Who administers the contract
The contracting officer who awarded your contract may not be the one you deal with day to day. The contracting officer normally delegates a list of contract administration functions to a contract administration office (CAO) 1, and the Defense Contract Management Agency and other agencies offer a wide variety of contract administration and support services 2.
The delegated functions are substantial. They include reviewing and evaluating contractors' proposals under FAR subpart 15.4 3, determining the allowability of costs suspended or disapproved 4, and preparing findings and issuing decisions under the Disputes clause where the administrative contracting officer (ACO) has authority to take definitive action 5.
Expect to be watched as well as paid. The contractor is responsible for timely contract performance, and the government maintains surveillance of contractor performance as necessary to protect its interests 6.
Who audits it
The auditor is a different agency. Normally, for contractors other than educational institutions and nonprofit organizations, the Defense Contract Audit Agency (DCAA) is the responsible government audit agency 7, and the auditor's responsibilities include reviewing the financial and accounting aspects of the contractor's cost control systems 8.
Your audit exposure depends on contract type. Under FAR 52.215-2, if the contract is cost-reimbursement, incentive, time-and-materials, labor-hour or price redeterminable 9, the contracting officer or an authorized representative has the right to examine and audit all records and other evidence sufficient to reflect properly all costs claimed 10. Records count whether they are on paper, in computer data or in any other form 11.
Cost-type work starts before the first audit. A cost-reimbursement contract may be used only when the contractor's accounting system is adequate for determining costs applicable to the contract or order 12, and an acceptable DoD accounting system provides for proper segregation of direct costs from indirect costs 13. Once performing, the contractor submits its final indirect cost rate proposal to the contracting officer and auditor within six months after each fiscal year ends 14.
Business systems on larger contracts
On contracts covered by the Cost Accounting Standards, DoD also looks at your business systems. The DFARS Contractor Business Systems clause applies only to covered contracts that are subject to the Cost Accounting Standards 15, and DFARS 242.7000 sets out what the contracting officer does after a final determination to disapprove a contractor's business system, under the heading "Determination to withhold payments" 16.
Bids2Bank's ComplianceGuard keeps a workspace's certification checklist and DCAA self-assessment 17. Use it to record what you have in place before the first request arrives.
Worked example. Contractor K wins its first cost-plus-fixed-fee task order. Before the kickoff it confirms its accounting system separates direct from indirect costs, sets a calendar date for its final indirect cost rate proposal, and writes down who will answer DCAA. When the auditor's first request arrives, Contractor K produces the timekeeping export and rate calculations within the agreed time and logs both.
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