The Defense Contract Audit Agency and Online Contract Management

3-16-16 | by Benjamin Fleshman

According to the Defense Contract Audit Agency (DCAA) website, the purpose of the DCAA is to: “provide audit and financial advisory services to Department of Defense (DoD) and other federal entities responsible for acquisition and contract administration.” It operates under the direction of the Secretary of Defense in order to provide these services to government offices.

 

This means that if your company, large or small, aspires to secure a government contract, whether in the field of defense or not, then your contract management process will need to meet the criteria of the DCAA. Fortunately, the DCAA has all criteria, applications, checklists, and any other preparation you might need on their website, which we have provided a link to above.

 

DCAA Assessment Criteria

Prior to awarding you the contract, the DCAA will assess several things. They will analyze your accounting system, to determine if it is acceptable for the potential contract. They will request that you fill out their specific checklist, and ask you to demonstrate that your accounting system meets SF 1408 criteria.

 

An acceptable accounting system, according to DFARS 252.242-7006, is defined as “a system…that provides reasonable assurance that:

  • Applicable laws and regulations are complied with;
  • The accounting system and cost data are reliable
  • Risk of misallocations and mischarges are minimized
  • Contract allocations and charges are consistent with billing procedures.”

 

In addition to this, among other things, comes the requirements placed upon the proposed contract. Your contract needs to be clear about the total cost, direct and indirect, of the contract.

FAR 31

You should be certain that your contract costs comply completely with FAR 31, as well, meaning that your direct and indirect costs are considered reasonable and allowable by the government. While most costs do fall under the “reasonable” category, it never hurt anyone to double check. (I still cry a little bit inside whenever I see that flowers are not an allowable or reasonable cost). If a cost is unallowable, then you will need “written policies and procedures to identify and exclude unallowable costs.”

 

Contract Clarity

With all of these requirements placed upon you during the pre-award, award, and post-award stages of a government contract negotiation, you will want to be sure that your contracts are clear, concise and reasonable. The first step in managing your contracts effectively will be to assemble a good team and collaborate. Everyone will need access to the document, and your team will need to be able to review and edit everything collectively. The team should be an adequate size to meet the demands of the task, but not so large that people become redundant.

Collaboration

The easiest way to collaborate effectively is to use a cloud-based contract management software system, such as Concord Worldwide’s. Using a software system like this means that your team will all have easy access to the contract draft, and everyone will be able to make edits. On top of that, whenever an edit is made, the entire group will be notified of the change and able to review it. Anyone in the group can comment on certain points and ask for clarity should they feel it necessary.

Contract Drafting

During the drafting process, be sure that your contract clearly states the allocable costs, FAR 31 allowable costs (both direct and indirect), unallowable costs, risk management, payment plans, billing procedures, deadlines, and all other information that you deem pertinent. These are the things that the DCAA will be looking for when they review your proposal and when they review your contract. And, because of UETA and ESIGN laws, the federal government will honor electronic signatures. This means that, if you’re using Concord’s contract management software, both parties can sign the contract electronically to make it legally binding.

 

Post-Award

After you have been awarded the contract, keep up on deadlines, regulations, and billing procedures. Here again, Concord’s cloud based system will be useful. You can store old contracts in the cloud, access them any time for review, and recycle them for future contracts, so you’ll know that they comply with government regulations every time. You will also receive deadline alerts until the fulfillment of the contract, so you will never miss a delivery date.

If your company is looking to sign a government contract, then the easiest way to manage the contract, terms, deadlines, and the entire process, really, is to use Concord’s Contract Management Software to draft, negotiate, sign, and fulfill the contract.