Will Not Having an Approved Accounting System Disqualify our Firm From Bid Opportunities? - PART II

Last week, we discussed the fact that (despite popular misconception), contractors DO NOT in fact need an "approved" accounting system in order to simply bid on contracting opportunities with the Federal Government. In Part II, we examine language in various solicitations from Federal Agencies that supports this assertion.

Solicitation language

A number of solicitations we’ve found validate the assertion that not having an approved accounting system does not bar anyone from bidding.

DoD SBIR/STTR solicitation language:

4.20 Adequate Accounting System

In order to reduce risk to the small business and avoid potential contracting delays, it is suggested that companies interested in pursuing Phase II STTR contracts and other contracts of similar size with the Department of Defense (DoD), have an adequate accounting system per General Accepted Accounting Principles (GAAP), Generally Accepted Government Auditing Standards (GAGAS), Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) in place. The accounting system will be audited by the Defense Contract Audit Agency (DCAA).

When bidding on the Navy services acquisition Seaport-E contract, new bidders are given these instructions:

Since there are firm fixed price CLINs included in this solicitation, a DCAA approved accounting system is not required to be eligible for award of a prime contract. However, successful awardees would not be eligible to receive a cost type or flexibly priced task order until a preaward survey of the offerors accounting system design complies in all material respects with the criteria contained in the SF1408. The Government will initiate requests for accounting system reviews for any successful offeror that does not currently have an approved system after awards have been made from this solicitation.

And from the DCAA itself in its Information for Contractors Pamphlet 7641.90, Enclosure 2, paragraph 3a.(2) that says in part:

… prospective contractors may have no work that requires the same type of accounting system required for Government work. A prospective contractor may not want to install a new, more detailed accounting system unless awarded a contract. In this case, if the potential Government contractor anticipates a contract award, it must have developed a system that is operable, though not necessarily in use.

The NASA case

A recent question on a professional social media site asked if this NASA solicitation language was proper.

“FAR 16.301-3 requires that a contractor's accounting system be adequate for determining costs applicable to the contract prior to the award of a cost-reimbursement contract.”

First of all, this is a misstatement of the FAR citation. This language also implies that a bidder must already have an approved accounting system in order to win the bid. However, reading the NASA acquisition supplemental regulations, we find something different:

1809.106-1 Conditions for preaward surveys.
(a)(i) Preaward surveys are used only to assist the contracting officer to make determinations of responsibility under FAR 9.104 They are not to be used to obtain information useful to proposal evaluation…”

Recourse

Bidders have a variety of options for battling implied or explicit barriers to bidding if they don’t already have an approved accounting system. Read carefully all solicitation terms and find the ones related to approved accounting systems. Most will identify a process for approval after a bid has been awarded to a winner.

If the solicitation is not clear, use the period of time designated for asking questions about the solicitation. If you miss that period, you should have access to all questions and answers. Chances are this question will come up if it’s not clearly identified in the solicitation.

If answers are tough to come by, ask if the solicitation has a Justification and Approval (J&A) for restricting full and open competition to only those bidders having approved accounting systems. Buying agencies, especially the DoD and NASA, provide small business ombudsman offices and competition advocates. Discuss these restrictive barriers with them citing the regulatory language above.

Your least effective recourse is likely a bid protest, and even the threat of a bid protest might do more damage than just letting the solicitation pass.

Conclusion

If you ever have any questions about this, or any other topic relating to federal contracting, or FAR and/or DCAA compliance, do not hesitate to contact the experts at ReliAscent.  At ReliAscent, the Success of all Small Business Federal Contractors is our Top Priority!