Procurement Information Circular
DOCUMENTATION AND NEGOTIATION REQUIREMENTS RELATIVE TO AUDITS PERFORMED BY THE DEFENSE CONTRACT AUDIT AGENCY (DCAA)
PURPOSE: To provide guidance on the need to:
1. Develop and document a negotiation position prior to negotiations;
2. Involve knowledgeable DCAA auditors in the negotiation process and in the review of any data provided by the contractor in response to the DCAA report;
3. Fully describe in a negotiation memorandum the resolution of DCAA audit recommendations; and
4. Report on any Reportable Contract Audit (RCA) reports when the impact of questioned costs to NASA exceeds the $100K threshold.
BACKGROUND: DCAA audits are a critical oversight control over contractors working on major NASA contracts and programs. To improve the effectiveness and efficiency of Government operations, Office of Management and Budget (OMB) Circular A-50, “Audit Follow-up”, requires all Federal agencies to establish audit follow-up systems “to assure the prompt and proper resolution and implementation of audit recommendations.” The Circular also requires that the follow-up systems provide for a complete record of action taken on both monetary and non-monetary findings and recommendations.
A recent OIG review of NASA’s Contract Audit Follow-up System identified several areas where the system could be improved. The suggested recommendations could result in a higher net savings percentage of the DCAA-reported questioned costs.
1. Develop and document negotiation positions: Contracting officers must follow the requirements in FAR 15.406-1 to establish pre-negotiation objectives before the negotiation of any pricing action. The scope and depth of the analysis supporting the objectives should be directly related to the dollar value, importance, and complexity of the pricing action.
2. Involve DCAA in negotiations when appropriate: When DCAA has provided an audit reflected in a pre-negotiation objective, DCAA should be invited to attend negotiations whenever the CO believes the DCAA expertise will enhance the Government’s ability to sustain or explain questioned costs or other audit recommendations. In addition, the CO should involve DCAA in the review of any data provided by the contractor in response to the DCAA report.
3. Fully describe in the negotiation memorandum the resolution of DCAA audit recommendations: Contracting officers must follow the requirements of FAR 15.406-3, Documenting the negotiation, and FAR 42.705-1, Contracting officer determination procedure. The documentation should include a summary of the contractor’s proposal, and any DCAA or other field pricing assistance recommendations. If there is an occasion where the CO deviates from the recommendation of the auditor, the memorandum should explain the reasons for the variance.
4. Report on any Reportable Contract Audit (RCA) reports when the impact of questioned costs to NASA exceeds the $100K threshold: PIC 00-06 provides guidance on contract administration and audit support services provided by the Defense Contract Management Agency and DCAA relative to reporting on RCAs. DCAA has agreed to forward to NASA any report administered by DOD where the impact of questioned costs to NASA exceeds the RCA threshold. Procurement personnel who receive these reports should immediately advise their Center DCAA Point of Contact so it can be included in the NASA electronic tracking system and reviewed monthly.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in effect until canceled or superseded.
HEADQUARTERS CONTACT: Lou Becker, Code HK, (202) 358-4593, e-mail: firstname.lastname@example.org.
R. Scott Thompson
Director, Contract Management Division