Thursday, December 1, 2016

Proof of an Adequate Accounting System Must be on CPA Letterhead

last March, the DHHS (Department of Health and Human Services) issued a solicitation for IT (Information Technology) services and supplies. The RFP (Request for Proposal) contemplated the award of up to 35 ID/IQ (Indefinite Delivery/Indefinite Quantity) contracts over a 10 year period.

The RFP contained detailed instructions regarding proposal submission including a requirement to submit verification of an adequate accounting system. Because of the need for contractors to respond to cost-reimbursement task orders, in order to be eligible for award, offerors must have verification of an accounting system that has been audited and determined adequate for determining costs applicable to this contract. For offerors proposing as a CTA (contractor team arrangement), each member of the CTA must show evidence that it has verification of an adequate accounting system. Failure to do so, the RFP warned, will result in an unacceptable rating.

Verification of an offeror's (and all members of the CTA's) accounting system could be performed by DCAA (Defense Contract Audit Agency), DCMA (Defense Contract Management Agency), or any federal civilian audit agency, or a third-party CPA firm. In the event the verification is from a third-party CPA firm, the verification letter shall be on the letterhead of the third-party CPA firm, and certified by a certified public accountant.

DHHS received 552 proposals in response to the solicitation. Two of the offerors submitted proposals as CTAs and included documentation that each members' accounting systems were adequate for cost-type contracts. But, because these forms were not submitted under the letterhead of the third-party CPA firm, DHHS found they did not comply with the solicitation's requirements to provide, on letterhead of the third-party CPA firm, verification that the CTA members' accounting systems had been audited and found adequate for determining costs applicable to the contract.

The two CTA's filed protests with the Comptroller General (CG) concerning their exclusion from consideration. The firms asserted that under current regulations, potential non-responsibility determinations need to be referred to the SBA. The CG did not agree. The CG found that DHHS's evaluation was one of technical acceptability, not a matter of responsibility. Both proposals were found unacceptable because they did not include the expressly required verification on the letterhead of the third-party CPA firm.

It is an offeror's responsibility to submit a well-written proposal, with adequately detailed information that clearly demonstrates compliance with the solicitation requirements and allows a meaningful review by the procuring agency. An offeror runs the risk that a procuring agency will evaluate its proposal unfavorably where it fails to do so.

You can read the full Comptroller General decision here.

By the way, we are a CPA firm and we regularly perform the kind of audits discussed above. If you have a need, give us a call.

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