DCAA's New Policy for Sampling Low-Risk Incurred Cost Proposals

Last July 24th, The Director, Defense Procurement and Acquisition Policy (DPAP), granted a Class Deviation authorizing DCAA to modify its process for sampling low-risk incurred cost proposals. Both DCAA and DPAP stated that the new process will provide for a more effective oversight approach without significantly increasing risk to the Government. What this really provides for is a method whereby DCAA can make its significant incurred cost backlog magically disappear.

Under the new procedures, all incurred cost submissions will be evaluated upon receipt for adequacy in accordance with FAR 52.216-7, using the DCAA Incurred Cost Proposal Adequacy Checklist. Inadequate submissions will be returned to contractors. Adequate submissions will be assigned to one of five strata based on ADV (costs charged to flexibly priced contracts during the year). These strata are

• under $1 million
• $1 to $15 million
• $15 to $50 million
• $50 to $100 million
• $100 to $250 million
• greater than $250 million

Within each of these categories, submissions will be further classified as low risk or high risk. High risk submissions will be audited. Low risk submissions will be sampled. Low risk proposals must meet the following criteria:

1. There has been a prior audit of incurred costs
2. No significant audit leads or no other significant risk has been identified
3. No prior significant total exception dollar reported in the last year audited. Significant is defined as $15 thousand for the under $1 million strata, $25 thousand for the $1 - 5 million strata, etc.

Low risk proposals under $1 million received before September 30, 2011 will not be audited. DCAA will send a memorandum to the contracting officer telling him/her that everything is fine. For low risk proposals under $1 million received after September 30, 2011, DCAA will select only 1% for audit. The remaining 99% will not be audited.

Sampling rates for the other strata include

• $1 to $15 million - 5%
• $15 to $50 million - 5%
• $50 to $100 million - 10%
• $100 to $250 million - 20%
• greater than $250 million - 100%

While there will still be a strong emphasis for ensuring adequate incurred cost submissions, there will be significantly fewer incurred cost audits in the future.