8 DFARS Business System Final Rule DFARS 252.242-7005 4/15/2017DFARS Business System Final Rule DFARS–SystemDFARS ProvisionDFARS ClauseAccountingIndirect / ODCControl EnvironmentBillingLaborGeneral IT242.75Earned Value Management234.2EstimatingBudget / PlanningMaterial Management & Accounting242.72Property Management245.1Purchasing244.3
9 4/15/2017–Elements of an Adequate Billing System DCAA Contract Audit ManualBilling System should provide reasonable assurance that billings applicable to Government contracts are prepared in accordance with applicable laws and regulations, and contract terms; and that material misstatements are prevented, or detected and corrected in a timely manner.
10 The Billing System should include processes for: 4/15/2017–Elements of an Adequate Billing System DCAA Contract Audit ManualThe Billing System should include processes for:Segregating and excluding unallowable costsSegregating incurred costs that are non-billableWithholding costs that are appropriate adjustmentsAdjusting submissions for final rates or indirect billing ratesIdentifying costs that require specific approvalIdentifying contract overpayments
11 Key Processes Include: Billing system policies and procedures Elements of an Adequate Billing System DCAA Contract Audit Manual4/15/2017–Key Processes Include:Billing system policies and proceduresBilling reviews and approvalsTraining of employeesContract briefings
12 Key Processes Include Reconciliation of recorded and billed cost Elements of an Adequate Billing System DCAA Contract Audit Manual4/15/2017–Key Processes IncludeReconciliation of recorded and billed costAdjustment of cost and ratesExclusion of non-billable costsSubcontractor progress payments, performance-based and commercial financing payments
13 Elements of an Adequate Billing System DCAA Contract Audit Manual 5-1100 4/15/2017–Key Processes Include Estimate to complete, estimate of costs of delivered/invoiced items Loss contract procedures Contract overpayments, refunds and offsets Billing system – IT system internal controls
15 FAR Allowable Cost & Payment (a) Invoicing (b) Reimbursing costs (c) Small business concerns (d) Final indirect rates (e) Billing rates (f) Quick closeout procedures (g) Audit (h) Final payment
16 Provisional Billing Rates Purpose of Provisional Billing Rates (PBRs) What are the procedures for establishing PBRs? When should we submit? What information should we provide? DCAA review Monitoring Common deficiencies Frequently asked questions
17 Purpose of PBRsOne criterion for an adequate accounting system is that it provide for billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms. Interim payments on cost-type contracts are allowed as specified in the contract provisions.Reimbursement of indirect costs in these interim payments is generally made through provisional billing rates.Provisional Billing Rates are established to approximate the contractor’s final year-end rates, as adjusted for any unallowable costs.Provisional Billing Rates are used for interim purposes until settlement is reached on the final indirect rates for the contractor’s fiscal year.FAR Billing Rates-provides procedures and guidance for establishing PBRs.DFARS (c) The Contractor’s accounting system shall provide for—…(16) Billings that can be reconciled to the cost accounts for both current and cumulative amounts claimed and comply with contract terms;
18 Reasons for Contractor Submission Contractors are STRONGLY encouraged to submit a billing rate proposal to assist the responsible official in establishing ratesOpportunity to present and explain expected changesNote: Vouchers and progress payments may be REJECTED if submitted without using properly established billing rates
19 Procedures for Establishing Billing Rates FAR (b)The contracting officer or auditor shall establish PBRs on the basis of information resulting from recent review, previous rate audits or experience, or similar reliable data or experience of other contracting activities.When the contracting officer or auditor determines that the contract value does not warrant submission of a billing rate proposal, PBRs may be established by making appropriate adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs.Also, contractors may voluntarily submit a billing rate proposal to assist the responsible official in establishing rates (Preferred).It is important to discuss the requirements with the contracting officer or cognizant auditor.It is important to discuss the requirements/procedures for establishing your billing rates with the contracting officer or DCAA auditor to establish the procedures you should follow in submitting and establishing billing rates based on your particular circumstances.Although FAR (b)- [see below]- permits the Government to establish provisional billing rates without a detailed billing rate proposal using historical data, experience tells us that history without regard to budgetary expectations, may not be representative of rate experience during the billing period. That is, the risk of over payment or under payment is increased. Furthermore, the Government may request a proposal if it is necessary to establish representative billing rates.To help ensure timely cost recovery (e.g., reduce the possibility of returned voucher, etc.), it is in the contractor’s best interest to submit a detailed provisional billing rate proposal prior to entering a new fiscal period that is as close as possible to the expected allowable year-end rates.Reference: FAR (b) states that “When the contracting officer (or cognizant Federal agency official) or auditor determines that the dollar value of contracts requiring use of billing rates does not warrant submission of a detailed billing rate proposal, the billing rates may be established by making appropriate adjustments from the prior year’s indirect cost experience to eliminate unallowable and nonrecurring costs and to reflect new or changed conditions.”
20 Procedures for Submission Contractors submit provisional billing rates to its DCAA Office or Administrative Contracting OfficerElectronic submissions are encouragedProvide in excel format on a CD or throughFAR (a)—The contracting officer (or cognizant Federal agency official) or auditor responsible under for establishing the final indirect cost rates also shall be responsible for determining the billing rates.
21 When Should We Submit?Prior to the beginning of the fiscal year (once budgets are complete) or when the established billing rates are no longer representative of final year end rates due to unforeseen events or circumstances.The PBRs should represent a 12-month period (the contractor’s fiscal year).PBRs should be submitted at least annuallyVouchers and progress payments can be returned if submitted without properly established billing rates.FAR requires the billing rates to be established by the Contract Auditor or Contracting Officer before use in public vouchers. Therefore, contractors should submit a proposal as early as possible prior to the beginning of the fiscal year to allow the necessary time to review and establish the rates. If budgetary data is available for the next year prior to the end of the current year, the contractor should submit when available to facilitate the review and establishment of provisional billing rates for the next fiscal year.
22 What Should We Provide in a PBR Proposal? Proposed billing rate calculations (Pool and Base) with brief rationalePrior fiscal year (FY) pool and baseCurrent FY to date pool and baseCurrent FY budget pool and base, if availableComparative analysis with explanation of any significant differencesAgain, as stated on slide 4, discuss the format and specific requirements with your ACO and/or DCAA auditor.
23 DCAA ReviewSome example procedures DCAA may perform include the following:Compare proposed pool and base to prior year and year-to-date pool and bases.Review trend of questioned costs in relevant incurred cost audits and consider an adjustment for unallowable expenses in calculating current year provisional billing rates.
24 Monitoring PBRs should be monitored: Throughout the year Immediately after year-endUpon submission of the final indirect rate proposalPBRs may be adjusted by either party at any time to prevent substantial under or over payment – FAR (c).If PBRs are adjusted, the contractor should submit adjustment vouchers accordingly.FAR (c) indicates that established provisional billing rates may be prospectively or retroactively revised by mutual agreement at the request of the Government or contractor to prevent substantial over or under payment. The objective of this section is to ensure that billed costs are as close to what the contractor expects to incur in order to avoid significant over or under payment over the life of the contract. At many small businesses, unexpected events can have a significant impact on the indirect cost rates (e.g., award of a new contract, change in healthcare premiums, etc.) Therefore, the contractor should monitor its actual indirect cost rates on a monthly basis and if there are significant differences which will affect the year end rates, propose an adjustment to the contracting officer or DCAA office responsible for establishing provisional billing rates.FAR (e) When the contractor provides to the cognizant contracting officer the certified final indirect cost rate proposal in accordance with (b) or (b), the contractor and the Government may mutually agree to revise billing rates to reflect the proposed indirect cost rates, as approved by the Government to reflect historically disallowed amounts from prior years audits, until the proposal has been audited and settled. The historical decrement will be determined by either the cognizant contracting officer ( (b)) or the cognizant auditor ( (b)).
25 AdjustmentSubmit a letter with new rates, an explanation as to what caused the change, and with supporting dataIf DCAA/DCMA has NOT issued a memo:Begin using the new rates immediatelyIf DCAA/DCMA HAS issued a memo:Continue using the rates as listed on the memo unless you receive a new memo from DCAA/DCMAPlease contact your cognizant office if you have concernsNOTE: If PBRs are adjusted, use the new rate on the current year cumulative expenses
26 Common DeficienciesFailure to remove unallowable costs from the billing rate projections.Failure to adjust provisional billing rates based on actual experience:Before year end, if there are known or reasonably anticipated significant variances.After year end once actual rates, net of unallowable expenses, are calculated.
27 Frequently Asked Questions Do I submit the Provisional Billing Rate Proposal to the ACO or DCAA Office?FAR indicates the office responsible for final indirect cost rates also establishes provisional billing rates.If final rates are ACO determined, submit to that office.If final rates are audit determined, submit to local DCAA Office.The ACO may request DCAA assistance to review the provisional rate proposal as part of his or her efforts to establish provisional billing rates.If the contractor is uncertain on whether its final indirect rates are determined by audit or the contracting officer, it should contact its ACO or DCAA auditor for clarification.
28 Frequently Asked Questions Can I use just use the most recent FY ended rates for provisional billing purposes?No. However, the responsible official may establish the billing rates based on prior year history less unallowable costs.If budgetary data is available, your proposed billing rates may be based on the budget less the estimated unallowable costs.Once provisional billing rates are established with DCAA or the ACO, do I need to submit proposed changes based on new information?YES. The contractor should submit new proposed billing rates when known or reasonably anticipated significant variances have occurred.
29 Fee Withhold Three contract clauses (FAR 52 Fee Withhold Three contract clauses (FAR , -9, and -10) regulate how the Government will pay fees under CPFF and CPIF contracts
30 Public Voucher Contractor Responsibilities Preparation of Vouchers Electronic Submission of Vouchers Common Deficiencies
31 Contractor Responsibilities Contractors should:Contact the cognizant DCAA office after contract award.Ensure DCAA has the necessary information to process contract billings, such as current provisional billing rates, copy of the contract, any special contract provisions, etc.Maintain adequate billing system internal controls.Ensure adequate support is maintained for amounts billed.Submit timely incurred cost proposals and final vouchers in accordance with FAR
32 Preparation of Vouchers The contractor is responsible for preparing and submitting claims for reimbursement according to the terms of the contract.Vouchers should not be submitted more than once every two weeks.Public voucher claims for reimbursement must be prepared on the prescribed Government forms:First voucher on a contract is an interim voucher, as are all subsequent vouchers prior to the final voucher.Final voucher will not be submitted until all contract work is completed. The auditor may provide advice concerning the format for preparing public vouchers and financial representations.
33 Electronic Submission of Interim Vouchers All vouchers should be submitted through WAWF unless contract terms require hard copy vouchers to be submitted.In WAWF, the “Cost Voucher” is the equivalent of the SF Data equivalent to the SF 1035 must be included in a separate electronic file and attached to the cost voucher in WAWF.Vouchers must be prepared and submitted in accordance with the terms of the contract, including any special billing or payment instructions.Guidance and training for completing a cost voucher invoice can be obtained from the WAWF website at https://wawf.eb.mil.
34 Electronic Submission of Interim Vouchers Electronic Submission of Interim V ouchers examples from DCAA Manual , Information for Contractors, located at:
35 Electronic Submission of Interim Vouchers Final voucher:Last voucher to be submitted on a contract.A separate completion voucher will be submitted for each individual project or task order for which a separate series of public vouchers has been submitted.In accordance with FAR (d)(5).
36 Common Deficiencies Common deficiencies found during voucher reviews: Math errors.Billed costs not allowed per the contract terms (e.g., overtime).Incorrect provisional billing rates (indirect costs).Billing over contract ceiling amounts.
37 Progress Payment FAR 32.5 – Progress Payments Based on Costs SF 1443 – Contractor’s Request Invoice & Receiving Report WAWF's Receiving Report takes the place of the DD250 and MIRR
39 Wide Area Workflow (WAWF) Contractors input invoices via InternetGovernment performs inspection/acceptance via InternetSends inspection/acceptance information to Payment System via Electronic Data InterchangeProvides visibility to all – Industry, DCMA, DCAA, DFAS, Buying CommandsMaintains electronic recordsStandard DOD application with Single Face to IndustryProvides secure and auditable transactions
40 Wide Area Workflow (WAWF) Benefits for ContractorsElectronic submission of invoicesFaster paymentsTotal visibility of document statusEliminates lost or misplaced documentsSecure transactions with audit capability
41 Wide Area Workflow (WAWF) Document types used to create, submit, inspect, accept, certify, or process payment on the following document types: Invoice Document Types (Seven) Receiving Report Document Types (Six) Receiving Report and Invoice Document Types (Four) Financing Document Types (Three) Voucher Document Types (Five) Property Document Type (One)
42 Wide Area Workflow ***Billing to the correct Contract Line Item Number (CLIN) on the Contract is critical*** DFARS Clause Wide Area Workflow Payment Instructions Attached to the invoice/voucher, must be supporting documentation, if required by the contract
43 DCAA Oversight/Monitoring Periodic Audits by DCAA DCAA Oversight/Monitoring Periodic Audits by DCAA. When contract financing is cost-based, such as interim cost reimbursement (interim vouchers) or cost based progress payments, the billing system and the contract costs are subject to periodic audits by DCAA. DCAA will, at a minimum, verify that the costs billed have been incurred in performance of the contract, that they are in agreement with the accounting records, and that they are in accordance with the contract terms.
44 Wide Area Workflow (WAWF) Includes a voucher sampling approach that replaces the direct bill programDFARS gives DCAA authority to:Approve interim vouchers selected using sampling methodology for provisional payment and forward to the disbursing officeALL provisionally approved interim vouchers are subject to a later audit of actual costs incurredReview final vouchers and send to the Administrative Contracting Officer (ACO)
46 Internet Vendor Bank WAWF Application DoD Pay Systems EDIFTP Data UploadWeb Input using Web FormsSubmits ShippingReports & InvoicesInternetWAWF transmits payment actions EDI 810C, 856, & 861 via GEX to DoD pay systemEFTAuthorize transfer of fundsVia EFT to Vendor’s bankReceives notification of awaiting actionsPays or rejects invoices using Web Forms online in WAWFCertifies invoices ready for payment in WAWFAccepts / rejects using Web Forms online in WAWFInspects / rejects using Web Forms online in WAWFVendorBankWAWFApplicationDoD PaySystemsPayment OfficeLocal Processing OfficeAccepting / Receiving ActivityInspecting Activity
47 Invoice requirements are listed in The Federal Acquisition Regulations (FAR) (FAR Part ). Company must be registered in System for Award Management to receive electronic payments (EFT) (https://sam.gov) Federal Agencies use different electronic payment systems such as: - Wide Area Work Flow (WAWF) - DoD - PayWeb - ONR -Payment Management System (PMS) – DHHS
48 Be proactive before submitting invoice: - Read your contract - Understand your contract - Ask questions of your Contract Specialist - Follow the invoicing instructions - Know who is responsible for actions needed - Monitor your invoices progress
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