DEFENSE CONTRACT AUDIT AGENCY

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DEFENSE CONTRACT AUDIT AGENCY

• DCAA
• Auditing Can Make a Difference On Your Contract
• Presented by
• Douglas Black
• DCAA Financial Liaison Advisor
• and
• Sharon Horne
• DCAA Branch Manager
• Hampton Roads Branch Office
• January 28, 2010

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Defense Contract Audit Agency
AGENDA

• DCAA Background
• Summary of DCAA Audit Results
• DCAA Staffing
• Financial Liaison Advisor
• DCAA Involvement
• Types of DCAA Field Pricing Support
• COPD vs. OT COPD
• Cost vs. Price Analysis

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Defense Contract Audit Agency

• Established in 1965
• Separate Agency of the Department of Defense
• Reports to the DoD Comptroller General
• Provides services to all DoD Components
• Provides all necessary contract audits for DoD
• Provides accounting and advisory services for
  DoD.
• Provides accounting and advisory services to
  non-DoD agencies.

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DCAA REVISED MISSIONDoD Directive 5105.36, Jan
4, 2010

• The DCAA, while serving the public interest as
  its primary customer, shall perform all necessary
  contract audits for the Department of Defense and
  provide accounting and financial advisory
  services regarding contracts and subcontracts to
  all DoD Components responsible for procurement
  and contract administration. These services shall
  be provided in connection with negotiation,
  administration, and settlement of contracts and
  subcontracts to ensure taxpayer dollars are spent
  on fair and reasonable contract prices. DCAA
  shall provide contract audit services to other
  Federal agencies, as appropriate.

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RESPONSIBILITIES AND FUNCTIONS

• b. Assist in achieving the objective of prudent
  contracting, by providing DoD officials
  responsible for procurement and contract
  administration with financial information and
  advice on proposed or existing contracts and
  contractors, as appropriate.
• c. Audit, examine, and/or review contractors and
  subcontractors accounts, records, documents, and
  other evidence systems of internal control and
  accounting, costing, and general business
  practices and procedures in accordance with and
  other applicable laws and regulations..

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Defense Contract Audit Agency
Director Deputy Director
Executive Officer
General Counsel Defense Legal Service
Assistant Director Operations
Assistant Director Resources
Assistant Director Policy Plans
Regional Offices (5) Director Deputy
Director
Regional Offices (5) Central, Eastern,
Mid-Atlantic, Northeastern, and Western
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DCAA Staffing History
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Agency Heartbeat

• 83 Field Audit Offices
• 3,600 Auditors
• Supervisory ratio of 6 to 1
• DCAI Training

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Summary of DCAA Audit Results
Effective Auditing Produces Results
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What is a Financial Liaison Advisor?
Command
Financial Liaison Advisors
FAO
Agency
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FLA Services vs Field Auditor

• Field Auditor

FLA

• On-Site at contractor
• location
• Has access to contractors
• books and records (original
• source documents not
• copies)
• Performs audits/engagements
• Issues DCAA reports
• Gives opinions

• On-Site with Customer
• Available for immediate
• advice on cost/pricing
• data and audit/financial
• issues
• Facilitate audits/services

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DCAA Involvement

• Contracting officer request.
• Required by contract terms.
• Required by Federal Acquisition Regulations (FAR)
  and/or Defense Acquisition Regulation Supplement
  (DFARS).
• Depends on type of contract to be awarded.
• Firm-fixed-price (FFP) contracts and time and
  material (TM) rates most effort takes place
  during proposal stage.
• Flexibly-priced contracts (cost reimbursable,
  cost plus fixed fee, fixed-price redeterminable,
  TM hours) - most effort takes place at incurred
  cost stage.

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Field Pricing Assistance

• FAR 15-404-2(a)(1)-
• The contracting officer (CO) should request field
  pricing assistance when the information at the
  buying activity is inadequate to determine a
  reasonable price.
• The CO must tailor requests to reflect the
  minimum essential supplementary information
  needed to conduct a technical or cost/pricing
  analysis.

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DFARS 215.404-2 Criteria

• DFARS 215.404-2(a)(i) further supplements the
  FAR states that CO should consider requesting
  field pricing assistance for
• Fixed-price proposals exceeding cost or pricing
  data threshold, (i.e. 650,000).
• Cost-type proposals exceeding FAR cost or pricing
  data threshold, (i.e. 650,000) with significant
  estimating system deficiencies.
• Cost-type proposals exceeding 10 million without
  significant estimating system.

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DFARS 215.404-2 Exceptions

• DFARS 215.404-2(a)(ii) further states that the
  CO should not request field pricing support for
  proposed contracts or modifications in an amount
  less than that specified in DFARS 215.404-2(a)(i)
  (prior slide). However, an exception may be made
  when a reasonable pricing result cannot be
  established because of
• A lack of knowledge of the particular offeror or
• Sensitive Conditions (e.g. a change in, or
  unusual problems with, an offerors internal
  systems).

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DCAA Field Pricing Support

• Four types of DCAA forward pricing services
• Specific Cost Information
• Pre-Award Accounting Survey
• Audit of a Specified Cost Elements
• (Part of a Proposal)
• Audit of a Complete Proposal

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First Audit Steps in Reviewing Proposals

• Review the proposal for adequacy
• Establish a reasonable report due date based on
  the risks identified and any specific
  considerations of the contracting officer

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Adequacy Responsibilities

• Contractor is responsible for preparing and
  submitting an adequate proposal along with
  support for the costs (which includes
  subcontractors).
• DCAA is responsible for expressing an opinion on
  the proposal related cost or pricing data as to
  the acceptability of negotiating a fair and
  reasonable price.
• Contracting Officer is responsible for requiring
  timely submission of required data and making an
  informed decision as to the reasonableness of the
  cost.

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Submission Guidelines

• FAR 15.403-5 allows the Contracting Officer in
  connection with the submission of cost or pricing
  data, to
• Require use of FAR 15.408, Table 15-2
• Specify an alternate format or
• Permit submission in the contractors format.

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Guidelines continued

• FAR 15.408, Table 15-2
• Contains the guidelines for submitting a contract
  price proposal.
• Includes instructions to contractors for
  organizing and identifying the contents of a
  proposal.
• General Instructions
• Cost Elements

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Exceptions to Cost or Pricing DataFAR 15.403-1b

• Below Simplified Acquisition Threshold
• Agreed-upon prices
• Based on adequate price competition
• Set by law or regulation
• Commercial item or modification
• Waiver granted

FAR Threshold for Cost or Pricing DataWhen FAR
15.403-1b exceptions do not apply
650,000 FFP or cost-type contract
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Which is Cost or Pricing Data?
Certified
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Cost Analysis
Price Analysis
FAR 15.404-1(b)
FAR 15.404-1(c)
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Cost Analysis Considerations

• Identify riskiest elements of cost in the
  proposal
• Break selected elements into their components
• Obtain contractor basis of estimate for those
  components
• Obtain supporting data from contractor
• Obtain additional supporting data from DCAA, if
  available

• Labor
• Hours
• Direct Rates
• Material
• Quantities
• Unit cost
• Indirect Rates
• Pool elements
• Base elements
• Allocation method

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www.dcaa.mil

VISIT US ON OUR WEBSITE...
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DCAA Field Audit Office Locator

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DCAA Pamphlet (DCAAP) 7641.90Information for
Contractors

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Questions?
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