Charged with a CAS Noncompliance? No Worry - Good Chance the Contracting Officer Will Ignore It

The Defense Contract Audit Agency (DCAA) is responsible for testing contractor compliance with Cost Accounting Standards (CAS) and report any noncompliances to the cognizant contracting officer, usually someone from the Defense Contract Management Agency (DCMA) to resolve the potential noncompliances.

FAR (Federal Acquisition Regulations) Part 30, Cost Accounting Standards Administration, contains the regulations on what should happen after issuance of CAS noncompliance reports. The Department of Defense, Office of Inspector General (DoD-IG) initiated an audit to see how well contracting officers were complying with these regulations. Its report was issued last week.

The IG selected 27 DCAA audit reports addressing noncompliances with CAS 403 (Allocation of Home Office Expenses to Segments), CAS 410 (Allocation of Business Unit G&A to Final Cost Objectives), and CAS 418 (Allocation of Direct and Indirect Costs) to determine whether contracting officers' actions taken in response to the 27 reports complied with FAR 30.6 (and DoD Instruction 7640.2, Policy for Follow-up on Contract Audit Reports).

The results, from a taxpayer's perspective, were disappointing. The IG found

• 12 instances in which contracting officers did not issue a Notice of Potential Noncompliance within 15 days, 
• 16 instances when contracting officers failed to complete all actions on the reported noncompliances within 12 months,
• 3 instances in which contracting officer did not have adequate documentation or rationale for determining that the DCAA reported noncompliances were immaterial,
• 8 instances in which contracting officers did not obtain a legal review of their CAS determination (as required by DCMA guidance)

As a result, correction of reported CAS noncompliances was delayed and contractors were inappropriately reimbursed for additional costs resulting from the noncompliances.

The IG recommendations included more training (of course, more training is the IG's solution to every problem) and more effective controls to ensure contracting officer compliance with the regulations. DCMA, of course, concurred with the recommendations, and why wouldn't they? Those recommendations are extremely benign.

You can read the entire IG report here.