As a government contractor we all learn that the growth of our business means there is also a growth of the government’s involvement in our business systems. The business systems of primary interest to the government are:
- Earned Value Management (EVM)
- Cost Estimating
- Material Management and Accounting (MMA)
- Property Management
The government’s interest in your internal business systems is usually triggered by the value of a new contract awarded to your company. When a contract has a maximum value of $50 million or more, the Request for Proposal or Request for Quote should state that it is for a “Covered Contract” as defined by the Federal Acquisition Regulations (FAR). At this value level, you are required to comply with the Cost Accounting Standards (CAS) and DISCLOSE your cost accounting practices. Compliance with this requirement is done by filling out the CAS Disclosure Statement form that you can obtain at (www.whitehouse.gov/omb /procurement/casb_ds-1.pdf)
Once you have submitted the CAS Disclosure Statement, all future audits of your business will focus on whether or not you are following the procedures and practices that you have disclosed.
WARNING – Ignoring the CAS Disclosure Statement when your company is small and growing and waiting until you are proposing on a contract, can create an enormous and costly problem. Changing business system P&P to achieve CAS compliance can, and often does, involve very significant overhead efforts and expenses that can be easily avoided.
The key to avoiding these costs is simple: download the CAS Disclosure Statement form, fill it out, implement your business system to comply with the requirements you have selected BUT do not submit it. Then when your business grows to the level that requires you to disclose, you are already in full compliance with the P&P you have selected. Importantly, if you revise your P&P – remember to update and revise your CAS Disclosure Statement.
We are currently finalizing a Guide to the Government and Your Business Systems which provides a compilation of the Government’s requirements related to their involvement in your business system. If you would like to receive a copy, please email Ed Harrington at Ed@ClientViewConsulting.com.
In the near future we will be providing a discussion of the government contract oversight roles that the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA) utilize when overseeing Contractor Business Systems. Other Federal Agencies often turn to DCAA for contract audit support.
This discussion will also include an overview of the government’s increasing emphasis on these systems, including the criteria for compliance (including CAS) and definitions used to define deficiencies. We’ll also address the need for internal controls, the impacts of non-compliance and include some insights on resolving issues.