Is the Data From Your Computer Any Good?

It wouldn't be an overstatement, would it, to say that just about every kind of information and data is electronic (or based on electronic systems) these days - accounting data, budgets and forecasts, purchasing, estimating, direct and indirect rate development, tracking, EVMS, and on-and-on. We've all come to rely upon Word, and Excel, and proprietary accounting software. Even auditors these days utilize electronic working paper applications to compile, prepare, and report on their work.

So take the case of a typical proposal submission. It was probably submitted electronically, as per the instructions of most Request for Proposal (RFPs) or Request for Quotation (RFQs). The prospective contractor may have developed its estimates of material costs from historical purchases recorded in its electronic purchasing system. Its computation of direct labor rates would no doubt come from its timekeeping and payroll systems. Its indirect expense rate forecasts would come from data produced by the accounting software(e.g. QuickBooks) and perhaps some budgeting applications. Quantities (materials and labor), if there was useful production data for learning curve applications or other trends, would come from production schedules, also electronic.

So now comes the Government (cost/price analysts, contracting officers, contract auditors, etc) to review, assess, and render opinions on the acceptability of proposed costs. The Government reps might break the submission apart and ask the prospective contractor to support various items of its proposal. Invariably, the supporting data will ultimately drill down to data from one or more electronic (computerized) system.

How is the analyst or auditor to know, with reasonable assurance, that the underlying data is any good? What controls do contractors have to ensure the reliability and accuracy of their data systems? What is to prevent prospective contractors (like so many in unnamed foreign countries) to maintain two or three sets of books? Do contractors have trained and qualified individuals responsible for maintaining accurate data and records or has the task been seconded to someone who's skill set is in other areas (as is common in very small companies).

Tomorrow we will look at how contract auditors respond to the problem of ensuring that they can justifiably rely on the accuracy of contractor prepared and submitted electronic data.