Contractors to Get Double Teamed on Forward Pricing Rate Proposals

DCMA (Defense Contract Management Agency), not to be confused with DCAA (Defense Contract Audit Agency) recently implemented a policy to encourage its contract administration staff to complete reviews of forward pricing rate proposals (FPRP) within 30 days of receipt and commence negotiations of forward pricing rate agreements (FPRA) within 60 days of receipt.

DCMA is growing their cost monitoring function because they can no longer rely on DCAA to provide timely reporting on FPRPs.  DCMA is gearing up its capability to make sound and timely assessments of contractor submitted FPRPs and they will be performing their reviews at the same time DCAA is conducting their audit(s). This means that contractors will need to prepare themselves to be responsive to simultaneous reviews, one from DCMA and the other from DCAA.

The DCMA policy emphasizes that input from DCAA is not necessary to complete its review unless someone in their chain decides that audit input is necessary to close a critical gap of information. That begs the question, doesn't it, as to why DCAA's audit is necessary to begin with. Who in DCMA is going to say that he/she can't finish their review of an FPRP because it needs information from DCAA. That will never happen.

But, DCAA is going to plug along and do their review anyway. At such time as they're comfortable with the sufficiency of their audit tests, they'll issue their report to DCMA. DCMA, in turn, will look it over and do one of two things (according to a recent DCAA memo). DCMA will look it over and see if there is something in there that would cause them to bail on the rates that they had negotiated and re-open the rate determination process or, they will read it and file it for future use. Guess which of the two options will prevail most often.

Notwithstanding the fact that we have two Agencies wasting resources by performing the same reviews, but we have contractors already complaining that they have to provide the same information, sometimes formulated slightly different to appease the respective staffs, at additional cost to them (and ultimately the Government).

This dual approach to reviewing FPRAs can't last too long. Complaints will be heard at a high enough level for someone in the Defense Department to make an executive decision and call off one of the Agencies.

This work should stay with DCAA. That Agency has the auditors who are first and foremost, accountants, who understand the vagaries and intricacies of indirect rate analysis and complex cost accounting systems, DCAA just needs to stop trying to "audit" everything and develop non-audit processes for some of its "products". If they forget about GAGAS (Generally Accepted Government Auditing Standards) for a moment and get back to being nimble and responsive to customer needs, they can provide an extremely valuable service to the Government.