New Guidebook on Cost Principles from DCAA

The Defense Contract Audit Agency (DCAA) has eliminated Chapter 7, Audit Guidance on Selected Areas of Costs, from its Contract Audit Manual and replaced it with a new and greatly expanded guidebook on FAR Part 31 Cost Principles. DCAA writes:

This Guidebook addresses FAR 31.2 and other areas of cost audited. In this first edition of the guidebook, we have expanded what used to be included in Chapter 7 by adding 23 additional chapters to address FAR 31.2 cost principals that had not previously been included in CAM. Initially, many sections of the guidebook are a replica of what was in Chapter 7; however, we have rewritten and updated 13 areas of cost. We will be continuing to rewrite the other chapters in this guidebook and will publish them as completed.

The 13 updated chapters include:

1. Bonus and incentive compensation (Chapter 7)
2. Depreciation (Chapter 19)
3. IR&D/B&P (Chapter 33)
4. Legal (Chapter 41)
5. Royalties (Chapter 64)
6. Pensions (Chapter 53)
7. Manufacturing and production engineering (Chapter 45)
8. Joint ventures and teaming arrangements (Chapter 37)
9. Insurance (Chapter 34)
10. Idle facilities and idle capacity (Chapter 32)
11. Patents (Chapter 52)
12. Consultants (Chapter 58)
13. Alcoholic beverages (Chapter 2)

This new guide is definitely a work in process as many of the chapters state "This chapter is currently under construction.

The cost covered by the guide are listed in alphabetical order rather than FAR Part 31 order which may be easier or more cumbersome to navigate depending upon your familiarity with FAR. It appears that each FAR cost principle is covered as well as many other types of costs not specifically covered in the FAR.

We should note that this is intended to be guidance for the contract auditor and not the final word on what is allowable or not allowable. Many disputes have risen over DCAA's interpretation of FAR and the Government does not always prevail.

You can access DCAA's new guidebook directly by clicking here.