Most Government contractors with cost-reimbursable contracts are familiar with DCAA (Defense Contract Audit Agency) practice of sending out letters related to annual incurred cost submissions. Up until now, DCAA has issued letters before the end of contractors' fiscal/calendar year reminding them of their obligation to submit within six months after year end. Those letters are followed up with letters after 30 days overdue, three months overdue, and five months overdue. After six months, the auditor helps the ACO come up with some unilateral rate determinations.
Frankly, this DCAA practice has always been nonsense. Auditors hated it because it was purely administrative work and detracted from the real nuts and bolts of "auditing". It was silly because DCAA has been and is still lagging in accomplishing incurred cost audits. DCAA made a big deal out of holding contractor's to timely submission, only to pile them up on shelves for years and years. Even today, DCAA is working on submissions that are nearly eight years old. Additionally, DCAA's tracking system was moribund - we have many cases where contractors have gotten past due letters after their timely submissions.
This is about to change. Starting now, DCAA will not be issuing any more letters to contractors. It will be up to DCMA (Defense Contract Management Agency) to ensure contractor compliance with the terms and conditions of their contracts (as it should always have been). DCAA will continue to educate contractors of their contractual requirements as part of on-going interactions but enforcement of the requirement to submit final incurred cost proposals will be administered by DCMA.
You can read more about DCAA's new policy by clicking here.
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