Tuesday, July 28, 2015

DCAA Compensation Reviews - Contracting Officer Involvement

This is a second in our series of articles that examine the methodologies used by the Government to assess compensation reasonableness in the post JF Taylor/Metron era. There were two ASBCA (Armed Services Board of Contract Appeals) cases from 2012; JF Taylor (ASBCA Nos. 56105, 56322) and Metron (ASBCA Nos. 56624, 56751, 56752) that were (mostly) decided in favor of the appellants (i.e. the contractors). In deciding for the appellants, the ASBCA criticized the methodologies employed by DCAA in deriving its estimates of "reasonableness". You can refer to the following past articles for a recap of those decisions.

In Part 1 of this series, we explained how DCAA continues to utilize the "fatally flawed" methodologies of the past to audit compensation costs. DCAA rationalizes that their methodologies were not repudiated - they just didn't have the right "expert" on the case to rebut the contractor's experts.

Today we want to identify what we think may be a growing trend by contracting officers to come to their own conclusions regarding compensation reasonableness. Okay, maybe we don't have a trend - maybe its just a couple of anecdotes - but it could become a trend.

We know of a couple of cases where contracting officers' (DCMA contracting officers, in these cases) totally disregarded the DCAA recommendations (based on the three-survey average plus 10%) and performed their own analysis. In one case, the contracting officer asked the contractor to go out and "buy" a survey representative of its size, industry, location, etc and based on that survey, offered the contractor a compensation level at the 75th percentile. Although still less than claimed, the contractor accepted it. In the decision, the contracting officer specifically refused, in light of the J F Taylor case, to accept DCAA's position. The ACO considered DCAA's position dead on arrival. The other case was similar - the contracting officer used a single survey but was not quite as generous in the percentile offering.

The lesson here for contractors is to recognize that DCAA is very intransigent when it comes to defending its position so its best to go right to the contracting officer to resolve the issues. This is not to say that the contracting officer will give away the shop but they seem to be smart enough not to want to defend a position that doesn't comport with case law.

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