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Presented to: By: Date: Federal Aviation Administration Ready for Cost Type Contracts - Accounting Systems and Administration Small Business Vendor Day.

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Presentation on theme: "Presented to: By: Date: Federal Aviation Administration Ready for Cost Type Contracts - Accounting Systems and Administration Small Business Vendor Day."— Presentation transcript:

1 Presented to: By: Date: Federal Aviation Administration Ready for Cost Type Contracts - Accounting Systems and Administration Small Business Vendor Day Michelle Brune, Manager Cost/Price Analysis Services February 3, 2016

2 Federal Aviation Administration Pre-Award: Accounting System Survey 2

3 Federal Aviation Administration AMS Guidance Procurement Guidance T3.2.4-A3b(2)(b) use of a cost type contract is appropriate when the contractor’s accounting system is adequate for determining costs applicable to the contract Procurement Guidance T3.2.2.7-A1c(1) (b) Whether the surveying activity is within or outside of the contract administration office, the CO should obtain from the office or auditor: (ii) The adequacy of the prospective contractor’s accounting systems and the suitability of their use in administering the proposed type of contract 3

4 Federal Aviation Administration Prior to Contract Award CO obtains information on prospective contractors, including determining which contractors have an adequate accounting system –Depending on the circumstances the CO may obtain information on contractors before issuing the solicitation. For contractors without an adequate Accounting System, the CO will take steps to ensure a Pre-Award Accounting System Survey (SF 1408) is performed prior to contract award 4

5 Federal Aviation Administration Pre-Award Accounting System Survey Evaluates design of Accounting System to determine suitability for a Government Cost Type Contract Contractor must be prepared to demonstrate compliance with criteria on SF1408 –Contractor must demonstrate it has Accounting System in place able to, among other things, accumulate and appropriately segregate costs 5

6 Federal Aviation Administration 6 Accounting System Survey may be performed by:  DCAA (Defense Contract Audit Agency)  Independent auditor requested by Agency  Independent auditor requested by Vendor/Company BUT, audit must test requirements of SF 1408, and Agency reserves right to accept survey as adequate Pre-Award Accounting System Survey

7 Federal Aviation Administration SF 1408 Criteria SECTION I – RECOMMENDATION 1.Prospective Contractor’s Accounting System is acceptable for award of prospective contract SECTIONI II – EVALUATION CHECKLIST 1.Is Accounting System in accord with Generally Accepted Accounting Principles applicable in the circumstances? 7

8 Federal Aviation Administration SF 1408 Criteria (continued) 2.Accounting System Provides for: a.Segregation of direct and indirect costs b.Accumulation of direct costs by contract c.Appropriate method for the allocation of indirect costs to cost objectives. (A contract is a final cost objective.) d.Timekeeping system that identifies employees' labor by cost objectives e.Periodic (at least monthly) determination of costs charged to a contract through routine posting of books of account f.Exclusion of unallowable costs per FAR 31 (AMS T3.3.2 Appendix 2), Contract Cost Principles and Procedures, or other contract provisions g.Identification of costs by contract line item and by units 8

9 Federal Aviation Administration SF 1408 Criteria (continued) 3.Accounting System provides financial information:  Required by contract clauses concerning limitation of cost (FAR 52.232-20 and 21) (AMS 3.3.1-12 and 3.3.1-13) or limitation on payments (FAR 52.216-16) (AMS 3.2.4-14) 4.Is the Accounting System designed, and are the records maintained in such a manner that adequate, reliable data are developed for use in pricing follow-on acquisitions? 5.Is the Accounting System currently in full operation? 9

10 Federal Aviation Administration Administration of Cost Type Contracts What You Do What We Do 10

11 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment: Invoices Allowable costs paid in accordance with FAA Cost Principles (described in clause) Payments for costs…particularly for costs of Indirect Rates under paragraph (d), shall be subject to the provisions of the "Limitation of Costs" clause, or the "Limitation of Funds" clause, if applicable Contractor shall be responsible to manage and control the allowable cost of performance of the contract, such that payments for any allowable costs, including Indirect Rates under paragraph (d), shall not exceed the estimated cost set forth in the schedule, or the funded amount, less an allowance for fee, if the contract is incrementally funded 11

12 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment What Contractors Do:  Submit invoices in accordance with clause  Provide invoice detail by cost element Direct labor incurred (by individual at base rates) Other Direct Costs (travel, subkts, materials) Overhead G&A Fee  Do Not Bill as a Time & Materials type rate; burdens must be shown  Fee should be $ amount vs. %! IMPORTANT  Track funds expenditure by cost and fee! 12

13 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment: Billing Rates Billing rates: until final annual indirect cost rates are established for any period, the Govt reimburses the Contractor at billing rates established by the CO or by an authorized representative (the cognizant auditor), subject to adjustment when the final rates are established Billing Rates:  Shall be the anticipated final rates, and  May be prospectively or retroactively revised by mutual agreement, at either’s party’s request, to prevent substantial overpayment or underpayment. 13

14 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment: Billing Rates What We Do  Billing rates may be established by cognizant audit authority, DCAA or other civilian agency, or by CO based on proposal What Contractors Do  Submit Forward Pricing Rate Proposal annually to cognizant federal agency official to use for billings (ACO/DCMA)  Monitor for unexpected indirect cost growth! Notify CO for potential adjustment per clause 14

15 Federal Aviation Administration Invoices and Fee Withholding AMS 3.2.4-6 – Fixed Fee  See Section (b) Payment of the fixed fee shall be made as specified in the Schedule; provided, that after payment of 85 percent of the fixed fee, the Contracting Officer shall withhold further payment of fee until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the FAA's interest.  This reserve, for the entire contract including any orders placed against a contract, Basic Ordering Agreement, Basic Agreement or other ordering vehicles, shall not exceed 15 percent of the total fixed fee or $100,000, whichever is less What We Do: withhold fee reserve from payment pending physical completion of contract (or delivery order) 15

16 Federal Aviation Administration Invoices and Fee Withholding AMS 3.2.4-8 Incentive Fee See section (c) Withholding of payment  Normally fee paid as specified in the Schedule  Lesser fee paid, a appropriate, if CO considers that performance or cost targets will not be achieved  CO discretion to pay higher fee if Contractor demonstrates that performance or cost clearly indicates that the Contractor will earn a fee significantly above the target fee  15 percent/$100K withholding provisions are discretionary (except for any base fee withholding) 16

17 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment: Final Indirect Rates Final annual indirect cost rates and the appropriate bases are established for the period covered by the indirect cost rate proposal The Contractor shall, within 180 days after the expiration of each of its fiscal years, or by a later date approved by the CO, submit to the cognizant CO and to the cognizant audit activity proposed certified final indirect cost rates for that period and supporting cost data specifying the contract and/or subcontract to which the rates apply Proposed rates shall be based on the Contractor's actual cost experience for that period. The appropriate Government representative and Contractor shall establish the final indirect cost rates as promptly as practical after receipt of the Contractor's proposal 17

18 Federal Aviation Administration AMS 3.2.4-5 – Allowable Cost and Payment: Final Indirect Rates What Contractors Do  Submit incurred cost claim to CO and cognizant federal agency official within 180 days after your FY close  Be prepared to support an audit of costs claimed  After final rates determined, submit adjusting invoice for the FY What We Do  Review and audit claim as appropriate  Establish final rates  Review and pay adjustment subject to KT provisions 18

19 Federal Aviation Administration AMS 3.3.1-12 – Limitation of Cost …performance of this contract, exclusive of any fee, will not cost the FAA more than the estimated cost specified in the contract The contractor shall notify the Contracting Officer in writing whenever it has reason to believe that – 1.The costs the Contractor expects to incur under this contract in the next 60 days, when added to all costs previously incurred, will exceed 75 percent of the estimated cost specified in the “Schedule”, or 2.The total cost for the performance of this contract, exclusive of any fee, will be either greater or substantially less than had be previously estimated. As part of this notification, the Contractor shall provide the Contracting Officer a revised estimate of the total cost of performing this contract. 19

20 Federal Aviation Administration AMS 3.3.1-14 Limitation of Funds …performance of this contract will not cost the FAA more than the estimated cost specified in the "Schedule” – what’s currently funded. The Contractor shall notify the Contracting Officer in writing whenever it has reason to believe that the costs it expects to incur under this contract in the next 60 days, when added to all costs previously incurred, will exceed 75 percent of the total amount so far allotted to the contract by the FAA  The notice shall state the estimated amount of additional funds required to continue performance for the period specified in the "Schedule“ What Contractors Do (under both clauses):  Track incurred costs and fee expended, notify CO per clause when thresholds reached 20

21 Federal Aviation Administration Reference and Contacts For general cost contract policy and guidance:  AMS Policy 3.2.3, Pricing Methodology, Principles and Standards  AMS Guidance T3.2.3, Cost and Price Methodology  AMS Guidance T3.3.2, Contract Cost Principles  AMS Guidance T3.10.1, Contract Administration For contract specific questions consult your cognizant Contracting Officer 21

22 Federal Aviation Administration QUESTIONS? 22


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