Wednesday, November 5, 2014

Who Is Your Cognizant Federal Agency?

Part 42 of the Federal Acquisition Regulations (FAR) is all about contract administration - things that happen after a contract is awarded and who in the Government responsible for performing those activities. It includes an ever-expanding list of 71 contract administration functions (up from 69 functions a few years ago).

For DoD contracts, these functions are performed by DCMA (Defense Contract Management Agency). Other agencies have their own contract administration functions - DOE (Department of Energy) and NASA are two such departments having robust contract administration functions.

The administration functions are delegated to contract administrators by the contracting officer. The contracting officer may decide to keep most of the administrative functions and not delegate them. There are a couple of contracting activities within DoD that do just that - they retain most of the ACO functions. However, according to FAR, there are four functions that must be delegated - they cannot be retained by the contracting officer. These are forward pricing rate agreements, final incurred cost settlement, anything to do with CAS (Cost Accounting Standards) and determining the adequacy of contractors' accounting systems.

It is very common for contractors have a mix of contracts from various Federal agencies. We were just reading about one contractor with significant contracts from DoD (Defense) and DOE.(Energy) and AID (Agency for International Development). Each one of those agencies have their own contract administration functions but it would not be necessary, desirable or even workable if each one were trying to perform their contact administration functions independent of the other. For example, why would you want two different agencies to independently review a contractor's accounting system and determine whether the system was adequate for Government contracting purposes. What would happen, for example, if DoD declared the accounting system adequate but DOE came along and declared it inadequate?

To prevent inefficiencies and duplication, FAR came up with the concept of "Cognizant Federal Agency". FAR states that only one federal agency will assume contract administrative functions at a given contractor and that agency will be called the Cognizant Federal Agency. The Cognizant Federal Agency is normally the agency with the largest dollar amount of negotiated contracts, including options (see FAR 42.003). What happens then is that the various agencies get together and tally up their negotiated contracts and the winner becomes the Cognizant Federal Agency.

Contracting is not static and sometimes, the contract mix changes so that the assigned Cognizant Federal Agency no longer has the preponderance  of the contracts at a particular contractor. So, if the responsibility for contract administration flips from one year to the next and then back again, a significant loss of continuity and efficiency might occur. FAR has this one figured out.
Once a Federal agency assumes cognizance for a contractor, it should remain cognizant for at least five years to ensure continuity and ease of administration. If, at the end of the five year period, another agency has the largest dollar amount of negotiated contracts, including options, the two agencies shall coordinate and determine which will assume cognizance. However, if circumstances warrant it and the affected agencies agree, cognizance may transfer prior to the expiration of the five-year period.
So, if you don't like your contract administrator, go out and get a bunch of contracts from a different Federal agency and in five years, you'll have a new one.

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