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Form 1s – An Overview
Breakout Session # F15
Name
Rita Wells
David Richardson
Date
July 31, 2012
Time
4:00 – 5:15 pm
1
Form 1s – An Overview
What is a Form 1?
Key Terms, Acronyms and References
What is the impact on a contractor that receives a Form 1?
What are the next steps?
Contractor?
Government?
2
What is a Form 1 ?
DCAA Form 1, Notice of Costs Suspended and/or
Disapproved
• Notice Issued by DCAA to a Contractor
• Applies to Cost Reimbursement Contracts
• Identifies Contractor’s Costs to be Suspended or
Disapproved
• NASA Form 456 (15-105) used on NASA contracts
3
Form 1
4
Types of Form 1 Notices
Regular Form 1: When the cost element to be suspended
or disapproved is applicable to only one contract, a regular
DCAA Form 1 will be issued.
Blanket Form 1: Where the cost element to be suspended
or disapproved is applicable to more than one contract, a
blanket DCAA Form 1 will be issued.
• Contains a description of the issue involved and lists
all affected contracts.
5
Form 1s – Key Terms & Acronyms
DCAA – Defense Contract Audit Agency
DCAA Form 1 - Notice of Costs Suspended and/or
Disapproved under Cost Reimbursement Contracts
DCMA – Defense Contract Management Agency
FAR – Federal Acquisition Regulations
DFARS – Defense Federal Agency Regulation Supplement
ACO – Administrative Contracting Officer
6
Form 1s – References
FAR 42.302 (a) - Contract Administration Office Functions
(7) Determine the allowability of costs suspended or
disapproved as required (see Subpart 42.8), direct the
suspension or disapproval of costs when there is reason
to believe they should be suspended or disapproved,
and approve final vouchers.
(8) Issue Notices of Intent to Disallow or not Recognize
Costs (see Subpart 42.8).
7
Form 1s – References
FAR 31- Contract Cost Principles and Procedures
Contains cost principles and procedures for
(a) The pricing of contracts, subcontracts, and
modifications to contracts and subcontracts whenever
cost analysis is performed (see 15.404-1(c)); and
(b) The determination, negotiation, or allowance of costs
when required by a contract clause.
8
Form 1s – References
DOD Directive 5105.36 (January 4, 2010) – DCAA has
responsibility to
“ Approve, suspend, or disapprove costs on
reimbursement vouchers received directly from
contractors, under cost-type contracts, transmitting the
vouchers to the cognizant Disbursing Officer.”
9
Form 1s – References
FAR 42.8 - Disallowance of Costs - Prescribes policies and
procedures for:
(a) Issuing notices of intent to disallow costs; and
(b) Disallowing costs already incurred during the course of
performance.
10
Form 1s – References
FAR Subpart 32.6 - Contract Debts
• Contracting Officer has primary responsibility for identifying
and demanding payment of contract debts.
• Amount of indebtedness determined by the contracting
officer shall be an amount that—
(1) Is based on the merits of the case; and
(2) Is consistent with the contract terms.
•
Contracting Officer shall issue the demand for payment as
soon as the contracting officer has determined that an
actual debt is due the Government and the amount.
11
Form 1s – References
DOD Instruction 7640.02 - Contract Audit Follow-up
• Procedures for tracking and resolving DCAA reports
• Requirement for Contracting Officers to resolve DCAA audit
reports within 6 months of report issuance, and disposition
them within 12 months of report issuance
12
Form 1s – References
DCAA Contract Audit Manual (DCAM) (May 24, 2012)
Section 6-900 - Notices of Cost Suspensions and
Disapprovals under Cost-Reimbursement Contracts
• General Guidelines for Suspensions and Disapprovals
• Types of DCAA Form 1s
• Preparation, Acknowledgement & Distribution of Form 1s
• Deductions on Public Vouchers for Suspensions &
Disapprovals
• Contractor’s Request for Reconsideration or Claims
13
What is the impact on a contractor that receives
a Form 1?
• The Form 1 will either suspend or disapprove costs.
• The impact on the contractor, and the contractor’s
response, will depend on whether the costs are suspended
or disapproved.
14
Suspension of Costs
Direct or indirect costs that lack adequate explanation or
documentation may be suspended until:
• The required data are received, and
• A determination can be made as to the cost allowability
15
Suspensions - Continued
Suspensions may also be used to:
• Reduce the fixed-fee when the interim amount claimed for
payment is in excess of the amount authorized by the
contract.
• Establish the necessary withholding reserves required by
the contract terms when the contractor fails to do so.
• Suspend costs that are otherwise allowable but that have
not met the contract billing requirements.
16
Disapproval of Costs
Costs claimed by the contractor
• For which audit action has been completed, and
• That are not considered allowable,
Will be disapproved.
17
Disapproval of Costs - Continued
Disapproved cost may comprise any of the following:
• Items specifically limited or excluded by FAR Part 31 or
other terms of the contract.
• Items which, although not specifically unallowable under (1)
above, are determined to be
• unreasonable in amount,
• contrary to generally accepted accounting principles,or
• not properly allocable to the contract
• Items disapproved at the direction of the ACO
18
What Are the Next Steps – For The Contractor ?
• Following the issuance of a DCAA Form 1, the contractor
may:
(1) request the cognizant ACO in writing to consider
whether the unreimbursed costs should be paid and to
discuss the findings with the contractor; and/or
(2) submit to the ACO a claim for disapproved costs in
accordance with FAR 33.2 (Disputes and Appeals).
19
What Are the Next Steps – For The Contractor ?
• The contractor should make every attempt to submit the
required explanations, documentation, data, or justification
in support of suspended costs.
• The focus should be on demonstrating price
reasonableness.
• If the contractor can support suspended costs, the Form 1
may be rescinded.
20
What Are the Next Steps – For The Government ?
• DCAA auditor is responsible for:
• Keeping the ACO informed of issues that may result in
a Form 1.
• Consulting with the Contracting Officer if the full
immediate deduction of a cost suspended or
disapproved would seriously impair ability of the
contractor to continue contract performance.
• A previously issued DCAA Form 1, including those issued
at the direction of the ACO, may be rescinded by the
auditor.
21
What Are the Next Steps – For The Government ?
• ACO is responsible for resolving Form 1s within 6 months
and dispositioning them within 12 months.
• If the ACO supports the DCAA Form 1, the ACO should
issue a demand for payment as part of the final decision, if
a final decision is required (FAR 32.604 and FAR
32.605(a)).
• If the ACO issues a demand for payment and the contractor
does not make payment within 30 days, the ACO may
authorize DCAA to disapprove the costs under another
contract with future billings.
22
What Are the Next Steps – For The Government ?
• ACO should notify the auditor promptly of any claims they
may receive.
• The ACO will normally make a written determination
as promptly as practicable on contractor written
requests for reconsideration
• When a formal claim is filed, the ACO should make a
final decision within 60 days.
• If a contractor disagrees with the ACO’s final decision
regarding a claim, the contractor may appeal the
decision to the ASBCA or the Court of Federal Claims.
23
What Are the Next Steps – For The Government ?
• If the ACO does not sustain the contract auditor's cost
disapproval:
•
DoD Instruction 7640.02 requires the ACO to comply
with the documentation and review procedures
prescribed by his/her DoD component prior to final
disposition of the disapproved cost.
• When a claim of disapproved costs is decided in the
contractor's favor, the ACO may advise the contractor to
resubmit on its next public voucher the amount determined
acceptable by the ACO.
24
Form 1 Summary
• Form 1 Notices are issued by DCAA
• The Final Decision on sustaining Form 1s is made by the
ACO
• Issuance of Form 1 Notices may result in immediate
withholding of monies from a contractor’s invoices
• Contractors can provide additional supporting
documentation of price reasonableness to the auditor for
suspended costs
• Contractors can request discussions with the ACO and/or
file a Claim
25
Form 1s
Questions / Discussion
26
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