October 31, 2000
CONTRACTOR INSURANCE/PENSION REVIEWS
PURPOSE: To provide guidance on Contractor Insurance/Pension Reviews (CIPRs).
BACKGROUND: The NASA Office of Inspector General's (OIG) review of health care costs at NASA contractors identified a concern regarding NASA's involvement in the CIPR process. The OIG has recommended that guidance be provided to NASA contracting officers regarding CIPRs.
GUIDANCE: A CIPR is an in-depth evaluation of a contractor's insurance program; pension plans; other deferred compensation plans; and the related policies, procedures, practices, and costs to determine whether they are in compliance with the FAR and pertinent contract clauses. The review of a contractor's compensation structure, including pension plans, and its insurance plans are two of the contract administration functions found at FAR 42.302 normally delegated by NASA to the contract administration office (CAO). The CAO for most NASA contractors is the Defense Contract Management Agency (DCMA), which uses administrative contracting officers (ACOs). The ACO is responsible for determining the allowability of insurance and pension costs for Government contracts. In carrying out this responsibility, CIPRs are conducted by DCMA insurance/pension specialists and Defense Contract Audit Agency auditors.
The DCMA's guidelines state that a CIPR is normally conducted only when a contractor has $40 million of qualifying sales to the Government during the contractor's preceding fiscal year, and the ACO, with the advice from DCMA insurance/pension specialists and DCAA auditors, determines a CIPR is needed based on a risk assessment of the contractor's past experience and current vulnerability. Qualifying sales are those contracts for which cost or pricing data were required or contracts priced on other than a firm-fixed-price or fixed-price with economic price adjustment basis. Sales include prime contracts, subcontracts, and modifications to such contracts and subcontracts.
Although a contractor may not meet the above stated guidelines, a special CIPR may be conducted if the following circumstances exist, and these circumstances may result in a material impact on Government costs:
1. Information reveals a deficiency in the contractor's insurance/pension program;
2. The contractor proposes or implements changes in its insurance, pension, or deferred compensation plans;
3. The contractor is involved in a merger, acquisition, or divestiture; or
4. The Government needs to follow up on contractor implementation of prior CIPR recommendations.
CIPRs are usually self-initiated by the ACO; however, if NASA or any other Government agency believes that a review should be conducted, a recommendation to that effect should be provided to the ACO. If the ACO concurs, the review may be conducted as a special CIPR or as part of an already scheduled CIPR.
NASA contracting officers with major contracts should request that ACOs for those contractors provide them with a copy of any CIPR reports. In cases where issues are found that could have a significant financial impact on the agency, NASA should provide input to the ACO to assist in the resolution of the issues. The NASA input should be provided by the installation providing the preponderance of the NASA funding. This may entail that installation discussing the issues with contracting officers from other NASA installations providing significant contract funding to the particular contractor. The extent of NASA participation and the form of that participation should be dependent on the particular circumstances.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in effect until cancelled or superseded.
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R. Scott Thompson
Director, Contract Management Division