Friday, April 13, 2018

Policy Shift for DCAA Adequacy Reviews

The Defense Contract Audit Agency (DCAA) recently updated its policy regarding adequacy determinations of contractor submitted annual incurred cost submissions (see Audit Alert on 2018 NDAA Section 803 Timeliness Requirement for Incurred Cost Adequacy Reviews and Audits).

The new policy requires incurred cost submissions to be reviewed for adequacy within 60 days of receipt. This was not something DCAA did on their own. The Agency was forced to adopt this policy based on the 2018 NDAA (National Defense Authorization Act) that was enacted on December 12, 2017. To conform to this law, the Agency quite emphatically states that audit teams must complete the adequacy review and notify the contractor of the results of the adequacy review within 60 days.

Adequacy reviews are not audits. Adequacy reviews primarily check to see whether all the information required by FAR 52.216-7, Allowable Cost and Payment, are included and that data included on the various schedules are internally consistent.

The adequacy checklist is available on line and we recommend contractors complete the checklist themselves prior to submitting the incurred cost submission to the Government. Using the checklist internally should increase the likelihood of getting an "adequate" score from DCAA.

Section 803 of the 2018 NDAA also requires DCAA to complete audits of incurred cost submissions within 12 months of receiving a qualified submission. It will be interesting to see whether DCAA can meet that challenge. They've never been able to consistently do so heretofore but now that the requirement is a law rather than a regulations or a goal, there is a lot more motivation to do so. We just hope that DCAA does not kick back incurred cost submissions for minor infractions just to start the one-year clock over again.

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