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    Under this scenario is their any issue with making a CPFF type award to a company that has it's accounting function handled by an "Affiliate" company. Note: The contractor in question for the award, and the "Affliliate" company have different DUNS and Cage Codes. Both are small businesses. The contractor in question is an 8a small business.


    Answer

    The issue concerning a contractor accounting system under a CPFF contract is not who performs the accounting, an "Affiliate" company, but that the accounting system:
     
    (a)  ".The contractor's accounting system is adequate for determining costs applicable to the contract or order; and."
    (b)  ".adequate Government resources are available to award and manage a contract. This includes appropriate Government surveillance during performance in accordance with 1.602-2, to provide reasonable assurance
    that efficient methods and effective cost controls are used."
    (c)  ".Appropriate Government surveillance during performance to provide reasonable assurance that efficient methods and effective cost controls are used..."
    (d)  ".to determine the acceptability of a contractor's accounting system for accumulating costs under a prospective Government contract..."
    (e)  ".obtaining an understanding of the design of the prospective accounting system. and those procedures essential to reach an informed opinion on whether or not the design of the prospective contractor's accounting system is acceptable for accumulating costs under a Government contract.
     
    Sources: FAR Subpart 16.3 -- Cost-Reimbursement Contracts  16.301-3 --  Limitations.
      DCAA Contract Audit Manual
      l 518
      5-201 December 12, 2012
      5-200 Section 2 --- Pre-award Surveys of Prospective Contractor Accounting Systems and Post Award Accounting System Audits 
     

    Subpart 16.3 -- Cost-Reimbursement Contracts

    16.301-3 -- Limitations.

    (a) A cost-reimbursement contract may be used only when --

    (3) The contractor’s accounting system is adequate for determining costs applicable to the contract or order; and

    (4) Prior to award of the contract, or order, adequate Government resources are available to award and manage a contract other than firm-fixed-priced (see

    5-202 Preaward Survey of a Prospective Contractor’s Accounting System

    a. A preaward survey of a prospective contractor’s accounting system is an examination of the accounting system at either a large or small contractor before contract award. The audit is performed at the request of a contracting officer to determine the acceptability of a contractor's accounting system for accumulating costs under a prospective Government contract... The audit scope should be limited to obtaining an understanding of the design of the prospective accounting system… and those procedures essential to reach an informed opinion on whether or not the design of the prospective contractor’s accounting system is acceptable for accumulating costs under a Government contract.

    7.104(e)). This includes appropriate Government surveillance during performance in accordance with 1.602-2

    , to provide reasonable assurance that efficient methods and effective cost controls are used.

    (ii) Appropriate Government surveillance during performance to provide reasonable assurance that efficient methods and effective cost controls are used;

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