27 replies to this topic

[leo1102]

BLUF:  Can we contract with a private company to perform an audit on a FFP construction contract  greater than $10M?

We (USACE - DOD) have a FFP construction contract greater than $10M on which we want an audit performed.  We requested an audit from DCAA on 11 Jun 2010.  We received a Risk Assessment working paper B on 31 May 2011.  We received nothing else.   The DCAA website states that they "shall perform all necessary contract audits for the DOD".  Do we need a waiver to contract out the audit and, if so, what is the process for requesting one?

Thanks.

[here_2_help]

I don't see why not. I've heard Shay Assad, Charlie Williams, Jr. and Ron Youngs all mention that DCMA is seriously considering use of independent third party auditors. So if it's not policy now, I don't think it's prohibited.

But I'm curious whether you've read FAR 15.504-2 and whether you've concluded that you need field pricing assistance.  What's preventing you from negotiating a fair price, even without an audit report?

Hope this helps.

[leo1102]

We are not negotiating a new contract - we already have the FFP construction contract.  I was wondering if we require a waiver from DCAA to get an outside agency to do an audit.

[Cajuncharlie]

A quick look at FAR Part 42, DFARS 242 and PGI, AFARS, and EFARS found no such requirement.  One of them did mention that a request for audit support should include a due date.  It would seem that if the due date had come and gone, and reasonable follow-ups met with unreasonable delay, the file could be documented accordingly, and after appropriate internal approvals, one could proceed with contracting for audit services.  Also, there was mention of inter-agency agreements.  It would be necessary to learn what those have to say about the subject.

[Ophelia]

Just a side comment--DCAA is having big problems.  They are unresponsive, slow, and getting in the way of many procurements.  Something needs to happen and soon.  Government agencies are starting to do their own audits.

[Vern Edwards]

According to DOD Directive 5105.36, dated 4 January 2010, para. 3, DCAA "shall provide all necessary contract audits for the Department of Defense... ." According to para. 4.c, "No separate contraact audit organization independent of DCAA shall be established in the Department of Defense."

[leo1102]

Does  "No separate contract audit organization independent of DCAA shall be established in the Department of Defense" mean that we can not contract with a commercial entity in support of USACE DoD.

We are not creating an audit organization "in the DoD".  We are considering contracting with a commercial entity to provide contract audit services.

I found the same info you all did - I find it ambiguous at best.  I am unable to locate a clear answer to whether we can contract out audit services or not.

Unless, of course, I am not reading the material as it is meant to be read.

[Retreadfed]

leo1102, on 04 April 2012 - 08:33 AM, said:

BLUF:  Can we contract with a private company to perform an audit on a FFP construction contract  greater than $10M?

We (USACE - DOD) have a FFP construction contract greater than $10M on which we want an audit performed.  We requested an audit from DCAA on 11 Jun 2010.  We received a Risk Assessment working paper B on 31 May 2011.  We received nothing else.   The DCAA website states that they "shall perform all necessary contract audits for the DOD".  Do we need a waiver to contract out the audit and, if so, what is the process for requesting one?

Thanks.

If you are in DoD, see DOD Instruction 7600.02.  It might give you some ideas.

[formerfed]

Waiting ten months for a DCAA audit is ridiculous.  I would just get an audit from a commercial accounting firm and document the reason.  You might also publicize your efforts and become a legend in the bureaucracy

[Vern Edwards]

Those of you advocating the use of private accounting firms to audit contractor proposals should perhaps take a look at OFPP Policy Letter 11-1, Performance of Inherently Governmental and Critical Functions, dated September 12, 2011, 76 Fed. Reg. 56227 - 56242, and pay special attention to the new definitions of "inherently governmental functions," "critical functions," and "closely associated functions." I'm not saying that you cannot hire contractors to perform proposal audits. I don't know whether you can or not. However, it might not be a simple matter.

[leo1102]

Thanks to all.  We are not looking to audit a proposal - we are looking for an audit on a FFP construction contract.

[Vern Edwards]

Proposal, incurred costs -- they are the same in terms of function. The auditor gets access to private information and makes judgements.

[Navy_Contracting_4]

leo1102, on 07 April 2012 - 10:01 AM, said:

Thanks to all. We are not looking to audit a proposal - we are looking for an audit on a FFP construction contract.

What aspect of a FFP construction contract are you looking to have audited?

[Retreadfed]

leo1102, on 07 April 2012 - 10:01 AM, said:

Thanks to all.  We are not looking to audit a proposal - we are looking for an audit on a FFP construction contract.

What clause in the contract are you relying upon as the authority for such an audit and what is it that you want audited?

[Vern Edwards]

Navy, Retread:

A CO administering a fixed-price construction contract might want an audit for any of a number of reasons. Most likely, the contractor has requested an equitable adjustment due to one or more change orders, a differing site condition, defective specifications, defective GFP, or a government delay of work, or it might be seeking a unit price adjustment due to a variation in quantity of a unit-priced item. Such things are quite the norm in construction work. The contract is worth more than $10 million, so one or a combination of proposed or claimed adjustments might easily eceed the TINA threshold, require the submission of certified cost or pricing data, and thus require cost analysis. The CO does not need a contract clause for an audit, not if the contractor hopes to settle without litigation. No big deal.

[here_2_help]

"The CO does not need a contract clause for an audit, not if the contractor hopes to settle without litigation. No big deal."


My point was that the CO should not need an audit to negotiate an equitable adjustment.

H2H

[Vern Edwards]

So you say. But it's up to the CO to decide what he needs. He may be negotiating with the contractor based on incurred costs and may want to verify the amount and allowability of the costs incurred. If a CO issues a change order, nothing requires the contractor to request the equitable adjustment before costs have been incurred.

[Retreadfed]

Vern Edwards, on 11 April 2012 - 01:55 PM, said:

Navy, Retread:

A CO administering a fixed-price construction contract might want an audit for any of a number of reasons. Most likely, the contractor has requested an equitable adjustment due to one or more change orders, a differing site condition, defective specifications, defective GFP, or a government delay of work, or it might be seeking a unit price adjustment due to a variation in quantity of a unit-priced item. Such things are quite the norm in construction work. The contract is worth more than $10 million, so one or a combination of proposed or claimed adjustments might easily eceed the TINA threshold, require the submission of certified cost or pricing data, and thus require cost analysis. The CO does not need a contract clause for an audit, not if the contractor hopes to settle without litigation. No big deal.

Vern, I agree that if the contractor is seeking a price adjustment, the government would have the right to audit the request for an adjustment under the Audit clause, 52.215-2, which should have been included in the contract.  However, no mention was made of a need to audit a request for a price adjustment.  Instead, what was mentioned was an audit of the contract.  The only right the government has to audit such a contract is to determine if it was defectively priced or for a CAS non-compliance.

[Vern Edwards]

Retread:

I understand all of that. I'm just trying to explain what I think the poster meant. I don't see the point of you guys pursuing him for his reasons. Why do your care? He asked a question. The answer is what matters.

But have at it. Maybe he'll answer you. I'm done.

[Infoseeker]

USACE, if my memory serves me correctly you have to pay DCAA for audits despite you having the word "ARMY" in your name.

Of all the agencies that might be able to get around the "DoD must use DCAA," I would think USACE would have the best chance because you have the little snafu where you have to pay DCAA for audits.

This post is probably useless.., sorry about that.  But this is again, a very interesting topic.