The General Services Administration (GSA) is leading an inter-agency working group to develop a guide to assist civilian executive agencies in selecting private firms to perform required contract audits. The inability of DCAA (Defense Contract Audit Agency) to perform timely audits has been reported here and elsewhere and the subject of several GAO (General Accountability Office) and Inspector General reports. Civilian agencies, unlike the Defense Department are not required to utilize DCAA for their contract audit services. Agencies that do utilize DCAA, reimburse DCAA for those services thus there has developed a strong consensus within civilian agencies that they can receive more timely services by contracting with commercial firms rather than relying upon DCAA. Some even contend that the cost for commercial audits are less than the cost for comparable DCAA audits. That contention is difficult to assess. The hourly rates charged by private firms are generally higher than the hourly rates charged by DCAA so the other variable is the number of hours it takes to perform the work. It might be that DCAA, unbound by a profit motive, spends too many hours while a private firm, needing to make a profit, spends too few hours. A number of years ago, the Energy Department moved away from DCAA and contracted with private firms for its contract audit services. Though we have not seen a comprehensive assessment of how that is working, we do know that in some circumstances, the Energy Department has been concerned with the cost growth of these services - especially when contracted firms are called upon to assist "extra-scope" activities such as helping to resolve audit issues that arose from their audits.
The GSA is now requesting feedback on their draft "Civilian Contract Audit Services Ordering Guide". One of the problems facing Civilian Agencies is to determine what contract audit services are required. Heretofore, those agencies have relied upon DCAA to tell them what audit services are needed. So the guide lays out the different audit services that may be needed including (i) audits of final indirect cost rate proposals, (ii) evaluation of provisional billing rate proposals, (iii) audits of forward pricing rate proposals, (iv) business system audits including accounting systems, (v) floorchecks, and more. The guide identifies best practices among Government agencies that have used or are currently using commercial auditors for their contract audit needs. The draft guide includes considerations for what makes for a quality audit, sample documents to attach to RFQs (Requests for Quotations), recommendations for evaluating contractor responses, and pricing considerations. It also includes examples of helpful non-price evaluation factors.
The time for submitting comments to the draft guidance ends October 27th. Instructions for submitting comments can be found under FedBizOps. The draft guide can be downloaded there as well.
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