By Federal News Radio – originally published August 22, 2016
This week marks the two-year point since the Defense Department — worried that only 56.5 percent of its contracted dollars involved a meaningful competition between two or more vendors — issued a series of corrective actions to reverse a downward slide that’s been ongoing for nearly a decade.
It’s time to <RETHINK> how you determine allowability of IR&D costs. Not rethinking your approach could result in the government deeming your IR&D costs expressly unallowable. Spending a few minutes reading this blog will provide you with the required knowledge to ensure your IR&D costs continue to be allowable.
Effective January 30, 2012, the DFARS IR&D cost principle (DFARS 231.205-18(c)(iii)(C)) now requires, as a condition of allowability, contractors to report their IR&D projects to the Defense Technical Information Center (DTIC). Even though this requirement applies only to “major contractors”, as defined in DFARS (DFARS 231.205-18(a)(iii)), the government encourages all contractors to follow this process.
There are additional consequences of not reporting your IR&D project to DTIC. On April 24, 2014, DCAA issued guidance to their auditors explaining how the failure of complying with the DFARS requirement could impact Forward Pricing, Incurred Cost, Cost Accounting Standards, and Accounting System audits. For example, DCAA asserts that a failure to comply with the reporting requirement may constitute a CAS 405 noncompliance and an Accounting System deficiency.
Haven’t reported your IR&D projects to DTIC? Have no fear! Fortunately,
DoD has decided that GSA Schedule prices may not be fair and reasonable and is instructing Contracting Officers to conduct their own pricing review on GSA task orders.
For those unfamiliar with FAR 8.404(d), its authority provides one of the primary values of the GSA Schedules program. It states: “GSA has already determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, under schedule contracts to be fair and reasonable. Therefore, ordering activities are not required to make a separate determination of fair and reasonable pricing…”. By pre-determining that prices/rates for goods and services under schedule contracts are “fair and reasonable”, purchasing agencies have been relieved of performing the proposal analysis techniques described in FAR 15.404-1. Since they don’t have to duplicate the work already done by GSA COs in reviewing pricing, utilizing the Schedules program provides government buyers with a significant savings in time and effort. Well, not anymore for DoD buyers…
In August 2012 Defense Procurement and Acquisition Policy (DPAP) issued Class Deviation 2012-O0014 which implemented accelerated payments to prime contractors, who were in turn, to accelerate payments to their subcontractors. On February 21, 2013, Richard Ginman, Director, DPAP, issued a letter which rescinded Class Deviation 2012-O0014. This is only the beginning of the effects of sequestration.
The payment acceleration policy was implemented to assist with the cash flow of all small-business contractors, whether they are prime contractors or subcontractors to non-small-businesses. While the policy of accelerating payments has been rescinded the DoD will continue with the policy