DCAA getting tougher on Consultant costs
At ReliAscent we have noticed lately several examples of the DCAA interpreting a regulation differently than they had in the past. This apparent shift in interpretation might catch an unsuspecting company by surprise and cause some heartache. What we have noticed is related to how the FAR addresses consultant and subcontractor costs in FAR 31.205-33. The issue seems to center around adequate documentation for consultants. The DCAA appears to be interpreting this regulation very literally now. The FAR requires monthly time reporting, monthly work product or similar to support the Consultant services. In many audits from the past, this type of proof was either not looked at or not required in many instances. I have heard of several instances where Incurred Cost submittals for up to as much as 7 years ago are just now being audited (this is another problem). The issue is that the DCAA is requiring companies on these audits to produce this documentation and in many cases it just doesn't exist since the work was completed a long time ago. I know of one case where the same consultant, working for the same company had their invoices passed in an ICE audit for the year 2006 but now (this year) when the 2007 ICE is being audited the DCAA is rejecting the consultant documentation. They have indicated that the consultant should be providing adequate time sheets for this time period and, in fact, this consultant may no longer be active or able to produce the time documentation. It would be a different story if the DCAA were timely and looking back only at last year but records 5 to 6 years old, for a small business and for a small business consultant are now being called into question. This just goes to show you how important it is to maintain all your records when you are contracting with the Federal Government, and keep them for a longer period of time than you might otherwise think prudent. In two other separate instances, companies are being audited for 2007 Incurred Cost submittals. In both cases the DCAA has disallowed nearly all of the consultant costs because of inadequate documentation by the consultants. Both companies have used the same procedures for many years (up to 20 years) and have been continuously audited by the DCAA without any consultant costs being questioned until now.
We would be interested to hear from our readers to see if you have encountered similar situations. ReliAscent is working through several national organizations to try and establish some consistency on this but this type of background work will take time. Meanwhile, there are lots of past due Incurred Cost Submission Audits being conducted and this could cause some headache. The only way to prepare for this is to review your documentation and, if possible, make sure your consultants and subcontractors can help supply any missing documentation.