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Today was the first time I saw the following assertions made by DCAA at http://www.dcaa.mil/guidance.html.

GUIDANCE

When contractors enter into agreements to provide goods and services to the Government, they must follow government acquisition guidance and regulations. DCAA assesses contractor compliance with these regulations based on the type of contract with the Government...

Likewise...

FAR – Federal Acquisition Regulations: Acquisition regulations for contractors doing business with the government

and...

DFARS – Defense Federal Acquisition Regulation Supplement: A supplement to the FAR that provides DoD-specific acquisition regulations for contractors doing business with DoD

Do you agree with DCAA's guidance? Do you know anyone who is trying to follow DCAA's guidance? If so, are they succeeding?

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Not literally. That statement at the DCAA website has no legal effect and too broad.

I would put it this way: Contractors doing business with the government must comply with the terms of their contracts, with laws enacted by Congress, and with regulations that implement those laws that require them to act or refrain from acting in certain ways. Neither the FAR nor the DFARS is a regulation for contractors. They are regulations for government personnel who conduct acquisitions. But some parts of the FAR or DFARS must be incorporated into contracts by mutual agreement. Regulations that must be incorporated into contracts by force of law, but that have been omitted without proper authorization, might be read into a contract by a court or a board of contract appeals.

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The DCAA Guidance is wrong. According to FAR 1.104, the FAR applies to "acquisitions" as defined at FAR 2.101. According to the definition of "acquisition", an acquisition is made by the Federal Government. When a contractor enters into a contract with the Federal Government, they may agree to comply with certain regulations cited in the contract's terms and conditions. However, to say that the FAR is an acquisition regulation for contractors is just plain wrong.

See "What is the relationship between the FAR and a federal contract?" on p. 23 of this report.

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INoW -- Don is correct and Vern is correct and DCAA is flat-out wrong.

HOWEVER, recent court decisions (KBR) have confirmed that a contractor under a cost-type prime contract is responsible for ensuring that prices paid for subcontracted goods and services are fair and reasonable, just as would be the case if the Government were purchasing the goods/services directly. The principle applies regardless of subcontract type. If the Government asserts that the prices paid were unreasonable, the burden is on the contractor to show why the prices were reasonable. If the contractor cannot show that through evidence, then the costs incurred (i.e., the prices paid to the subcontractors) will be disallowed.

This is DCAA's new favorite method of identifying big dollars to question, which will then be reported to Congress as "taxpayer savings".

Hope this helps.

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HOWEVER, recent court decisions (KBR) have confirmed that a contractor under a cost-type prime contract is responsible for ensuring that prices paid for subcontracted goods and services are fair and reasonable, just as would be the case if the Government were purchasing the goods/services directly. The principle applies regardless of subcontract type. If the Government asserts that the prices paid were unreasonable, the burden is on the contractor to show why the prices were reasonable. If the contractor cannot show that through evidence, then the costs incurred (i.e., the prices paid to the subcontractors) will be disallowed.

This is DCAA's new favorite method of identifying big dollars to question, which will then be reported to Congress as "taxpayer savings".

As a follow-up question, do you know if this has happened on FFP contracts that include CPFF CLIN's? I am trying to understand what triggers FAR 52.216-7 Allowable Cost and Payment to be included in the contract. If FAR 52.216-7 was included in an FFP contract because of a CPFF CLIN, it should only apply to the CPFF CLIN. But how does the contracting officer know whether or not FAR 52.216-7 must be included in a contract when most CLINs are FFP instead of CPFF? Is it more of a case-by-case situation where contracting officers use their judgment on each contract?

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If the contract includes even a single cost-reimbursement CLIN, wouldn't you want to include the contract clause at FAR 52.216-7 Allowable Cost and Payment in the contract?

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If even a single CLIN is cost-reimbursement, wouldn't you want to include the contract clause at FAR 52.216-7 Allowable Cost and Payment in the contract?

Right, it makes sense to me. :) Is there something more than logic that says contracting officers must include FAR 52.216-7 when even one CLIN is cost reimbursement?

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Yes -- the prescribing language for the clause itself. The prescribing language in FAR 16.307( a )( 1 ) says to use the clause when a cost-reimbursement contract is contemplated. A contract with a CR CLIN is a CR contract. That same contract might also have fixed-priced CLINs and fixed-price clauses, and is a FP contract. It's both. Our automated systems might want to force us to call it one or the other, but it really is both.

I can't cite cases, but I tend to recall there have been cases where a CLIN is treated like a contract.

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INoW -- do you do LinkedIn? Because the topic Retreadfed raised is in very active discussion there now, under the Government Cost Compliance group.

H2H

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