Friday, November 26, 2010

Contractor Insurance/Pension Reviews (CIPR)

Back in June, we reported on a DoD proposal to move the requirement to perform CIPRs (Contractor Insurance/Pension Reviews) from Guidance to Regulation. You can read that posting here for details and background on the reason for the change (the DoD Inspector General found that guidance was ignored in a lot of cases and recommended that the requirement be upgraded from "guidance" to "regulation" to increase the liklihood that the Government would better assess risks in this area.

On November 24, 2010, the propsed rule became a final rule with essentially no changes. Here's a rundown on the requirements.

A CIPR is a DCMA/DCAA joint review that provides in-depth evaluation of a contractor's insurance programs, pension plans, deferred compensation plans, and all of the related policies, procedures, practices, and costs.

The administrative contracting officer (ACO) is responsible for determining the allowability of insurance/pension costs in Government contracts and therefore is responsible for determining the need for a Contractor/Insurance Pension Review (CIPR). DCMA is the DoD Executive Agency for the performance of all CIPRs. Because of the technical nature of these costs, DCMA has specialists in these areas. DCAA is the DoD agency designated for the performance of contract audit responsibilities related to Cost Accounting Standards administration as they relate to a contractor’s insurance programs, pension plans, and other deferred compensation plans.

An in-depth CIPR is conducted only when a contractor has $50 million of qualifying sales (essentially qualifying sales are negotiated contracts and subcontracts) to the Government during its preceeding fiscal year and the ACO (relying on advice from the DCMA insurance/pension specialists and DCAA auditors) determines that a CIPR is needed based on a risk assessment of the contractor's past experience and current vulnerability. Risk areas include such things as information that reveals a deficiency in the contractor's insurance/pension program and contractor proposals to implement changes to its insurance, pension, or deferred compensation plans.

Next week, we will look at the ACO's risk assessment procedures in more detail in order to identify some of the factors that weigh into his/her decision to proceed with a CIPR.

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