Monday, November 1, 2010

Significant Changes to Audit Thresholds

The Department of Defense has revised its procedures (Procedures, Guidance and Information or PGI) to limit contracting officers' requests for DCAA audit assistance to fixed-price proposals greater than $10 million and cost-type proposals greater than $100 million. This, according to DoD, is to "... align DCAA audit resources to those areas with greatest risk." This does not change the $700 thousand cost or pricing data threshold. Now, pricing support for proposals under the new thresholds will come from the Defense Contract Management Agency (DCMA) instead of through Defense Contract Audit Agency (DCAA). Some contracting officers are no doubt pleased with the change. They are hoping that DCMA will improve on the timeliness of pricing support they have been receiving lately.

Not everyone is pleased with the change. POGO (Project on Government Oversight) estimates using 2009 data, that there will be about $92 billion that will no longer be subject to audit. POGO is concerned that taxpayer interests might not be served by this move. Additionally, DCAA auditors are somewhat concerned about their own future. Pricing support represents a substantial portion of DCAA's workload. With $92 billion less to audit, current staffing levels may be too high.


  1. The $700 mentioned in this that $700,000?

  2. When does this take effect?

    Will DCMA just express an opinion on the resonableness of the pricing, or will they be invovled in the negotiation?

  3. This new DoD policy to limit audit requests to proposals over $10 million (fixed price) and $100 million (cost reimbursable) became effective on September 17, 2010.

    We don't know exactly the role that DCMA will play in negotiations. We do know that they are "standing up" a new pricing function and have, in some cases, hired away DCAA auditors.