Friday, July 14, 2017

2018 NDAA Passes House - Now On to the Senate

Earlier today the House passed the fiscal year 2018 National Defense Authorization Act (NDAA) by a wide margin; 344-81. Now, the Senate needs to act on its version. The House version calls for $696 billion in spending while the Senate version sits around $700 billion. Both spending proposals exceed the President's $603 billion defense plan.

The bill that passed the House still contains the provision requiring DoD to subcontract at least 25 percent of its incurred cost audit workload in lieu of requesting DCAA (Defense Contract Audit Agency) to perform the audits (see Transitioning from Government Auditors to Commercial Auditors for Incurred Cost Audits for additional details on this provision).

It is not clear who will pay for these audits. It almost seems like an unfunded mandate. Audits conducted by DCAA are authorized in the NDAA (nearly $600 million in the Fiscal Year 2018 House budget). But if DCMA (Defense Contract Management Agency) must pay for the audits that it awards to commercial audits (perhaps as much as $100 million per year), it is going to need to find a source for those funds. It's unlikely that the Agency will want to fund them from operations.

Perhaps DCAA could pay for the audits. After all, they'll be able to save that amount by hiring fewer auditors since their workload will diminish when commercial auditors take over.

One note concerning the 25 percent target. It is measured on costs charged to flexibly priced contracts, not 25 percent of contractors. To get to 25 percent of incurred cost dollars, there will have to be at least a few of the major Defense contractors thrown into the mix.

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