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The first contractor business system of concern today is a contractor’s accounting system. DFARS clause 252.242-7006, Accounting System Administration, sets forth 18 systems criteria against which an accounting system is measured for “acceptability.”

Obtain and keep an “acceptable accounting system” through self-assessment and action as necessary to provide a reliable, consistent, compliant, and accurate accounting system.

Evaluate information on organization structure, products/services, contract awards, sales, business plans, etc. to determine needs of company accounting system.

Review accounting manuals, policies, procedures, and system support software for adequacy.

Evaluate third-party audit reports and response actions to enhance and improve the accounting system.

Perform transaction tests, as mutually agreed upon, to measure the degree to which practices mirror procedural expectations.

Analyze above, discuss with appropriate company personnel, identify any compliance and/or improvement issues, and assess alternative courses of action.

Oral and/or written report to identify findings, recommendations, and observations for corrective actions and/or enhancement.

Obtain and keep an “acceptable accounting system,” thus avoiding payment withholds and related administrative burden and risk.

Determine compliant accounting practices that also enhance cost recovery and profitability of Government and commercial contracts.

Benefit from third party, independent assessment of accounting system and related indirect insight into accounting “best practices” to enhance competitiveness and reduce risk.

General program management, contractual, and management systems review of Government contracts to identify and eliminate areas that could expose the company to adverse findings through Government audit or investigation.

The identification and correction of items such as:

Cash flow and profit shortfalls.

Undercoverage of allowable costs.

Lack of formal risk mitigation procedures.

Reduce exposure to payment withholds related to DFARS clause 252.242-7005, Contractor Business Systems.

Obtain and keep an “acceptable purchasing system” through analysis and correction, as required, of current purchasing policies, procedures, and practices.

Obtain an “acceptable purchasing system,” thus avoiding payment withhold and Government’s participation in, and adverse effect on, cost effectiveness of the purchasing process.

Increase competitiveness by decreasing material costs through improved cost/price analysis techniques.   

        
Reduce exposure  to risk by avoiding improper terms and conditions in subcontracts.

Reduce exposure to fraud or defective pricing caused by purchasing process.

Achieve proper flow down of prime contract provisions.

Assure compliance with Public Law 87-653, “Truth in Negotiations,” and Public Law 91-379, “Cost Accounting Standards.”

Satisfy requirements of DFARS clause 252.244-7001, Contractor Purchasing System Administration.

Many U.S. Government contractors (except qualified small businesses) are subject to the promulgated Cost Accounting Standards (CAS).  Contractors are required to follow disclosed or established cost accounting practices consistently and to comply with individual standards.  Findings of non-compliance can be costly and time consuming and may result in reduction of contract prices and assessment of interest penalties.

Evaluate information on organization structure, contract awards, sales, headcount, pricing  and collection procedures, etc. to determine CAS and Disclosure Statement applicability.

Review accounting manuals, policies, procedures, and system support software.

Evaluate third-party audit reports on estimating and cost accounting practices.

Analyze above and discuss with appropriate personnel to identify compliance issues and to assess alternative courses of action.

Select allocation methods that enhance allowable cost recovery.

Achieve consistency in estimating, collecting, and reporting costs.

Limit potential financial risks by acceptance of inappropriate CAS clauses in proposals and contracts.

Reduce exposure to price adjustments and related interest for “voluntary” cost accounting changes and non-compliance with CAS.

Effect compliance with the Disclosure Statement filing requirement.

Identify areas of potential CAS non-compliance.

Provide alternative CAS interpretations.

Reduce implementation cost of conformance with CAS while enhancing the benefits of compliance.

Avoid defective pricing allegations and potential false claims indictments related to CAS 401 non-compliance.

Filing of Disclosure Statement that meets both management needs and regulatory provision only when required.

Implementing beneficial cost accounting changes before Disclosure Statement is filed.  Reducing cost and time associated with preparation, filing, and negotiation of the Disclosure Statement; and realizing long-term cost savings by avoiding subsequent “voluntary” changes.

Resolving of Government findings of inadequate disclosure or CAS non-compliance.

Filing an accurate, complete, and internally consistent Disclosure Statement. 

Evaluate the impact of proposed changes, and/or implement necessary changes for compliance, preparation of cost impact proposals, and revision of the CAS Disclosure Statement.

Evaluate the proposed change through discussions with client personnel and examination of cost data, records, and regulations.

Review the change in light of current CAS applicability and Disclosure Statement provisions.

Determine contract-by-contract effect and potential price impact resulting from implementation of changes to cost accounting practices.

Select optimum cost accounting practices to enhance allowable cost recovery over the long term.

Reduce financial impact of CAS-imposed changes.

Reduce implementation cost of changes.

Assure compliance with the regulatory requirement for notification of cost accounting changes.

Obtain independently reviewed cost impact statement for submission to the Government.

Review chart and text of accounts for indications of unallowable costs.

Review accounting policies, procedures and CAS/DS (if applicable and available) used to identify and account for unallowable costs.

Review historical data, including DCAA audit reports, bid packages, and financial information.

Interview appropriate personnel regarding treatment of specific cost items for potential non-compliance with FAR and CAS.

Improve productivity of resources employed in the business, overall effectiveness, and credibility with customers, lenders, and shareholders.

Enhance recovery of allowable direct and indirect costs and identify allowable costs that are not included in cost proposals and invoices relating to U.S. Government contracts.

Resolve open cost allowability issues and develop negotiation alternatives.

Determine the cost accounting system’s effectiveness in complying with the fundamental requirement for collecting costs by contract.

Prevent inclusion of expressly unallowable costs in cost proposals and invoices for Government contracts.

Assure consistency of cost accumulating and cost estimating practices.

Evaluate information on organization structure, products/services, contract awards, sales, business plans, etc. to determine needs of company estimating system.

Review estimating manuals, policies, procedures, and system support software for adequacy.

Evaluate third-party audit reports and responsive actions to enhance and improve the estimating system.

Perform transaction tests, as mutually agreed upon, to measure the degree to which practices mirror procedural expectations.

Analyze above, discuss with appropriate company personnel, identify and compliance and/or improvement issues, and asses alternative courses of action.

Obtain and keep an “acceptable estimating system,” thus avoiding payment withhold and related administrative burden and risk.

Determine compliant estimating practices that also enhance cost recovery and profitability of Government and commercial contracts.

Benefits from third party, independent assessment of estimating system and related indirect insight into estimating “best practices” to enhance competitiveness and reduce risk.

Businesses have used a material management and accounting system (MMAS) effectively for many years as a means of forecasting and time phasing material requirements for production. The unique requirements of Government contract cost accounting systems in an ERP MMAS environment have caused enforcement agencies to focus more on the adequacy of those systems. 

For contractors to minimize risks of non-compliance, while not jeopardizing schedule and cost in the production cycle, they must thoroughly understand the implementation and documentation of the operational, administrative, accuracy measurement, and financial aspects of an MMAS system.

Specific evaluation procedures will be agreed upon with the client before the engagement begins.

A team of specialists with extensive manufacturing, systems, and defense contract compliance experience will conduct the review, following a system overview by client personnel.

Management provides review of key system transaction flow documentation (including data collection documents and computer system reports) in storyboard, audit trail, or system flow diagram fashion.  System control points and weaknesses will be identified. (Optionally, if the client provides no flow diagrams, system flow diagrams will be prepared and documented with control points and weaknesses indicated.)

Key functional personnel will be interviewed to obtain system design information, system features and application procedures, and identify internal control points in the process.

Cross functional work sessions will be conducted to highlight the interrelationship among the various functions.

Transaction testing will be performed, as required and agreed upon, to validate system application procedures to actual practices

An independent, objective, and cost-effective evaluation of the MMAS system against the requirement of DFARS clause 252.242-7004, MMAS.

A regulatory compliance risk analysis with recommendations that, if followed, should result in systems and procedures that comply with federal regulations.

The means for an effective response to ten MMAS Standards.

An independent evaluation for management of key MMAS issues, allowing management to continue focusing on other business issues without extensive interruption. .

Review historical measures of business base and related overhead expenses.

Remove the obvious anomalies caused by changes in business environment.

Analyze the resulting data by overhead pool, using regression analysis that recognizes the nonlinear nature of overhead.

Project overhead rates for any specific business base, using the regression analysis model.

Compare the rates predicted by regression analysis with other estimates.  Determine whether variances reflect reasoned corporate decisions or are “unexplained.”  Estimates that fall outside the regression analysis predictions may represent unrecognized support requirements or opportunities to control overhead growth.

Determine and support forward pricing rates.

Improve strategic planning.

Identify excesses in planned overhead expenses.

Determine appropriate overhead rates for total program and long-term contract estimates-to-complete.

Analyze alternative proposals at various business volume levels.

Assist in preparing bids for multiyear procurements.

Evaluate supplier cost proposals.

The existence of, and continuing adherence to, an adequate Government property management system is a condition precedent to being awarded most negotiated U.S. Government contracts, to receiving and using Government-owned property, and to indemnifying the Government against losses of or damage to Government property.

FAR clause 52.245-1, Government Property, sets forth ten outcomes expected from an "acceptable property management system."  DFARS clause 252.245-7003, Contract Property Management System Administration, refers to the system criteria of the above FAR clause and outlines the process for withholding payments if a contractor's property management system is disapproved by a Contracting Officer

Review existing policies and procedures for adequacy.

Analyze reports and corrective actions relative to customer reviews.

Interview cognizant personnel to ascertain whether current practices are in accordance with Government regulations and company procedures.

On-site sampling to confirm proper treatment and control of Government-owned and contractor acquired property.

A fully “acceptable” property management system that satisfies the expectations of FAR clause 52.245-1, Government Property, and DFARS 252.245-7003, Contractors Property Management System Administration.

A cost-effective property management system.

Avoidance of system disapproval by the customer that could result in monetary withhold and/or loss of contract award status.

Re-approval where system has been disapproved.

Apply special pricing methods and cost principles applicable to REA proposals and/or claims.

Work with cognizant personnel to assure full recovery of both direct and indirect costs, with special emphasis on prior years’ costs, loss of useful value of assets, settlement expenses, and unabsorbed overhead.

Analyze and coordinate contractor’s data with cost principles and pricing methods to develop a REA and/or claim containing optimum cost recovery and profit elements.

Choose best approach by analyzing alternative methods for preparing REAs and/or claims.

Enhance recovery and cash flow through proposal content.

Assure compliance with contract and regulatory requirements.

Avoid cost of adding special capabilities to staff as consulting for proposal preparation is frequently recoverable as part of the REA and termination settlement expenses.

Responding successfully to Requests for Proposal (RFP) requires knowledge of applicable laws and regulations, as well as experience in the structuring of contracts and negotiating with the Government. Negotiating successfully requires a thorough understanding of which provisions are negotiable and which elements of the scope of work can be modified.

Assist clients in understanding the solicitation requirements and in preparing responsive, winning proposals containing optimum profit potential and minimum risk.

Conduct a meeting to review the purpose and history of the solicitation in light of the company’s strategic plans, market position, and competitive factors.

Review and analyze the solicitation to determine fixed versus flexible provisions and critical proposal requirements.

Meet with the proposal team to review solicitation requirements, perform strength/weakness assessments, identify areas requiring clarification or emphasis, and develop proposal strategy, including suggested proposal modifications.

Prepare an assessment of the solicitation and provide proposal strategy recommendations.

Select appropriate contract type based on the nature of the solicitation.

Avoid undesirable terms and conditions.

Limit risks by passing back to the Government in special clauses those risks over which contractor has no control, and modifying terms and conditions for those which exceed “prudent business risks.”

Achieve compliance with applicable laws and regulations.

Develop credible estimates, bases of estimates, and substantiation data.

Enhance profit for risks taken using a “structured” method.

Submit timely, complete, and accurate proposals.

Improve win probability