DCAA issued new guidance last month which effectively tells auditors to lighten up a bit. Instead of insisting upon a strict interpretation of "work product" being some formal report that evidences work performed, DCAA is now acknowledging that there are many ways for contractors to satisfy FAR 31.205-33 documentation requirements. DCAA states:
The type of evidence satisfying the documentation requirements will vary significantly based on the type of consulting effort and from contractor to contractor. Therefore, it is important for the audit team to understand that the evidence required from the contractor is essentially the following:
• An agreement that explains what the consultant will be doing for the contractor;
• A copy of the bill for the actual services rendered, including sufficient evidence as to the time expended and nature of the services provided to determine what was done in exchange for the payment requested, and that the terms of the agreement were met. This documentation does not need to be included on the actual invoice and can be supported by other evidence provided by the contractor;
• Explanation of what the consultant accomplished for the fees paid – this could be information on the invoice, a drawing, a power point presentation, or some other evidence of the service provided.
DCAA will even accept retroactively prepared evidence:
The contractor may provide evidence created when the contractor incurred the cost as well as evidence from a later period. Audit teams should consider evidence from a later period provided by the contractor, taking care to assess the quality of the evidence (generally, evidence prepared after the fact is less persuasive) and will likely need to obtain additional corroborative evidence. As an example of evidence from a later period, the contractor may facilitate a meeting between the consultant and the audit team to obtain documentation (oral/written) from the consultant regarding what effort they performed (i.e., third party confirmation). The audit team should consider the evidence provided by the consultant, along with other evidence obtained, to determine if the total evidence gathered is sufficient to satisfy the documentation requirements.
And consider this statement from the same guidance:
The purpose of the work product requirement is for the contractor to be able to demonstrate what work the consultant actually performed (in contrast to what work is planned to be performed). Although a work product usually satisfies this requirement, other evidence also may suffice. Therefore, if the audit team has sufficient evidence demonstrating the nature and scope of the consultant work actually performed, the contractor has met the FAR 31.205-33(f)(3) requirements even if the actual work product (e.g., an attorney’s advice to the contractor) is not provided. The audit team should not insist on a work product if other evidence provided is sufficient to determine the nature and scope of the actual work performed by the consultant.
This new guidance should ease the burden of justifying the allowability of consulting costs - it tells auditors to quit being so strident in their interpretations and use some judgment and common sense.