Cybercrime costs the U.S. economy between $57 billion and $109 billion every year and is not showing any signs of slowing down.
With increased Pentagon spending and the Defense Contract Audit Agency’s (DCAA) reduction and outsourcing of their Incurred Cost Submission audit backlog, government contractors should anticipate a significant increase in audit activity.
Government spending has increased, leaving Congress no choice but to review the Pentagon’s enforcement of the law related to the incomplete and inaccurate cost and pricing data used to establish contract pricing. First implemented in 1962 to level the playing field during contract price negotiation, the law has left many government contractors raking in the profits today. But what may seem like a windfall could lead to a downfall.
The Defense Contract Audit Agency recently questioned the allowance of subcontractor costs, not based on their reasonableness, but on the contractor’s lack of supporting documentation as defined in the cost principle. Government contractors can protect themselves and recover the costs they are owed, but there are steps to follow and documents to submit.
For government contractors, it is important to recognize your ethics and business conduct program must be tailored to your company’s specific risk profile. This is a dynamic compliance process and has to be monitored and revised accordingly to keep it relevant and effective. Does your company’s business conduct and ethics program meet the necessary requirements?
Government contractors’ incurred cost proposals include all costs incurred during the fiscal year on both commercial and government contracts. For those with fiscal years the same as calendar years and work was performed on cost reimbursable and/or time and material contracts that include the Allowable Cost and Payment clause at FAR 52.216-7, it’s time to begin preparing and submitting your incurred cost proposal/submission.
Contractors or subcontractors that have never had an audit performed by DCAA, or have made changes to their accounting and estimating systems and processes, should be proactive and have self-assessment/mock-reviews of each performed in advance of a DCAA audit. Are you ready?
Government contractors must stop work immediately when they receive a stop work order (SWO) from a contracting officer. What are the next steps? There are several processes to follow, including one to aid in the recovery of additional costs incurred as a result of the SWO.
The government cannot dictate the number of indirect rates you have or how you apply them but they can cite you for non-compliance in the allocation of your indirect costs. Learn how best to allocate your costs based on the type of expense.
Was your rate structure used to allocate indirect costs to your products or services established to satisfy your accounting software? Was it dictated by your customer? Did you set it up because you thought that is what was needed to win contracts? Did you get it from a book or seminar, or even Google? If you answered “yes” to any of these questions, you need to read further.