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FAR Survey

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The FAR Survey provides a quick preliminary assessment of problem issues or concerns of management within the various federal contracting regulatory and performance areas covered by the survey, such as but no limited to, the following subject areas:

  • Cost Accounting Standards (CAS)
  • Examines whether the Cost Accounting Standards apply to a particular contract, whether full or modified coverage applies if the contract is subject to the CAS, whether a Disclosure Statement is required and when it must be submitted if it is required, whether changes to accounting methods are cost accounting practice changes and whether those practices trigger submission of a cost impact proposal and computation of any payment of savings to the government, including applicability, how to implement a cost accounting practice change so that it minimizes the cost impact, how to compute a cost impact to minimize the amount of any repayment, and what strategies can be used to optimize cost allocation and maximize cost recovery in order to maximize revenues.

  • FAR Part 31 Cost Principles and Procedures
  • The FAR Part 31 Cost Principles and Procedures provide 5 tests of cost allowability. Only one of the five tests include the 52 specific costs that are totally unallowable, of which there are few in this category, or they are conditionally unallowable. Just because a government auditor claims that a cost is unallowable does not mean that it is and their is plenty of reason to have an auditor's claims validated. In addition to cost allowability, these principles prescribe the requirements and standards for allocating costs both direct and indirect. Since a contractor's allocation techniques can significantly effect cost recovery and a contractor's revenue recognition, this aspect is also worthy of considerable examination by contractors, particularly when questioned by government auditors that are likely intended simply to reduce the government's financial obligations. Finally, the treatment of unallowable costs and their associated costs are also prescribed by these principles and procedures. The survey is not a comprehensive compliance review. Rather, it is an examination of particular cost treatments. The survey will either provide the answer to the question being considered or identify the analysis necessary to determine the answer if the issue is more complex.

  • Truth-in-Negotiations Act (TINA)
  • The Truth in Negotiations Act imposes certain disclosure requirements on contractors negotiating certain cost based contracts and contract modifications. While a lot of contractors believe these requirements to be disclosures about their proposal computations, the Act's requirements actually pertain to the disclosure of facts whether or not they were used by the contractor in computing its offer. Failure to make the disclosures exposes the contractor to both give backs as well as various other penalties. The survey examines whether the contractor is making the proper disclosures and whether other procedural remedies are warranted.

  • Acquisition Methods
  • There are a number of different acquisition methods like those involving negotiation, competition or commercial items. The issues can often be what are the requirements for something like negotiation, since depending on the dollar threshold a number of additional requirements, like Cost Accounting Standards and Cost or Pricing Data under TINA can be triggered. Similarly, many contractors look to exemptions like commercial items as a means to sell to the federal government while avoiding the troublesome standards like Cost Accounting Standards and Cost or Pricing Data under TINA. Just because the government or an upper tier contractor characterizes a particular need as a Commercial Item does not mean that the contractor actually has one. Sometimes the more frequent issue is that the government or upper tier contractor wants to get cost or pricing data as means to learn about a contractor's actual profit margins and narrow them. Thus, it becomes the contractor that wants to use the commercial item pricing as a means to block the customer's view at their actual profit margins. The survey helps contractors understand their actual obligations, in case there is someplace where they have exposure, or how to qualify and justify for a commercial item exemption in order to avoid customer abuses.

  • Equitable Adjustments and Assessment of Problem Contracts
  • Problem contracts can occur in a variety of situations because of things like delays, defective specifications, differing conditions, delinquent customer furnished property or information, the unsuitability of customer furnished material or information, etc. Sometimes the cause of the problem is not even clear to management because it happened early in the performance of the contract and went undetected by program managers and contracts professionals in the slow boil of contract performance and administration. While in some cases the cause of the problem really is a contractor problem, most often in the world of government contracts the real cause of the problem is customer driven just due to the complex nature of government contracts. The survey examines a problem contract and tries to determine the real cause of the problem and if there are remedies available to the contractor in the form of a Request for Equitable Adjustment (REA). The survey also attempts to determine the rough order of magnitude for the issue to better inform management about the potential payoff for pursuing this issue.

  • Program Cancellations and Contract Terminations
  • Program cancellations and contract terminations, at least the real serious kind, can be a once in a career occurrence for even seasoned managers. When they represent a contractor's major effort, they can represent a serious threat to a contractor's on-going operations. Beside just how to handle the mechanics of the cancellation or termination, there often are questions about what options are available to maximize revenues and minimize the adverse impacts. The options can often involve identification of previously unrecognized changes that can increase both revenue dollars and the amount of claimable profits on the terminated work. In addition there are often investments that the contractor has made in the contract effort that may not have been fully recovered. These unamortized costs may also be recoverable, which also increases revenues and cash flows. Finally, the termination process can be complex on a large program. The costs of winding down the contract can be immense and provide a means to keep the labor force employed for a little while at least until the next contract kicks in. The survey examines the canceled program and/or terminated contract and informs management about the process that will be required to complete the cancellation and/or termination effort as well as about the differing options that are available to maximize revenues and diminish the impact of the cancellation and/or termination.

  • Contractor Business System Reviews (CBSR)
  • The Defense Contract Management Agency (DCMA), through Administrative Contracting Officers (ACO), generally has responsibility for deciding whether contractor business systems are acceptable and then either approving or rejecting them as unacceptable. The reviews and audits themselves, on which ACO decisions are based, are conducted, depending on the business system being reviewed, by Defense Contract Management Agency (DCMA) review teams or auditors from the Defense Contract Audit Agency (DCAA). There are six different CBS that are subject to these reviews. Those systems are the Accounting, Estimating, and Material Management and Accounting System that are reviewed by DCAA and the Purchasing, Property Management, and Earned Value Management systems that are reviewed by DCMA. The survey can review any of a contractor's business systems and identify whether there are any potential shortcomings that need to be addressed in subsequent Business Engineering efforts in order for the contractor to pass those reviews.

  • Safeguarding Controlled Unclassified Information (CUI)
  • Prior to getting awards involving CUI, contractors are supposed to have in place controls and procedures complying with the NIST SP 800-171 publication security controls. In addition, the contractor is supposed to have completed an assessment confirming that those controls and procedures are in place. Prior to bidding on contracts containing CUI the Survey can be used to identify whether a contractor has in place the required controls and procedures and the efforts it needs to undertake in order to achieve compliance with the those requirements.

  • Protection of Data Rights
  • The government would like to have title to a contractor's technical data rights so that they can share them with anyone and get a better price for manufacture of the end item. For contractors keeping their data rights is more than just claiming them as data rights. There are a lot of contracting and accounting issues, too. The survey examines a contractor's contracting and accounting procedures involving its technical data rights to ensure that they are adequately protected.

The survey typically involves 3 to 4 days of on-site field work analyzing data, reviewing documents and talking with key personnel about the issues of interest. The field work is then followed with a letter report summarizing our findings, conclusions and recommendations, if any, with appropriate citations to applicable rules and regulatory requirements.

The FAR Survey is a great way to get started in assessing government contract concerns. While it is not as robust as a full-scale compliance review, cost structure optimization, Request for Equitable Adjustment (REA) proposal, Termination Settlement Proposal, or other more penetrating analyses of compliance subject but it provides an expert analysis in a short period of time in order to either confirm or assuage management's concerns and obtain a more reasoned solution to those concerns, if they actually exist.

The complex nature of government contracts often results in the basis of concern and its remedies being very different than what management may have feared. The survey tends to focus management on the correct issues for determining success as well as a better understanding of what might be required.

To discuss a specific matter or your interest in having a FAR Survey, click below.