Thursday, September 8, 2011

Provisional Billing Rates

Some Government contractors have been receiving letters from DCAA requesting early submittal of their 2012 provisional billing rates. Provisional billing rates are used in to bill the Government for indirect costs on vouchers and progress payments.

The text within the letters vary a little but state something along the lines of:

In order to expedite the establishment of provisional billing rates prior to the start of the next calendar year, we are hereby requesting you to submit your provisional billing rate packages to our office by such and such a date. By obtaining the packages at this time, we can review and establish rates prior to submission of vouchers to the Government in 2012. By establishing your provisional billing rates prior to the start of 2012, this will ensure minimal delay in voucher processing.

The letter goes on to request that several documents be provided along with the rates including
  • 2012 budgetary data for each pool and base cost element
  • Year to date rates including amounts by pool and base cost element
  • Identification of unallowable expenses by amount and account nomenclature, and
  • Estimated 2011 year end rates including pool and base amounts by cost element.

There are several problems with this request. First, in at least one case, it went to a company with no active Government contracts. Second, there is no contractual requirement to submit provisional billing rates this early. Contractors need only submit rates prior to their use. The earliest that these rates will be needed is sometime in February 2012, when contractors bill for January 2012 costs. Thirdly, most small contractors do not prepare future year budgets this early in the year. Calendar year contractors have only eight months of "actual" costs at this point in the year (January through August).

Finally, the letter contains an implied threat. It states that "By establishing your provisional billing rates prior to the start of 2012, this will ensure minimal delay in voucher processing". We ask, why should there be any delay at all, much less a minimal delay. The Government is bound by the terms of cost reimbursable contracts to reimburse contractors in a timely manner. Failing to do so (according to some legal experts) is a breach of contract.

DCAA has been losing both influence and workload while retaining the same level of staffing. DCAA no longer audits proposals under $100 million dollars, the organization does not conduct financial capability reviews any longer. DoD took away their EVMS reviews (except when specifically requested). Non-Defense agencies are looking elsewhere for their audit needs. Sounds to us like the Organization is looking for things to do so now they've decided to tinker around with contractors' cash flows.

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