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The DoD IG recently published its review of various DCAA audits from 2011-2013: http://www.dodig.mil/pubs/report_summary.cfm?id=5967. I found pages 61-71 about DCAA audit 2701-2012C210... to be very insightful. The issues surrounding this report highlight an apparent difference between the cost analyst and the DCAA auditor.


The primary value of the cost analyst at a prime contractor (or upper-tier subcontractor) is to mitigate time constraints imposed by DCAA requirements (or, stated positively, to provide flexibility in maximizing the value for the customer.)

Timeline of Events:

Sep'10 - The Joint Strike Fighter (JSF) program office (PMO) asked DCAA Ft. Worth for assistance in anticipation of a proposal for 42 aircraft.

Jan'11 - The JSF PMO changed its requirement to only 32 aircraft and asked DCAA to not review subcontractor proposals (see Key Points 1 & 2).

Mar'11 - The JSF PMO asked DCAA Ft. Worth to provide "full scope audit assistance" once the proposal was received by DCAA Ft. Worth.

Apr-May'11 - DCAA Ft. Worth received the proposal and determined it adequate while waiting for cost/price analysis on $1.7B in subcontracts.

Aug'11 - DCAA Ft. Worth asked DCAA Bay States Branch Office (BSBO) to perform and complete an assist audit by the very end of Nov'11.

Sep'11 - DCAA BSBO said the subcontract proposal had many inadequacies, but agreed to proceed and give an adverse (bad proposal) opinion.

Sep'11 - The JSF PMO asserted in its pre-negotiation memo (not yet approved) that it would rely upon its own cost analyst for the subcontract.

Nov'11 - DCAA BSBO gave DCAA Ft. Worth a memo with limited cost information saying its assist audit report should be done by mid-Jan'12.

Nov'11 - The JSF PMO pre-negotiation memo (see Sep'11) was approved on the very date the assist audit was originally supposed to be done.

Jan'11 - The results of a DCMA technical evaluation were received by DCAA BSBO, but not incorporated into the audit report (issued 7 weeks later).

Mar'12 - DCAA BSBO provided its adverse opinion that the proposal was not acceptable for negotiation (just under 4 months after the due date).

DoD IG Findings:

1. DCAA should not have started the assist audit if DCAA didn't think it was adequate. And, (apparently...) in the future if the customer still wanted DCAA to continue, then DCAA should report that customer to the DoD IG?! (Different people could reach different conclusions from the DoD IG report.)

2. DCAA should have not have made the judgment call to request the assist audit. The JSF PMO had made it clear that it would take care of all the subcontract proposals on its own and did not need DCAA to help. (This is where the cost analysts at the prime and at the JSF PMO were used.)

3. Once DCAA decided to actually proceed with the assist audit of the subcontract proposal, DCAA should have incorporated the results of the technical evaluation from DCMA. According to the DoD IG, DCAA had "ample time" to incorporate the results (e.g. 7 weeks before audit report issuance.)

Key Points:

1. In Jan'11 the JSF PMO stated that it was "willing and open to discuss realistic, creative solutions to the generation and transmission of audit data to seek the greatest benefit to the Government." (That sounds like getting the facts without the report.)

2. In Jan'11 the JSF PMO also communicated there was 'enormous pressure to get...wrapped up by late summer/early fall' and that the JSF PMO would use the price/cost analysis of the prime contractor on the subcontract proposal.

3. In Sep'11 the JSF PMO communicated that its prenegotiation plan relied upon the JSF PMO cost analyst input for this subcontractor and took into account the prime contractor's price/cost and technical analysis of the subcontract proposal.

4. The DoD IG agreed with the JSF PMO that its prenegotiation memo demonstrated "a combination of analytical techniques and procedures used by the contracting officer to establish a fair and reasonable pre-negotiation position" for the subcontract.


DCAA disagreed with the DoD IG on all three findings and asserted that the new DFARS adequacy checklist would take care of things in the future. The DoD IG agreed that the new DFARS checklist would help and also stated, "Although DCAA did not agree, the management comments are responsive and we do not require additional comments." (This appears to mean the DoD IG decided to just drop the issue.)


Whereas DCAA may conclude a proposal is inadequate for audit and should not be used as a basis for negotiations, the program office will find "realistic, creative solutions" to formulate prenegotiation positions and meet schedule expectations.

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FAR 15.404-2(a)(1) requires a contracting officer to first determine whether “the information available at the buying activity” is adequate for negotiating a fair and reasonable price before requesting field pricing assistance. If the information on hand is found to be adequate, then the contracting officer need not request field pricing assistance, and may proceed to proposal analysis. In my view, the Proposal Adequacy Checklist does nothing to address the real challenge -- which is to train Government COs and support staff to evaluate cost proposals upon receipt in order to determine if field pricing assistance is needed and, if so, where and how much is needed.

In my view, the DAR Council did a poor job (once again) of supporting the COs and the DOD acquisition process by implementing the Proposal Adequacy Checklist as they did. There was an article in the latest edition of Thomson's Government Contracts Cost, Pricing and Accounting Report that had much to say about that particular decision.


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In my view, the Proposal Adequacy Checklist does nothing to address the real challenge -- which is to train Government COs and support staff to evaluate cost proposals upon receipt in order to determine if field pricing assistance is needed and, if so, where and how much is needed.

I agree with you that the government CO's and support staff should take full responsibility for cost analysis and only request field pricing assistance to the extent required. I found the discussion at the following link to be helpful: http://farsite.hill.af.mil/reghtml/changes/dac/DPN20130328.htm. The thing that really stood out to me was the discussion in comment #38 about final checklist item #17.

It appears that the DAR Council expects defense contractors to provide a price/cost analysis with the proposal for every "subcontractor" regardless of dollar value. That seems incredible. I understand that Table 15-2 requires a price/cost analysis to be done and price/cost analysis over $700k to be submitted with the proposal. But to me this is a new requirement to actually require the submission of ALL price/cost analyses with the proposal. Do you think this is what DCAA was getting at in its reply to the DoD IG?

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