Standards, Best Practices, and Typical Problems for Companies New to the Federal Market

Transcription

1 Standards, Best Practices, and Typical Problems for Companies New to the Federal Market Firms new to the federal market or at least new to larger cost reimbursement contracts (not fixed fee), may not fully understand government expectations. The following describes DCAA best practices for accounting systems and proposals. A Pre-Award Accounting System Survey is Typical Before a Contract is Awarded A prospective contractor s accounting system and internal controls must provide reasonable assurance that your accounting system itself and your cost data are reliable, that misallocations and mischarges are minimized, and that contract charges are consistent with invoice procedures (see Page 4 below). The government recommends contractors have a reliable system in place before bidding on contracts (see Pages 6 & 8). To see an example of the survey you must pass before you get an award, go to: Pre-Award Survey of Prospective Contractor Accounting System Small Businesses are Not Exempt from Accounting for Costs on CP Contracts Small businesses with contracts less than $7.5 million are exempt from the 19 Cost Accounting Standards (CAS). With contracts between $7.5 million and $50 million, they are exempt from all but four of the CAS standards. But, they are not exempt from accounting for their costs on any Cost Plus (CP) contract (see Page 5). A Financial Accounting System is Not the Same as a Cost Accounting System Whereas financial accounting will report total costs at a company-wide level, cost accounting allocates those costs among various contracts, jobs, and cost objectives (see Page 7). Be Aware of Typical Problems on Proposals for Government Contracts Page 10 lists nine common errors that could jeopardize your proposal. Numbers 8 & 9 are No support [system] for indirect expenses and Inadequate or poor accounting and estimating systems. This is why it is so critical to ensure your accounting software is up to the task of fulfilling a variety of contract requirements before you bid or win contracts. Synergy Business Solutions can demonstrate the capabilities of Microsoft Dynamics SL to meet these requirements. Best Practices for Procuring Contracts in the Federal Market Copyright 2017 Synergy Business Solutions

2 Cost Proposals and DCAA Preaward Surveys Page 2

3 DEFENSE CONTRACT AUDIT AGENCY AGENDA Basics about Defense Contract Audit Agency Preaward Survey Policies FAR/DFAR Financial Condition / Capability Preaward Accounting Systems Page 3

4 DFARS / General Standards DFARS (e) & Applicable to: Cost-Reimbursement or Incentive type contracts Contracts billed using progress payments prospective contractor s accounting system and related internal controls must provide reasonable assurance that (i) Applicable laws and regulations are complied with; (ii) The accounting system and cost data are reliable; (iii) Risk of misallocations and mischarges are minimized; and (iv) Contract allocations and charges are consistent with invoice procedures. (ie, billed the same way as accounted for) Page 4

5 FAR 19.6 & 19.8 Small Businesses & 8(a) Small Businesses are exempt from the 19 Cost Accounting Standards (CAS) per 48 CFR 99 However, small businesses are not exempt from: Accounting for their costs on cost-type contracts Maintaining adequate financial resources to perform PCOs should still request Preaward Survey If small business does not meet FAR Part 9.1, they may apply for SBA Certificate of Competency (COC) FAR and Page 5

6 DCAA Services - Preaward Surveys BEST PRACTICE Suggested sequence of steps during source selection: Prospective offerors who intend to bid indicate readiness for DCAA Accounting System and Financial Condition reviews 2-3 months prior to the date proposals will be due: DCAA/Contractor/PCO works to resolve findings Offerors subsequently submit proposals Customer evaluates price/cost & documents Ktr responsibility Page 6

7 DCAA Services - Preaward Accounting System (17740) Financial Accounting System is NOT the same thing as Cost Accounting System Financial Accounting (eg, a P&L statement) will only report total amounts incurred for each cost element (labor, materials, etc) at company wide level Cost Accounting System distributes and allocates those costs among specific contracts, jobs or other cost objectives in causal/beneficial relationships Labor costs, for example, must be based on timekeeping system with hours recorded to each job, payroll cost attributed to the hours, etc Page 7

8 DCAA Services - Preaward Accounting System (17740) FAR (f), DFARS (e) and Audit is recommended for flexibly priced prime contracts (eg, CPFF, T&M, LH, etc) Preaward Accounting System Audit and SF focuses on contractor s ability to: allocate costs among contracts and CLINs in logical manner exclude unallowable costs record employee labor hours by contract segregate direct and indirect costs provide timely, accurate cost accounting data to support billings provide accurate data to support incurred cost claim by contract Page 8

9 Best Practices - Preaward Reviews Request Electronic Data in the RFP Request Accounting System and Financial Capability Reviews before proposal receipt Have offeror identify location of accounting records for parent / subsidiary company Page 9

10 Typical Problems found in Proposals Failure to conform to the specifications of the request for proposal Proposal not mathematically correct Unallowable cost included in proposal (far ) Supporting schedules do not tie into summary Lack of coordination between company departments Poor or no index of cost & pricing data Lack of support for SCA or DB wages above wage determination level No support for indirect expenses &/or improper allocation bases Inadequate or poor accounting & estimating systems Page 10