Friday, March 27, 2015

Expanded Access to Records Clause for Some Contracts

The United States Central Command's (CENTCOM) area of responsibility (AOR) includes countries in the Middle East, North Africa, and Central Asia. This AOR, of course, includes Iraq and Afghanistan. The military operations that are occurring in Iraq and Afghanistan are often referred to as contingency operations. The United States is spending a significant amount of money on these contingency operations. Since 2001, the US has spent $1.6 trillion in Iraq, Afghanistan, and fighting ISIS. A good part of that money goes to contractors and subcontractors supporting the contingency operations.

Over the years, there have been many many allegations of fraud, waste, and abuse among contractors and subcontractors operating in CENTCOM's AOR. Funds paid to contractors (and subcontractors) are subject to extortion or corruption and in some cases, provided directly or indirectly to persons or entities that are actively supporting an insurgency or otherwise actively opposing US forces.

Most contracts give the Government certain access to records rights. However, the access is generally narrowly defined and, except for cost-reimbursable contracts, does not automatically give the Government access to incurred cost data. Even in the case of defective pricing (or TINA, Truth in Negotiations Act), the Government is only granted authority to access cost or pricing data that was known to the contractor as of the date of agreement on price, not to cost incurred during contract performance. So essentially, the Government has been somewhat hamstrung in its investigations that contract funds are being used for illicit purposes because it has no contractual authority to demand cost records.

That's about to change.

Earlier this week, the Department of Defense issued a new DFARS (DoD FAR Supplement) clause that will give the Government additional authority to examine records under certain circumstances. The new DFARS clause applies to all contracts and subcontracts over $100 thousand in CENTCOM's AOR. It states, in part, that "In addition to any other existing examination-of-records authority, the Department of Defense is authorized to examine any records of the Contractor to the extent necessary to ensure that funds available under a contract are not subject to extortion or corruption or provided, directly or indirectly, to persons or entities that are actively supporting an insurgency or otherwise actively opposing United States or coalition forces in a contingency operation."

To activate the clause, a contracting officer must issue a written determination based upon a finding by the CENTCOM commander that there is reason to believe that funds available under the contract may have been subject to extortion, corruption, or siphoned off to the opposition. Then, once the written determination is made, the investigators or auditors (or both) will have the legal authority to look at whatever records it determines necessary to follow up on the "reasonable belief".

It will be interesting to see what, if anything, will come of this expanded access to records authority.

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