Cost Reimbursement and Contractor's Accounting System

[Weno2]

FAR 16.301-3(a) addresses the government can use a CR contract when (1) The contractor's accounting system is adequate for determining costs applicable to the contract.

FAR 15.404-2©(2) states "The KO shall not request a separate pre-award audit for of indirect costs, unless the information already available from an existing audit, completed w/in the last 12 months, is considered inadequate for determining the reasonableness of the proposed indirect costs."

(1) Can the government use an adequate audit of the contractor's accounting system, completed w/in the last 12 months to determine the adequacy of the contractor's accounting system for a new CR contract?

(2) Should the government use an adequate audit of the contractor's accounting system completed w/in the last 12 months to determine the adequacy of the contractor's accounting system for a new CR contract?

Does FAR 16.301-3(a)(1), determining the adequacy of the contractor's accounting system pertains to the specfic CR K? Not the contractor's overall accounting system.? My understanding is you would determine the adequacy of the contractor's accounting system every time you are awarding a CR K to the contractor.

Does FAR 15.404-2©(2) only address indirect rates, and not the contractor's accounting system? My understanding is there is a difference b/w indirect rates and a contractor's accounting system.

[here_2_help]

FAR 16.301-3(a) addresses the government can use a CR contract when (1) The contractor's accounting system is adequate for determining costs applicable to the contract.

FAR 15.404-2?(2) states "The KO shall not request a separate pre-award audit for of indirect costs, unless the information already available from an existing audit, completed w/in the last 12 months, is considered inadequate for determining the reasonableness of the proposed indirect costs."

(1) Can the government use an adequate audit of the contractor's accounting system, completed w/in the last 12 months to determine the adequacy of the contractor's accounting system for a new CR contract?

(2) Should the government use an adequate audit of the contractor's accounting system completed w/in the last 12 months to determine the adequacy of the contractor's accounting system for a new CR contract?

Does FAR 16.301-3(a)(1), determining the adequacy of the contractor's accounting system pertains to the specfic CR K? Not the contractor's overall accounting system.? My understanding is you would determine the adequacy of the contractor's accounting system every time you are awarding a CR K to the contractor.

Does FAR 15.404-2?(2) only address indirect rates, and not the contractor's accounting system? My understanding is there is a difference b/w indirect rates and a contractor's accounting system.

Weno2,

According to the DCAA, "An accounting system is adequate if its procedures are adequate to protect the Government's interest, and is suitable if it is in substantive compliance with CAS." The adequacy of a prospective contractor's accounting system is documented on SF 1408 (Preaward Survey of a Prospective Contractor's Accounting System). Typically, DCAA completes this form upon Contracting Officer request to do so and, based on that form, recommends whether an adequacy determination should be made.

Further, the Contracting Officer may request a post-award DCAA accounting system review at any time during contract performance.

Generally, once a contractor's accounting system has been determined to be adequate, it is considered to be adequate until the next review. Accounting system reviews are peformed periodically (usually every 3 years if I remember correctly). Accounting system adequacy may be impacted if the contractor changes some aspect (e.g., implements a new system or makes signficant changes to its procedures) -- at which point the Contracting Officer should request a post-award audit by DCAA to determine if the system is still adequate.

DCAA performs multiple types of audits/reviews on DOD contractors, and may find something during an audit that implicates the adequacy of the accounting system. If so, they will issue a "flash" report and open a limited scope audit to quickly evaluate whether the accounting system is in fact still adequate. If the limited scope audit determines it is not, then DCAA will recommend to the ACO that the accounting system be determined to be inadequate. It will stay inadequate until the contractor remediates the problem and DCAA reperforms a full system review.

I did not answer your questions directly, but trust this provides sufficent background for you to answer your own questions. If I missed something, I'm sure others will let me know!

Hope this helps.