Wednesday, October 10, 2012

More on DCAA's Adequacy Checklist for Forward Pricing Rate Proposals

A couple of days ago we alerted you to DCAA's (Defense Contract Audit Agency) new adequacy checklist for forward pricing rate proposals. The purpose was to alert you to the fact that this document exists and provide you an additional resource for ensuring adequate submissions.

Since our initial post, we've had a chance to review it more carefully. Based on our assessment now, we believe that DCAA has taken significant liberties in portraying or interpreting FAR and DFAR requirements for what constitutes an adequate forward pricing rate submission. While its not a bad checklist and can be used as a baseline for assessing your own proposal, the FAR and DFAR references that DCAA uses to support the checklist items simply do not say what DCAA wants them to say, in many cases.

Here's one example. Checklist item 9 states: Does the submission include a comparison of prior forecasted costs to actual results in the same format as the submission and an explanation/analysis of any differences (DFARS 252.215-7002(d)(4)(xiii))? The obvious impression here is that the cited DFAR regulation requires contractors to submit, along with its proposal, a comparison of prior forecasted costs to actual results.

But in reading DFARS 252.215-7002(d)(4)(xiii), you find that, first of all, that section discusses a requirement for contractors to provide a written description of their estimating system. Secondly, it only applies to contractors that received $50 million or more in DoD contracts and subcontracts in its previous fiscal year. Thirdly, the specific requirement requires that a contractor's estimating system provide for an internal review of comparisons between forecasted and actual rates. It says nothing about having to submit such comparisons as part of a forward pricing rate proposal.

We could cite additional examples but the point here is that if DCAA uses this checklist to reject your forward pricing rate proposal, you need to carefully review the basis for their assertions and determine whether there truly is a FAR or DFAR requirement to provide whatever it is that DCAA finds lacking.

1 comment:

  1. Paul,
    Your comments (criticism) of DCAA forward pricing adequacy checklist in on-point and one more indication of DCAA's FAR "illiteracy". Not only does DCAA refer to FAR or DFARS and nothing in the regulatory reference supports DCAA's specific interpretation, but the adequacy checklist acknowledges that where FAR isn't referenced, the items not referenced to FAR will be "needed for negotiations"--Since when do auditors speak for PCOs?