Monday, April 22, 2013

Submitting Certified Cost or Pricing Data Does Not Necessarily Mean You'll Be Audited

The question arises often - we're required to submit certified cost or pricing data for this particular solicitation, does that mean we'll be audited? Not necessarily.

The term "audit" no longer has the precise meaning it once had. At one time, the term, as used in Government procurement meant DCAA (Defense Contract Audit Agency). In today's vernacular, it could just as easily, or perhaps more likely, include DCMA (Defense Contract Management Agency) who for all intents and purposes, took over the function of evaluating contractor proposals once DCAA raised its threshold to $10/$100 million Fixed/Cost and later subsumed DCAA's program for evaluating indirect expense rates. In fact, DCMA won't correct you if you refer to them as auditors even though they do not adhere to anything close to Generally Accepted Government Auditing Standards when conducting their reviews.

Contracting officers are required protect the taxpayer's interests by ensuring that negotiated prices are fair and reasonable. Even when the circumstances require the submission of certified cost or pricing data, the contracting officer has wide latitude on how to best to evaluate a particular proposal. He/she might request an audit from DCAA (if its over their threshold), request assistance from DCMA (regardless of threshold), request assistance from the group that prepared the IGE (Independent Government Estimate), or perform their own analysis - especially when there is current, relevant data available in their files.

 According to FAR 15.404-1(a)(3), cost analysis can be performed without validating (auditing) the submitted data. The Government does have the right to examine the records that formed the basis for the pricing proposal up until the time of award but that does not mean that the Government is required to do so. There are many cases where solicitations requiring certified cost or pricing data, are awarded without audit.

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