Friday, July 10, 2015

Over the past few weeks, we have been bringing you updates on provisions in the House and Senate versions of the National Defense Authorization Act for 2016. The differences between the respective bills are being ironed out in conference committee so we do not know at this time which provisions will survive the final cut.

In the meantime, various interest groups have been weighing in on different aspects of the proposed legislation. Earlier this week, for example, the Professional Services Council (PSC), representing Government service contractors, released a letter written to Chairmen of the House and Senate Armed Services Committees expressing concern with "a small number of proposals" included in the bills.

One of their concerns addresses the proposal to limit DCAA's (Defense Contract Audit Agency's) ability to perform audits for other Governmental agencies on a reimbursable basis until such time as the Agency eliminates its own backlog of audits for the Department of Defense. We wrote concerning this provision back on June 3rd, 2015.

In PSC's view:
PSC supports many elements of this provision and shares the Senate Armed Services Committee’s concern about DCAA audit backlogs. However, we recommend that paragraph (a), which limits the ability for DCAA to assist non-Defense agencies with audit support, be deleted. Paragraph (a) is likely to exacerbate audit backlogs across all government agencies and may not improve DCAA’s capacity to support its work on DoD-related audits.
The PSC did not explain how the provision would likely exacerbate the audit backlog across all Government agencies but we can guess. When DCAA conducts incurred cost audits, they include audit coverage for all flexibly-priced contracts regardless of the agency awarding the contract. In reality, it takes very little additional audit effort to include non-DoD contracts as part of the scope of audit. If DCAA were prohibited from including those contracts, the awarding agencies would have to find someone else to audit their contracts. Since most agencies do not have contract auditors, it means that they'll have to contract with outside firms to perform their contract audits. So, instead of a single audit, the Government will end up performing multiple audits, incurring higher audit costs.

Not only will it likely cost the Government more money overall to conduct multiple audits, but contractors will be subjected to multiple audits and that obviously results in additional costs and inefficiencies for contractors.

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