DCAA has a two-pronged review process; one for contractors with more than $90 million in annual reimbursements under cost-type contracts (referred to as a "major" contractor) and the other for contractors with less than $90 million (non-major contractor). Most Government contractors fall under the $90 million threshold so that is the focus of this post.
DCAA has established seven criteria that a non-major contractor must meet in order to have its billing system deemed adequate and thereby qualify for the direct bill program.
- Contractors must maintain an adequate accounting system (to learn about adequate accounting systems, sign up for our 2-day course on Business Systems for Government Contractors to be held on June 22-23, 2010 in Seattle). At a minimum, billed costs must be reconcilable to the cost accounting records.
- Contractors must establish provisional billing rates. FAR 42.704(b) requires the contracting officer or auditor to establish billing rates based on information resulting from recent audits, previous audits or experience, or similar reliable data or experience of other contracting activities.
- Maintain cumulative allowable costs by contract to support the preparation of interim and final vouchers. Cumulative costs are necessary to assure that the cumulative amount billed does not exceed the total estimated ceiling costs on the contract and/or the current contract maximum frunding levels.
- Adjust billing rates to reflect acutal year-end allowable costs.
- Brief contracts to assure that billings accurately reflect special cost limitations contained in contracts. (see Schedule S in DCAA's ICE (electronic version of the Incurred Cost Model) for a pro-forma contract brief).
- Submit final year-end indirect incurred cost proposals within six months after year-end.
- Submit final vouchers for physically completef cost-type contracts with 120 days after settlement of final indirect cost rates.