On January 19, 2012, the DAR Council published a proposed rule in the Federal Register which would, if implemented as drafted, ease the burden on the poor, overworked, DCAA auditors who are stuck reviewing contractors’ interim vouchers.

We recently published some comments (found on GovExec.com) from self-identified DCAA auditors.  One of those rather plaintive comments said—

… Visit my office and I'll tell you about what is really happening in DCAA. Two of five teams in my office do nothing but process vouchers. Second, the only audits we perform are forward pricing. The CIGIE police have gigged my office to death on forward pricing especially FPRAs and we waste hundreds of hours on just working paper documentation. Third, my backlog of incurred cost is growing and I have no hope of ever getting to it. We have not auditing an incurred cost submission since 2009. Lastly, we have lost all credibility with contracting officers and they are awarding contracts and closing contracts without DCAA audits because we are not timely. We want to issue reports on time, but the working paper requirements and the review process is so onerous that we cannot possibility be timely. …

We helpfully italicized the second sentence in the above comment.  According to the commenter, about 40 percent of the local DCAA workforce was occupied reviewing interim vouchers.  Which is one large reason why recent DCAA productivity statistics are—shall we say?—less than confidence-inspiring.  When about 40 percent of your workforce is busy looking at interim vouchers—vouchers that will need to be audited again during close-out audits, and which may be sampled as part of any Accounting System review—then it doesn’t take a management consultant to figure out that you’re wasting everybody’s time.  And wasting taxpayer dollars along the way.

Most of us know the reason for this preoccupation with interim voucher reviews.  It stems from an ill-advised decision (made back in 2008/2009) to withdraw contractors’ “direct-billing authority” and impose an intermediate audit step between the contractors and the DFAS paying office.

At one point in time, we thought DCAA might have recognized the unintended consequences of its decision, and might be backing-off its interim vouchers reviews through a DFARS Class Deviation.  But no.  DCAA quickly stomped on the ray of hope offered by the Class Deviation.  According to DCAA, the Class Deviation applied only to “nonmajor” contractors—such as small businesses.  Everybody else was still subject to interim voucher reviews, no matter what the impact on DCAA’s productivity stats.

So, enough with the background and back to the proposed rule.  As the policy-makers at the DAR Council stated—

This rule proposes to revise requirements for approving interim vouchers. Interim vouchers that are selected using sampling methodologies will be reviewed and approved by the contract auditors for provisional payment and sent to the disbursing office after a pre-payment review. Interim vouchers not selected for a pre-payment review will be considered to be provisionally approved and will be sent directly to the disbursing office. All provisionally approved interim vouchers are subject to a later audit of actual costs incurred.

And that’s pretty much it.

The obvious effect of the rule would be to reduce the auditors’ workload.  They will not need to review 100 percent of the contractor’s interim vouchers.  Instead, they can take a sample of the interim vouchers (sample methodology carefully not specified) and let the others pass.  It’s going to free-up audit resources and permit them to be redeployed on more value-added audits.  This is good news for DCAA.

And it’s really good news for defense contractors, as well.