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#1 jpayne

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Posted 20 July 2011 - 07:11 AM

Can I outline an issue our company has with a Gov't Agency?

1) Our company submitted a proposal for a "3rd party oversight effort", involving 6 subcontractors to the Government.
2) The Government awarded the agreement to our Company AFTER the Gov't performed a financial audit on two of our subs.
3) An internal kickoff meeting for the award revealed that our company solicited Cost Reimbursable subcontracts from the 6 subcontractors.
4) There is no evidence the contractor's have a Government APPROVED accounting system Per FAR 16.301-3.
5) Therefore only FFP or T&M agreements can be issued.
6) Our company went back and requested T&M rates to move things forward.
7)Now our company is requesting the Government toAPPROVE the use of T&M subcontracts based on a proposed annual audit of the subs indirect rates.

CAN OUR COMPANY DO THIS? What will the Government's response be?

#2 Retreadfed

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Posted 20 July 2011 - 03:07 PM

Can I outline an issue our company has with a Gov't Agency?

1) Our company submitted a proposal for a "3rd party oversight effort", involving 6 subcontractors to the Government.
2) The Government awarded the agreement to our Company AFTER the Gov't performed a financial audit on two of our subs.
3) An internal kickoff meeting for the award revealed that our company solicited Cost Reimbursable subcontracts from the 6 subcontractors.
4) There is no evidence the contractor's have a Government APPROVED accounting system Per FAR 16.301-3.
5) Therefore only FFP or T&M agreements can be issued.
6) Our company went back and requested T&M rates to move things forward.
7)Now our company is requesting the Government toAPPROVE the use of T&M subcontracts based on a proposed annual audit of the subs indirect rates.

CAN OUR COMPANY DO THIS? What will the Government's response be?



Why do you think the subs need government approved accounting systems before yo9u can award them cost reimbursement subcontracts?

#3 jpayne

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Posted 20 July 2011 - 04:06 PM

Why do you think the subs need government approved accounting systems before yo9u can award them cost reimbursement subcontracts?



FAR 16.301-3

#4 joel hoffman

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Posted 20 July 2011 - 04:55 PM

Can I outline an issue our company has with a Gov't Agency?

1) Our company submitted a proposal for a "3rd party oversight effort", involving 6 subcontractors to the Government.
2) The Government awarded the agreement to our Company AFTER the Gov't performed a financial audit on two of our subs.
3) An internal kickoff meeting for the award revealed that our company solicited Cost Reimbursable subcontracts from the 6 subcontractors.
4) There is no evidence the contractor's have a Government APPROVED accounting system Per FAR 16.301-3.
5) Therefore only FFP or T&M agreements can be issued.
6) Our company went back and requested T&M rates to move things forward.
7)Now our company is requesting the Government toAPPROVE the use of T&M subcontracts based on a proposed annual audit of the subs indirect rates.

CAN OUR COMPANY DO THIS? What will the Government's response be?


What kind of pricing arrangement is used for your prime contract, which I assume is to perform 3rd party oversight of some other contract or activities for the government? I assume that you also proposed to use 6 specific subcontractors.

#5 Vern Edwards

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Posted 20 July 2011 - 07:08 PM

Can I outline an issue our company has with a Gov't Agency?

1) Our company submitted a proposal for a "3rd party oversight effort", involving 6 subcontractors to the Government.
2) The Government awarded the agreement to our Company AFTER the Gov't performed a financial audit on two of our subs.
3) An internal kickoff meeting for the award revealed that our company solicited Cost Reimbursable subcontracts from the 6 subcontractors.
4) There is no evidence the contractor's have a Government APPROVED accounting system Per FAR 16.301-3.
5) Therefore only FFP or T&M agreements can be issued.
6) Our company went back and requested T&M rates to move things forward.
7)Now our company is requesting the Government to APPROVE the use of T&M subcontracts based on a proposed annual audit of the subs indirect rates.

CAN OUR COMPANY DO THIS? What will the Government's response be?

Yes. I don't know.

P.S. Retread asked a good question. FAR 16.301-3 is not a good answer. It is addressed to government personnel about prime contracts. Ot doesn't say anything about subcontractors.

#6 Retreadfed

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Posted 20 July 2011 - 09:16 PM

Yes. I don't know.

P.S. Retread asked a good question. FAR 16.301-3 is not a good answer. It is addressed to government personnel about prime contracts. Ot doesn't say anything about subcontractors.


Also, look at what 16.301-3 actually says. It doesn't say anything about government approval.

#7 Vern Edwards

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Posted 21 July 2011 - 05:29 AM

The question of "approval" of a contractor's accounting system has come up in this forum countless times, and several persons have pointed out that FAR does not require "approval" of an accounting system. What actually happens is that DCAA or some other office examines a prospective contractor's accounting system before award as part of the process of determining contractor responsibility. See Defense Contract Audit Agency Manual (DCAAM) 5.202 a:

A preaward survey of a prospective contractor?s accounting system is an examina? tion of the accounting system at either a major or nonmajor contractor before contract award. The audit is made at the request of a contracting officer to determine the accepta? bility of a contractor's accounting system for accumulating costs under a prospective Gov? ernment contract. It is usually requested as part of an overall preaward survey of a contractor conducted by a contract administration office under FAR/DFARS/PGI 9.106/209.106/209.106. The audit scope should be limited to obtaining an understanding of the design of the prospective accounting system so as to appropriately complete Stan?dard Form 1408, "Preaward Survey of Prospective Contractor Accounting System" (see FAR 53.301-1408) and those procedures essential to reach an informed opinion on wheth? er or not the design of the prospective contractor?s accounting system is acceptable for accumulating costs under a Government contract. It is not necessary to conduct an in- depth evaluation of the overall accounting system (see 9-302). However, the auditor should be responsive to the request for audit.

SF 1408, "Preaward Survey of Prospective Contractor Accounting System," uses the word "acceptable." Sometimes, agencies make the adequacy of an accounting system a proposal evaluation factor. See, e.g., the GAO's decision in A-TEX, Inc., B- 299557, 2007 CPD ? 89:

Proposals were required to include the Defense Contract Audit Agency's (DCAA), or other federal audit agency's, verification of ?an accounting system that has been audited and determined adequate for determining costs applicable to this contract in accordance with [Federal Acquisition Regulation] FAR 16.301?3(a)(1).? RFP sect. L.12.5, as amended. Any offeror that did not have audit verification but was ?certain its accounting system has been determined adequate? could provide contact information from a cognizant auditing representative office. Id. Offerors were warned that their proposals would be rejected if the agency was unable to obtain audit verification. Id.

Footnote omitted.

DCAA also performs post-award "audits" of accounting systems, as described in DCAAM 5.203 a:

The post award accounting system audit is an examination of the accounting system at nonmajor contractors after contract award. The major objective of the post award ac? counting system audit is to determine if the contractor?s accounting system is adequate for accumulating and billing costs on Government contracts.

I have often wondered what distinction people are making when they say that FAR does not require "approval" of an accounting system. Why can't you say that an accounting system must be "approved" as being adequate?While the people who say that FAR does not require "approval" are technically correct, I think that they are quibbling to some extent.

As for subcontracts, DCAAM Chapter 5 says nothing about pre-award review of subcontractor accounting systems. However, DCAAM 5.611.1, "Types of Contracts," says:

a. The contractor should have policies and procedures in place for determining the types of subcontracts to be awarded and under what circumstances they are to be awarded. FAR 16.1 can be used as a guideline when evaluating the contractor's policies and proce? dures.

The DCAAM index makes no mention of pre-award review of subcontractor accounting systems.

#8 jpayne

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Posted 21 July 2011 - 08:16 AM

What kind of pricing arrangement is used for your prime contract, which I assume is to perform 3rd party oversight of some other contract or activities for the government? I assume that you also proposed to use 6 specific subcontractors.



A Cost reimbursable arrangement is used at the PRIME. Looking at all the responses, it appears our company CAN utilize a CR type agreement for SUBS also?

#9 jpayne

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Posted 21 July 2011 - 12:16 PM

The question of "approval" of a contractor's accounting system has come up in this forum countless times, and several persons have pointed out that FAR does not require "approval" of an accounting system. What actually happens is that DCAA or some other office examines a prospective contractor's accounting system before award as part of the process of determining contractor responsibility. See Defense Contract Audit Agency Manual (DCAAM) 5.202 a:


SF 1408, "Preaward Survey of Prospective Contractor Accounting System," uses the word "acceptable." Sometimes, agencies make the adequacy of an accounting system a proposal evaluation factor. See, e.g., the GAO's decision in A-TEX, Inc., B- 299557, 2007 CPD ? 89:


Footnote omitted.

DCAA also performs post-award "audits" of accounting systems, as described in DCAAM 5.203 a:


I have often wondered what distinction people are making when they say that FAR does not require "approval" of an accounting system. Why can't you say that an accounting system must be "approved" as being adequate?While the people who say that FAR does not require "approval" are technically correct, I think that they are quibbling to some extent.

As for subcontracts, DCAAM Chapter 5 says nothing about pre-award review of subcontractor accounting systems. However, DCAAM 5.611.1, "Types of Contracts," says:


The DCAAM index makes no mention of pre-award review of subcontractor accounting systems.


So Vern, it appears that our company should have no problem proceeding with this award with our subs perfoming under a CR type contract?
And there is no need to request that they change to a T&M contract?

Thank you for your responses!
Jeff

#10 Retreadfed

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Posted 21 July 2011 - 02:02 PM

So Vern, it appears that our company should have no problem proceeding with this award with our subs perfoming under a CR type contract?
And there is no need to request that they change to a T&M contract?

Thank you for your responses!
Jeff



If your contract requires you to obtain government consent to subcontract, look at FAR 44.202-2(a)(7). Because having an accounting system that is adequate for the contract type proposed is an element of responsibility, you may have to demonstrate to the contracting officer how you made that determination.




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