Here's the situation: I am working on a very large system development program with one of the top defense contractors. Because this is sole source the contractor has been direct charging proposal prep on all new contracts. I do not like this and the size of both the program and the contractor means that these costs really add up.
I've looked into proposal prep/B&P indirects as much as I can. I've looked at FAR 31.205-18(a), CAS 9904.420 and it's qualifier CAS 9904.402-61, I've read and re-read the Shay Assad Memo from 2011 on Direct and Indirect Charging of Contractor Proposal and Negotiation Support Costs. I've reviewed some GAO cases and I've reviewed the contractor's disclosure agreement.
My understanding from the Shay Assad Memo and CAS 9904.402-61 is that unless a contract exists then the Bid and Proposal Prep must be charged to a pool. The contractor's disclosure statement agrees with this. However, I run into a problem because it is a follow on acquisition. My understanding does not agree with the auditor from DCAA who tells me, direct charging on new contracts under this program is allowable because they are all follow on. I requested a reference where follow on was defined in terms of CAS and his explanation was essentially that since the system acquisition is in phases, the existence of a contract for one phase requires proposals for the next phase.
I know of only the one concrete definition of follow on that someone else referenced in one of the other discussions by GAO at http://www.gao.gov/a.../150/144237.pdf (page 26 the footnote): “Follow-on contract” means a new, noncompetitive procurement placed with an incumbent contractor, either by a separate new contract or by a supplemental agreement, to continue or augment a specific military program, where such placement was necessitated by prior procurement decisions. An example is a contract award for production of a major weapon system to the contractor that developed the system when award to any other source would result in substantial duplication of cost to the government that is not expected to be recovered through competition.
This agrees with what the auditor is saying but I don't think this agrees with the actual text of the Memo and CAS 9904.402-61. And if the existence of one contract requires the proposal for another contract then why doesn't the first contract allow for the proposal prep for the second contract?
Anyway, does anyone know if this interpretation, I'm getting from DCAA is standard across the board? Should I give up the fight for proposal prep to be charged indirectly and focus my attention to keeping down their direct charges instead?