DCAA Relations

Did I Say That?

August 1, 2013

I am not sure many staff members within DCMA or DCAA  realize that everything they say in writing is accountable and can come back to haunt them.
Today, I am reminded of the scene in “Casablanca” where Claude Rains is in the middle of closing down Rick’s because he discovered there is gambling going on and someone comes over and hands him his winnings!
DCAA Relations, Incurred Cost Proposals

Fix it, I Won’t

July 1, 2103

Over the last several years I continue to spend hours discussing the shortcomings and design flaws surrounding DCAA’s recent versions of the ‘model’ ICE (Incurred Cost Electronically)

My favorite complaint is DCAA’s decision to publish their latest two versions in June which, by remarkable coincidence, is only a couple of days before the majority of submissions are due across the country. This was followed up last year by one supervisor’s insistence the new Schedule J be utilized on a submission turned in before the new schedule was even published. This is funnier when I recall that he called the new Supplemental Schedule B by it old name the Schedule T.

The Schedule I bothers me for one serious design dating back to the introduction of the schedule from about a dozen years ago. FAR52.216-7(d) (2) (iii) (I) – Allowable Cost and Payment is pretty clear:

(I) Schedule of cumulative direct and indirect costs claimed and billed by contract and subcontract.

DCAA’s model Schedule I links back to the total costs on the Schedule H and the new document published by DCAA for determining the adequacy of a proposal includes this as a requirement. This now defines the “Current Year Cost FYE” on the schedule I as the total contract costs on the Schedule H.

The Schedule I now takes this figure and the figure from the previous year’s Schedule I to reach a cumulative cost amount. This is then reconciled to the contract “Cumulative Billed” through the last voucher of the year.  The final result is an amount that the contractor has overbilled or underbilled.

Yeah, right.

If these are CPFF contracts the billing includes fees while the Schedule H does not. This would mean that there is a reasonable chance that the Schedule I will always show overbilling by the amount of the Fee (Schedule H costs of $100 compared to billing $100 + $7 in fee shows up as an overbilling of $7).

Of course this assumes that the contractor neatly bills everything in a final voucher for the year. In other words, they bill all of the costs for December 1 to December 31 and not December 21 – January 7. There is no FAR requirement for tidy billing and with the introduction of intra-month billing several years ago it does not even make business sense.

I have heard all sort of amusing rationalizations from DCAA, contractors, and even consultants on this issue over the years.

  • One auditor argued that I could not link the model schedule I to the FAR paragraph I in the regulation.
  • The most common argument is that Billing does not include Fee and the contractor should remove the Fee from the Schedule I (thank God no one has asked me to remove it from the public voucher)

Most contractors and DCAA auditors solve the problem by adding a Fee column to the Schedule I and for years I did this. I stopped doing this several years ago for one simple reason: DCAA kept coming out with new versions of the ICE with this same problem (and new ones). Are the designers even talking to the auditors in the field?

I am always looking for a sign that the DCAA crisis which began in 2008 peaked and we are finally moving forward. Fixing the Schedule I would be such a sign if for no other reason that it would indicate the DCAA bosses in Washington are listening to the people on the front lines.

Fix it, I won’t.

Accounting System, Cost And Accounting, DCAA Relations, Department of Defense News, Incurred Cost Proposals, Running Your Business

Subcontractor Bites Prime Contractor

June 14, 2013

This article appeared in the Albuquerque Journal  this morning: http://www.abqjournal.com/main/210568/news/contractor-fraud-at-n-m-tech-program.html

I dug a little deeper and this case contains important information for government contractors. I have posted a copy of the complaint. I downloaded from the US District Court’s PACER system although you will notice the cover sheet instructed that it not be posted. Go Figure, I will not.

I am taking this off the complaint and offer no opinion about the truth of the complaint. I am sure that even as the subcontractor settled they did not admit any wrongdoing.

Here are the critical points.

  1. The Department of Homeland Security awards a series of contracts to a college in New Mexico (Prime). These contracts were to develop and implement training for first responders arising out of the Oklahoma City bombing.
  2. The Prime contracts for roughly a third of the contract value with a subcontractor  (Sub)to provide numerous trainers to help with the training. The contract between the Prime and the Sub utilized a Times and Material format.
  3. Although the prime contract was issued by the Department of Homeland Security, the Sub’s cognizant agency was the Department of Defense.
  4. This meant that all of the labor rates for the contract were reviewed and approved by DOD, not DHS.
  5. The complaint specifically alleges DCMA, there is no mention of DCAA in the complaint although I am personally aware of an excellent DCAA auditor who worked on audits involving the Prime.
  6. It is critical to understand that DCMA approved labor rates for actual people working for the Sub full time and with fully loaded benefits.
  7. It is also critical to understand that the prime and possibly DHS had no access to this rate work other than to know the rates had been approved by DCMA.

What is alleged to have happened is the Sub billed the Prime for higher per hour rates that they actually paid the people doing the work. They allegedly billed the Prime for a theoretical Lead Instructor at $95 an hour when the work was actually done by someone else at $55 an hour. In addition it is alleged the lower paid worker was a temp and received no benefits.

A classic case of where the government’s left hand has no idea what their right hand is doing.

This is treated as an alleged defective pricing with the Sub making a net profit of 37% instead of the 7-10% bid.

Just remember, Fixed Price, Time & Materials, and especially Cost type contract the money is never yours until the government says so. Sometimes that can take several years.

I cannot help but wonder how they handled the Schedule K on their incurred cost proposal submissions.