Friday, May 27, 2011

Access to Records - When Disputes are not Resolved

Companies desiring to enter the Government contracting arena must be prepared to open their books and records to the Government. Whether its estimating, purchasing, billing, tracking (e.g. EVMS), or quality, there is always the potential for someone from the Government to peer over contractors' shoulders to see if they're doing things correctly. The relevant statutes, regulations, and contractual provisions however do not give the Government access rights to anything and everything. There must be a nexus between the purpose of the audit or purpose of the review and the records being requested. If contractors have any concern over the relevance of any requested record, auditors must be prepared to discuss the basis for the request.

Once in awhile, the contracting parties reach an impasse. The Government determines that a particular record is absolutely critical to its review to the extent that it cannot proceed or express an audit opinion without it. The contractor is just as adamant that the data is not required and refuses to turn provide it to the Government. When elevating the issue up the various levels within the respective organizations fails to resolve the issue, the Government can and will take a number of actions.

If the audit pertains to forward pricing, claims, terminations, or requests for equitable adjustment, auditors will question any costs that are not adequately supported. If the amount in question is significant, the auditor will express an opinion to the effect that the contractors proposal (or assertion) is not acceptable as a basis for negotiating costs. This will most likely halt any negotiations.

If the audit pertains to incurred costs, billings, progress payments, or billing rates, the auditor will suspend or disapprove costs that are not supported. This action could have a detrimental impact on a contractor's cash flow situation.

Most audit agencies have subpoena authority. DCAA's own guidance lists subpoena power as one possibility for compelling contractors to provide requested data. However, DCAA has not issued a subpoena in more than 20 years so that seems an unlikely option. Its much more expedient for the Government to disallow or question costs.

The Government has the upper hand in these matters. Contractors can choose to forgo contracts and claims or face the prospect of not having all of their allowable and allocable costs reimbursed. However, if these are not desirable outcomes, the Government will ultimately get its way.

No comments:

Post a Comment