Monday, February 20, 2012

Revised Procedures for Submitting Interim Vouchers

Last month, we reported on DoD's proposal to streamline the process of submitting interim vouchers. Interim vouchers are used by contractors to bill for costs under cost-type contracts. For background, you can read the original post here.

Last week, DoD published a Federal Register "clarification" of its proposed rule. It states:

Interim vouchers that are selected using risk-based sampling methodologies will be reviewed and approved by the contract auditors for provisional payment and sent to the disbursing office after the pre-payment review. Interim vouchers not selected for a pre-payment review will be considered acceptable for payment and will be sent directly to the disbursing office. All interim vouchers are subject to an audit of actual costs incurred after payment. The sampling process will be accomplished largely within the Wide Area WorkFlow system.

The rule proposes to revise the requirements for approving interim vouchers by replacing the direct submission process ... with a risk-based sampling process. The proposed risk-based sampling process is a more effective and efficient approach. It allows for the evaluation of selected interim vouchers on a pre-payment basis in lieu of the current direct submission authorization, which does not allow for the pre-payment evaluation of higher risk interim vouchers. It is anticipated that the revised process will provide a more comprehensive samle of all vouchers and an enhanced oversight of higher risk vouchers, while allowing a more efficient processing of the vouchers not selected for pre-payment review.

This proposed rule represents a significant change to process of approving interim vouchers. Under the current rules, the contract auditor is the authorized representative of the contracting officer for authorizing direct submission of interim vouchers for provisional payment to the disbursing office for contractors with approved billing systems (DFARS 242.803(b)(i)(C)). That section will be eliminated under the new rule and replaced with a provision that states: "Interim vouchers not selcted for a pre-payment review will be considered to be provisionally approved and will be sent directly to the disbursing office".

This proposed rule is good news for small contractors. Any contractor who has tried to have its billing system approved for direct submission of interim vouchers can attest to the the fact that DCAA makes it very difficult to "pass". DCAA has effectively encumbered the process by setting a very high standard. The criteria include, adequate accounting system, reconciling billed costs to cost accounting records, establish billing rates with copious supporting data and rationale, maintaining cumulative allowable costs by contract, adjusting billing rates, briefing contracts, and submitting timely annual incurred cost submissions. Many small contractors simply "gave up" and factored extra time for DCAA review into their cash flow projections.

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