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The Defense Contract Audit Agency (“DCAA”) recently made public its Fiscal Year 2017 Report to Congress, which, among other things, provides an update on incurred cost audits.  Specifically, the report explains that DCAA:

  • Closed “6,786 incurred cost years” using a variety of methods, namely reports and memos, but also for other reasons (e.g., per the FY 2016 NDAA, DCAA was prohibited “from providing audit support to non-DoD agencies”);
  • Sustained audit exceptions for incurred costs audits 28.6% of the time;
  • Reduced the backlog related to incurred cost audits “to an average age of 14.3 months;” and
  • Is “on track to eliminate the backlog by the close of FY 2018” as it now has “under 3,000 incurred cost years in [such] backlog….”
  • “[W]ill be current on incurred cost based on a two-year inventory of audits” by FY 2018 and “will move to one year of inventory as required” in the FY 2018 NDAA.


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Contractors looking for updates to the statutory allowable cost limits on employee compensation may be looking in the wrong place.  But what was once lost can easily be found, at least for the moment, by simply navigating to a different website.

The Cost Principles and the Compensation Cap

FAR 31.205-6(p)(4) governs the allowable compensation of contractor and subcontractor employees.  It promulgates section 702 of the Bipartisan Budget Act of 2013 (“BBA”), which set an initial limit on allowable contractor and subcontractor employee compensation costs at $487,000 per year.  “Compensation” is defined broadly to include the total amount of wages, salary, bonuses, deferred compensation, and employer contributions to defined contribution pension plans.  According to the BBA, the cap is to be adjusted annually based on the Employment Cost Index calculated by the Bureau of Labor Statistics.  The BBA repealed the prior existing formula for determining the relevant compensation cap under 41 U.S.C. § 1127 and applies to contracts awarded on or after June 24, 2014.  It also provided agencies with the authority to establish “one or more narrowly targeted exceptions” for certain specialists.


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The Small Business Administration (SBA) has seemingly slipped a noteworthy change into a technical correction published in the Federal Register on March 26, 2018.  Indeed, this “technical correction” actually appears to be an attempt to overturn the impact of a decision that the Office of Hearing and Appeals (OHA) issued in January 2018 – In

Crowell & Moring has issued its Regulatory Forecast 2018: What Corporate Counsel Need to Know for the Coming Year.

The section focusing on government contracts, Will Purchasing Be Streamlined?” provides an overview of how the procurement process might be made more efficient, and this time, government contractors might be able

This week’s episode covers commercial items and the 809 report, and is hosted by Peter Eyre, Chris Haile, and Elizabeth Buehler. Crowell & Moring’s “Fastest 5 Minutes” is a biweekly podcast that provides a brief summary of significant government contracts legal and regulatory developments that no government contracts lawyer or executive should be without.

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Join us today for our webinar Building a Border Wall: Opportunities, Contractual Risks, and Business Considerations. The Trump administration published two contract solicitations for the design-build of a “border wall” between the U.S. and Mexico. The RFPs (linked here and here) contemplate a multiple-award, multiple-phase approach for acquiring prototypes and, eventually, full construction.  

Continuing his trend of fulfilling the promises set forth in his Contract with the American Voter, President Trump, on January 30, 2017, issued an Executive Order mandating the elimination of at least two existing regulations for every new regulation issued.  In particular, the order explains that “whenever an executive department or agency…publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”  In this way, the Administration intends to offset “any new incremental costs associated with new regulations….” Notably, however, the definition of regulation does not include: (1) “regulations issued with respect to a military, national security, or foreign affairs function of the United States”; (2) “regulations related to agency organization, management, or personnel;” or (3) “any other category of regulations exempted by the Director.”

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On Saturday, January 28, President Trump issued an Executive Order setting forth the ethics regulations governing current and future executive agency appointments, which is both more restrictive and less restrictive than the 2009 Obama Executive Order addressing the same issue.  Specifically, and with respect to the former, President Trump’s order bans all executive agency appointees from engaging in “lobbying activities” with respect to the particular agency in which the appointee served for a period of five years after leaving the Administration, and further prohibits such appointees from lobbying on behalf of a foreign government or political party during the remainder of their lifetimes (if such activities would require registration “under the Foreign Agents Registration Act of 1938”).  See §§ 1.1, 1.4.  These two prohibitions were absent from the Obama-era counterpart and mirror two of Trump’s promises outlined in his Contract with the American Voter.

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In Lockheed Martin Integrated Systems, Inc. (ASBCA Dec. 20, 2016), a case involving a $100 million breach of contract claim stemming from purportedly unallowable direct subcontractor costs, the Board granted Lockheed Martin’s motion to dismiss the Army’s untenable claim “for failure to state a claim on which relief could be granted,” concluding that the government