Wednesday, October 16, 2013

DFARS Proposal Adequacy Checklist - Will One Noncompliance Render Your Proposal Inadequate?

For the past few days, we've been discussing various aspects of DoD's proposal adequacy checklist that, since last March, has been required of prospective contractors whenever certified cost or pricing data is required. As we've stated before, its not a bad checklist and can help contractors ensure that certain requirements are not inadvertently overlooked. With six months of experience under our belts, we thought we would take a look at how implementation is going.

There are 36 questions in the checklist. In most cases, not all of them will be applicable on any given pricing action. Some of the questions are objective requiring little or not judgment. For example, question 13 asks whether there is a Government forward pricing rate agreement. That's a simple yes/no question. However, most of the questions have a subjective element to them and require some thought and judgment in answering them. And that is where problems have arisen between contractors and contracting officers and/or auditors.

For example, question 26 asks, "Does the proposal indicate the basis of estimate for proposed indirect costs and how they are applied? (Support for the indirect rates could consist of cost breakdowns, trends, and budgetary data.)".  The question here is, how detailed must that basis of estimate be? A contractor might state that indirect rates are based on projections of year-to-date actual rates, adjusted for non-recurring type expenses. The contracting officer on the other hand may want to see all of the details behind that statement and narrative to explain the non-recurring expenses.

Invariably, there will be differences of opinion on what constitutes adequate responses to the questionnaire and contractors will be faced with the prospect of having their proposal determined inadequate. That raises the question of how many "no" answers can there be without having the proposal rejected. There is no concise answer to that question because we are dealing with people, personalities, experience levels, significance, risk, and bad hair days. We can report on the official DCAA policy when it comes to answering that question.

It depends on the significance of the noncompliance(s). Multiple "no" answers can result in an overall adequate proposal. Or multiple "no" answers can render the proposal inadequate. The auditor should apply professional judgment in making the determination by considering the materiality and significance of the noncompliance(s) identified and their relationship to the overall proposal.
Our advice when questioned about adequacy of a response to one of the checklist items follows:

  • If the information is readily available, provide it.
  • If the information is readily available but too voluminous to include in the proposal (remember, some solicitations have page limits), tell them and offer to make it available at your location.
  • If the information is not readily available, look for alternative methods of satisfying the requirement.
  • If the auditor is being unreasonable, elevate the disagreement to the contracting officer. Ultimately, adequacy determination are made by the contracting officer, not the auditor.

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