Friday, April 28, 2017

Quarterly Limitation on Payments Statements (QLOPS)

There are certain contract clauses that require contractors to prepare and submit "Quarterly Limitation on Payments Statements" (QLOPS). These typically include Price Redetermination contracts (see FAR 52.216-5 and -6) and Incentive Price Revision contracts (see FAR 52.216-16).

A QLOP is a statement that shows

  1. the total contract price of all supplies delivered or services performed and accepted by the Government and for which final prices have been established.
  2. the total cost (estimated to the extent necessary) reasonably incurred for the items included in No. 1 above.
  3. the portion of the total interim profit that is in direct proportion to the supplies delivered or services performed and accepted by the government and for which final prices have not been established and
  4. the total amount of all invoices or vouchers for supplies delivered or services performed and accepted by the Government (including amounts applied or to be applied to liquidate progress payments).

QLOPS are required to be submitted quarterly to three groups; the contracting officer (CO), the administrative contracting officer (ACO) and the cognizant contract auditor (usually DCAA).

The purpose of QLOPS is to ensure that billing prices during contract performance are within a reasonable range of the expected final prices or estimates at completion (EACs). The Government does not want to ever be in a position where it has paid or reimbursed a contractor for more than the intrinsic value of the products delivered or services performed. To do so puts the Government at financial risk.

DCAA (Defense Contract Audit Agency) has a program for auditing QLOPS. Essentially, the audit will trace contractor representations back to accounting books and records and ensure that the reports are internally consistent with other reporting requirements such as progress payment requests, CPRs, budgets, and other management reports.

These audits can be intrusive and disputes sometimes occur regarding the "rights" of the auditor to view certain contractor information such as budgets and internal management reports. Contractors should find a way to satisfy the auditor however because he/she has certain audit objectives to meet. Disputes over access to records that are not resolved at the auditor level are usually elevated to the ACO or Contracting Officer level and that rarely works out well for contractors.

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