Former_DCAA

2 hours ago, C Culham said:

Therefore my question.    Paragraph (C) of the citation Joel provided -

"The contracting officer could request the data through a solicitation provision."

I wasn't ignoring your question, I'm just getting involved at the end and haven't seen the solicitation yet. 

18 hours ago, joel hoffman said:

See https://www.acquisition.gov/dfarspgi/pgi-215.404-71-4-facilities-capital-employed.

The KO or ACO is responsible to complete the form DD-1861…

They don't have the accounting information required to complete it. I'm just confused why they need the form if no COM is being claimed, how does it play into profit? 

We submitted a proposal without claiming any cost of money. The cost/price analyst from DCMA is asking us to complete form DD-1861 and says it’s so they can evaluate profit. 
 

Has anyone ever encountered this and can provide some guidance on why it would be required. 

11 minutes ago, here_2_help said:

If I understand the situation correctly, the company is moving to a pay-as-you go model. There is no liability on the balance sheet. Is that correct? If so, what does CAS 408 say?

It occurs to me that the company can estimate its liability, based on historical usage trends. A liability for the estimated annual usage can be booked. Let DCAA audit that value.

Correct, there will be no liability on the balance sheet. They're still a bit small for CAS to come into play, but I will review CAS 408.

1 hour ago, Retreadfed said:

How would this work if employees are subject to the SCA?

There is nobody subject to SCA.

On 10/20/2023 at 7:49 PM, Neil Roberts said:

can you provide more detail about an unlimited PTO model?

No vacation or sick time will be accumulated and nobody will have a "bucket" of hours/days. Employees can take an "unlimited" amount of PTO, but have to get their jobs done and coordinate with their manager. 

Our company is considering switching to to an unlimited PTO model. Has anyone encountered issues explaining this to an auditor?

One of my clients has a subcontract from a large prime that's structured as a T&M award fee, has anyone seen that before?

They get reimbursed for Time at fixed rates but without any fee/profit in the labor rate buildup and then get an award fee based on scoring criteria. 

14 minutes ago, Neil Roberts said:

If FAR 52.230-2 is included in the prime contract, 48CFR 9903.201(b) appears to be applicable and provides in part as follows:

(a) This subsection describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. (See 9904 or 9905, as applicable.) Negotiated contracts not exempt in accordance with 9903.201-1(b) shall be subject to CAS. A CAS-covered contract may be subject to full, modified or other types of CAS coverage. The rules for determining the applicable type of CAS coverage are in 9903.201-2.

(b) The following categories of contracts and subcontracts are exempt from all CAS requirements:

(2) Negotiated contracts and subcontracts not in excess of the Truth in Negotiations Act (TINA) threshold, as adjusted for inflation (41 U.S.C. 1908 and 41 U.S.C. 1502(b)(1)(B)). For purposes of this paragraph (b)(2), an order issued by one segment to another segment shall be treated as a subcontract.

(5) Contracts and subcontracts in which the price is set by law or regulation.

(6) Contracts and subcontracts authorized in 48 CFR 12.207 for the acquisition of commercial items.

(7) Contracts or subcontracts of less than $7.5 million, provided that, at the time of award, the business unit of the contractor or subcontractor is not currently performing any CAS-covered contracts or subcontracts valued at $7.5 million or greater.

 

Thanks, I guess the bigger question is whether the transfer is considered a subcontract. Currently, they don't issue a subcontract to the other segment, just an order. 

One  segment of a company receives a prime CAS-Covered contract. A portion of the work is completed by another segment of the company through an interorganizational transfer, without the work being competed. 

There is no "subcontract" issued, but instead an interorganizational order. 

Assuming no exception to CAS applies, would CAS apply to this interorganizational order?

2 minutes ago, joel hoffman said:

The question still is what is the context of the table?. The TO-RFP should provide some answers. The task order ought to but might not say that it is “ incorporated”.

IMO, you really need to find out what happened before “you were around”…

I will look for the RFP. In the Task Order section B.6, it says The Total NTE for this task order is 800K, has the PoP, Contract Type as T&M and then just has the table posted with no additional context. 

Just now, joel hoffman said:

 Which party generated the table of hours? Was this provided by the government in the task order proposal request or did you, as the contractor, propose it? It had to have come from somebody. If the government provided it in the TO-RFP, did the RFP describe what it was for?

i find it difficult to believe that it just appeared in the task order without any context. If you originated it, somewhere in the task order it should be mentioned. If the government generated it (or the content in it), it should have at least been described in the TO-RFP.

I was not around at the time, but my understanding is that it's directly from our proposal to the gov't and they just copy and pasted it into the Task Order. 

11 hours ago, ji20874 said:

There is no procedure.

If your T&M task order was prepared according to the FAR, there would be no table of hours -- there would be labor categories and hourly rates and a ceiling price, but no mandatory hours.

Inasmuch as your task order does not conform to the FAR and was prepared by someone who doesn't understand T&M contract principles, I cannot cite a FAR solution.  Joel gave you a good suggestion.

I agree, this is my first time seeing a table of hours by category in the task order. 

31 minutes ago, Retreadfed said:

For what purpose is the table incorporated into the order?  Is compliance with the table a requirement of the order or is the table included for informational purposes?

It's strange, its just hanging out there on its own page with no reference to it. 

On a T&M task order, where a table of hours and rates by labor category is incorporated into the task order, what is the procedure for transferring hours between labor categories (while still staying within the overall budget)? The project was started in 2020 and due to turnover, the hours mix will be different, but the overall cost will remain the same and the work will get done. 

However, the contracting officer is giving us a hard time about the change, without pointing to any guidance. I've reviewed the IDIQ, task order and FAR 52.243-3 and don't see reference to hours changes.

Thanks

1 minute ago, ji20874 said:

What do you think?

I think absent a plan to get people back to the office or attempt to sublease or break the lease, even if not truly idle facilities, DCAA could just use reasonableness to question the costs and that would be my position as an auditor. 

1 minute ago, ji20874 said:

DCAA,

Are you thinking that an office that is mostly empty because of the contractor's expanded telework counts as idle facilities for cost principles purposes?

In the scenario I'm dealing with, maybe 5 out of 100 people are coming in due to essentially permanent telework. Without further DCAA guidance, I assume many auditors will take that position. 

Does anyone have experience with how DCAA is treating facilities costs for contractors that have not returned to the office or have only partially returned?

I see 2 scenarios:

1) The company plans to return, however delayed their plans due to Omicron and increased cases. 

- Still past the 1 year generally allowed for idle facilities per FAR 31.205-17 Idle Facilities and Idle Capacity, would DCAA question lease costs?

2) The company realized that they don't need either all or some of the office space and should be looking into breaking the lease or subleasing

- Would lease termination costs be allowed?

If a company had a settled indirect rate year and then discovers some sort of fraud that changes the rates, is there a mechanism to redo the settled rates to account for the change? I'm not seeing anything in FAR 42.705 Final indirect cost rates.

2 hours ago, ji20874 said:

Maybe it could, especially if the rent was for a location solely for the performance of the contract work.  But if the rent is for the company headquarters space, maybe it couldn't.  We don't know if the original poster performs the contract work in a government facility, in a contractor-provided facility just for that contract, or in its company headquarters space.

Other direct costs is a subset of materials.  If rent fits under other direct costs, then it also fits under materials.

Thanks for the insight.

The company only rents one building that houses all employees and all direct and indirect functions are performed there (plus some telework).  There are a few other very small commercial contracts and gov't subcontracts, but this one contract is about 95% of the total work.

Just now, here_2_help said:

There is no problem for a non-CAS-covered contractor to change its accounting practices (will, other than compliance with Truthful Cost or Pricing Data requirements). The former practice was to charge the cost of facilities as an indirect charge; the changed practice is to allocate facility costs to benefiting cost objectives (contracts) based on occupied square footage, assuming that certain employees charge only one contract for the majority of their time. This can be done.

That's kind of the approach I was thinking, I just don't know what happens if they wind up winning another contract and that Contracting Officer rejects that idea. 

Just now, ji20874 said:

So, instead of

(1) charging "facilities" costs to an overhead pool and covering those costs with the overhead portion of the hourly rate charges,

you want to

(2) charge "facilities" costs as direct costs under materials.

Is that right?

If so, do you really think all of those "facilities" charges can fit under the definition of materials?

 

 

That is correct. The reason is that the indirect rates are extremely high and this is a change that can have the biggest impact. It is definitely a stretch though. 

25 minutes ago, here_2_help said:

Is the contractor subject to Cost Accounting Standards?

No

Just now, Vern Edwards said:

What does that mean? What do you mean by "facilities"? What costs are you going to charge?

Rent, leasehold improvements, utilities and related costs. They are currently accumulated in an intermediate fool and get allocated to Overhead and G&A based on headcount. 

1 minute ago, ji20874 said:

Will the new contract be fixed-price or cost-reimbursement?

It will most likely be T&M.