictions.

  2. When the closures or restrictions are related to the COVID-19 health emergency.

  3. And the contractor's (or subcontractor's) employees cannot perform their job duties (with respect to the contract) remotely; they must be performed at the (closed or restricted) site.

  4. When the contractor grants affected employees or subcontractors paid leave, including sick leave, in order to keep its workforce in a “ready state” to resume contract performance when the facilities are reopened or the restrictions are lifted; or, “to protect the life and safety of Government and contractor personnel.”

Thus, for contractors that qualify under the conditions above, their Federal contracts may be modified (without consideration) to reimburse them “at the minimum applicable contract billing rates not to exceed an average of hours per week” for the costs of the paid leave.

From a CAS perspective, the interesting thing about the above is that contractors may have to deviate from their disclosed or established practices in order to comply. Costs of paid time off (PTO) are not normally charged direct to contracts, because it’s not customary to charge contracts for time not actually spent working on contract tasks. Instead, contractors typically charge PTO costs to an indirect cost pool (often the pool the captures all costs of fringe benefits, including the employer’s portion of payroll taxes, the employer’s portion of medical insurance costs, and etc.), for subsequent allocation to contracts (or to other indirect cost pools) on a chosen allocation base. Therefore, charging indirect costs as direct costs is going to require a change in cost accounting practice.

And it’s not just that. “Normal” PTO costs associated with employees not impacted by COVID-19 are still going to be accumulated and allocated in accordance with the disclosed or established practices. It’s only the PTO costs associated with maintaining impacted employees in a “ready state” that are going to be direct costs of the impacted contracts. Which brings up a CAS 402 compliance question—is this the same cost, incurred for the same purpose in like circumstances, being treated two different ways (both direct and indirect)?

Sure, we’ll all assert that COVID-19 circumstances are different than the norm, and we’ll all point to the Section 3610 language. But will it be sufficient? That remains to be seen.

Looking at published Section 3610 implementation guidance (especially guidance published by DOD), it seems that there are even more options available to a contractor. “To the extent that the contractor workforce is shared across multiple contracts, contracting officers will need to coordinate on a reasonable allocation of costs, ideally through the administrative contracting officer.” That implies (if not expressly states) that contractors can pool their Section 3610 PTO costs and allocate them to contracts. We’re betting no contractor has a disclosed or established cost accounting practice for pooling COVID-19-related PTO costs and then allocating them to contracts. Note the guidance does not specify that the contracts that receive an allocation of such costs must have been impacted by COVID-19 facility closures or restrictions, only that the allocation of the costs to contracts must be made on a “reasonable” basis. In our view, that gives contractors a lot of flexibility to accumulate and allocate their Section 3610 costs.

Contracting officers are given the authority to determine what contractor Section 3610 costs they decide to reimburse. Who do you think they are going to lean on for an opinion regarding the costs claimed by contractors? That’s right, their contract auditors. Chances are that means DCAA.

The DOD guidance (link above) anticipates that DCAA auditors are going to get to express an opinion regarding whether the contractor has (a) accumulated legitimate Section 3610 costs, (b) accounted for them properly, and (c) allocated them to contracts in a reasonable manner. (And don't forget to propery credit those costs for any other COVID-19-related reimbursements, such as insurance settlements.) Auditors are going to be looking at previous contractor cost accounting practices related to PTO, and asking contractors to support/justify everything. (As we’ve noted before, a failure to document circumstances and decisions now will lead to potential audit issues downstream.) The guidance states “Proper administration and traceability of actions under section 3610 will require special attention to contracting procedures and contract administration by contracting officers, the Defense Contract Audit Agency (DCAA), and contracting officer’s representatives (CORs). … DCAA has oversight of billings under cost-reimbursement, time and materials, and labor hour line items.”

Certain contractors (Hi KBR!) were rather famously burned by DCAA second-guessing their decisions and questioning the resulting costs. They had to engage in expensive, protracted, litigation in order to recover the questioned costs, and many millions of dollars ended-up being left on the table, never reimbursed. Let’s use their painful lessons-learned to guide our decision-making today, during the current pandemic crisis.

We’ll note here that DCAA very recently issued audit guidance addressing how audits should be conducted under the current state of pandemic lock-downs. It states:

If audit teams are unable to obtain sufficient appropriate evidence (e.g., audit teams receive electronic documents from the contractor via e-mail and are unable to validate to original records), the audit team should continue with the audit and validate the electronic documents to original records when the Agency and/or contractor resumes normal operations. When normal operations resume, the audit team should validate the electronic data previously accepted and then issue the audit report. Audit teams are reminded to appropriately document the audit evidence received, including the methods used to obtain the evidence. … The lack of access to original documents, lack of access to contractor personnel, or the inability to validate the source of original documents (e.g., contractor records and contractor downloads) will generally result in a reservation about the engagement (i.e., scope limitation). In most cases, this scope limitation will result in a qualified opinion. However, the audit team should assess the evidence collected and use professional judgment in determining whether a scope limitation is necessary.

There is a FAQ in the back of the MRD that everybody should read. It discusses, among other things, the conduct of “floorcheck” audits using telephone or video conference, and the performance of “walk-throughs” via teleconference and/or Webex. Interesting stuff—but we hope the guidance will become obsolete in a few more weeks or months.

So: COVID-19; Cost Accounting Standards; DCAA. A jam-packed article covering all the popular topics. We trust you enjoyed it.

Last Updated on Sunday, 19 April 2020 19:46

Still Here!

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Hi there. I wanted you to know I’m still here, healthy and busy as ever.

Why no blog articles in the recent weeks?

Well, because I’ve been too busy! Unlike many in these perilous times, the consulting work has remained steady – or even picked up a bit! As always, the paying clients get priority over the rest of you. I suppose that if I made y’all pay for a subscription, then I would feel more compunction to generate blog articles like clockwork. But I don’t charge and you don’t pay; so the ones that do pay get to go to the head of the line.

Another thing: this year’s SDSU night class has started. Yes, I’m teaching “Financial Management of Government Contracts” again. But this time it’s all distance learning. That change has required me to transfer lots of course material into Blackboard and to learn this Zoom thingee everybody has been talking about. I am fine using WebEx, but Zoom is new. (And I confess I’m not very good at it yet. My class is amazingly patient with me.) Anyway, the number of hours I’ve put in revising last year’s slides, creating new content, and developing weekly quizzes was disappointingly high. Kind of makes this teaching thing a bit of a labor of love. That class continues for five more weeks.

Did I mention that both textbooks have been edited and submitted to LexisNexis? Yep. That was another couple of hundred hours of labor spent that could have gone into more blog articles. (I’m not complaining. Or at least, not much. I get paid for editing.) The new editions should be coming out this summer.

Looking to the near future, my ACI conference, “DCAA and DCMA Costs, Pricing, Compliance & Audits,” was postponed from its original June timeframe. Currently, it is scheduled for the end of August. Link: here. I’m team-teaching a CPSR Workshop and also participating on the Commercial Items panel.

So, yes. Busy times. But I know how blessed I am to be busy when so many others are not busy, or may not even have jobs at the moment. That’s why I’m absolutely not complaining. But it’s also why I haven’t put out the blog articles for a while. I promise to get back into the routine soon!

Until then, I ask your indulgence.

Last Updated on Monday, 18 May 2020 19:19

Performance-Based Payments: Final DFARS Rule

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It’s all COVID-19, all the time. Except when it’s not.

In between the pandemic panic1 the wheels of acquisition rule-making continue to grind, albeit with the rapidity of a downhill skier racing through gravel. In fact, on April 8, several DFARS final rules were issued, along with several proposed rules. By and large, there isn’t much in the regulatory revisions that is worth reporting—though note proposed dollar threshold changes to several DFARS regulations/clauses found in this proposed rule.

But the one thing that caught our eye was the final DFARS rule on performance-based payments (PBPs).

Readers know this one because we’ve commented on it before on this blog site, and even submitted a comment into the rule-making process. The “current state” DFARS rules were so bad that the DOD issued a Class Deviation to help contracting officers get it right.

Remember, PBPs are not progress payments. Progress payments are contract financing payments based on a percentage of costs incurred. PBPs are contract financing payments that are fixed amounts tied to accomplishment of significant program or technical events. We discussed the differences in this article.

Anyway, the final rule gets it mostly right. The impacted DFARS clauses have been revised “to specifically state that it is not necessary to have a Government-unique cost accounting system in order to report incurred costs under the clause”—which was our major gripe with them. In addition, “the procedures at DFARS 232.1004 are modified to eliminate the requirement to first agree on price using customary progress payments and then require consideration if performance-based payments are subsequently negotiated.” Those are good things, and we applaud the DAR Council for listening to public input. (Historically, that has not always been the case.)

In the final rule, the DAR Council makes it clear that some type of “job cost accounting” is still required when PBPs are used. In response to public comments on the issue, they wrote “It would be highly unlikely for a fiscally sound company to have no means of identifying the costs of performing a contract. Furthermore, the rule does not require any particular accounting system; rather, the rule states that ‘incurred cost is determined by the Contractor's accounting books and records.’”

Further despite respondents (including us!) pointing out that the government shouldn’t need to use incurred costs as the basis for negotiating future costs, the requirement was retained in the final rule. The DAR Council wrote “… aside from the value to Government negotiators of being able to evaluate current proposals for PBP milestone values against past experience, it remains important for the Government to know the risk it is incurring when it makes payments that may be disproportionate to the contractor's investment in contract performance.”

Regardless, the final rule represents a significant improvement over the current state that existed before the regulatory revision. One suspects that the DOD Class Deviation is no longer needed.

In the midst of COVID-19 thoughts and decisions and actions, consider the DAR Council, who is still grinding through open cases. We wish them well.


1 “Pandemic Panic” is the name of my new deathmetal band. I’m calling it now.

Last Updated on Sunday, 19 April 2020 19:47

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Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.