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In Voxtel, Inc., ASBCA No. 60129 (March 9, 2023), the Armed Services Board of Contract Appeals (ASBCA) issued a decision that presents a primer on the resolution of indirect cost rate disputes.  The ASBCA granted the contractor’s appeal in part, finding that its claimed executive compensation and independent research and development (IR&D) costs were allowable, but that certain rental costs related to the “fit-up” of a leased facility were unallowable.

The Defense Contract Audit Agency (DCAA) performed “adequacy” and “nomenclature” reviews of Voxtel’s indirect cost rate proposals (or incurred cost proposals, “ICPs”) for fiscal years 2007 to 2009, but did not conduct audits.  The Contracting Officer (CO) then issued a final decision unilaterally setting indirect rates and finding that the ICPs included unallowable executive compensation, IR&D, and rental costs.  The contractor appealed. …

Continue Reading If At First You Don’t Succeed: Contractor Successfully Challenges Disallowed IR&D and Compensation Costs

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In L3 Technologies, Inc., ASBCA Nos. 61811, et al. (Mar. 1, 2021), the Armed Services Board of Contract Appeals (Board) granted the Government’s motion to dismiss the appeal, over the contractor’s objection, following the Contracting Officer’s (CO) unequivocal withdrawal of its cost disallowance claims. The contractor argued that its case was not moot despite…

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The Defense Contract Audit Agency (“DCAA”) recently made public its Fiscal Year (FY) 2018 Report to Congress (“Report”), which, among other things, provides an update on its incurred cost audits and highlights DCAA’s industry outreach activities.  Although the Report touts DCAA’s elimination of the incurred cost audit backlog, DCAA acknowledges that there still is a…

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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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Continue Reading The End is Near: DCAA Projects End of Incurred Cost Backlog by FY 2018

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Contractors that use a fiscal year ending 12/31 submit their annual cost submissions in June of the following year.  For 2010 incurred cost submissions (ICS) submitted in June 2011, many contractors may receive affirmative claims from the Government seeking to disallow some or all of those incurred costs, because the Government has a 6-year statute…

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The 2016 National Defense Authorization Act prohibits the Defense Contract Audit Agency from providing “audit support” to any non-DOD agency until the Secretary of Defense certifies that DCAA has reduced its backlog of incurred cost audits to 18 months or less, a restriction that could cause some disruption for contractors when DOD contracts are not…

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On October 1, the DoD IG released a report titled “Evaluation of Defense Contract Management Agency Actions on Reported DoD Contractor Business System Deficiencies,” asserting that DCMA contracting officers “repeatedly” failed to comply with DFARS requirements involving reported business system deficiencies.  The report, which is similar to a report issued on June 29, 2015 regarding …

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On February 25 at 12 pm ET, I’ll be joining Joseph McCaffrey from BDO for a webinar focusing on the market for government contractors.  We’ll be talking about DCAA trends, high priority compliance and ethics matters, new final and proposed regulations impacting the industry, and insights into recent M&A activity and financing trends. It will…

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In December, I had the pleasure of speaking with Law360 regarding “Government Contracts Cases To Watch In 2015.” To no one’s surprise, the continuing DCAA audit backlog, and the Contract Disputes Act statute of limitations, are among the topics that contractors will be following with interest in 2015. In an upcoming post, we will discuss…