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    What is acceptable evidence to ensure the Subcontractors accounting system has been audited to determine is a Cost type contract can be awarded? Is there a difference between an accounting system being deemed "acceptable" vs. "adequate" (Verbiage in DCAA audit reports)? In determining if a Cost type subcontract is allowable...


    Answer

    Contract types and the criteria for selecting them are comprehensively addressed in Federal  Acquisition Regulation Part 16FAR 16.104 includes “Adequacy of the contractor’s accounting system” as one of many factors to be considered when selecting and negotiating the contract type.  Even more specific to the question, FAR 16.301-3(a)(3)  states that a cost-reimbursement contract may be used only when --  “The contractor’s accounting system is adequate for determining costs applicable to the contract or order.”   Additional information about what is expected of a contractor accounting system at the pre-award phase may be found on SF 1408 PREAWARD SURVEY OF PROPECTIVE CONTRACTOR ACCOUNTING SYSTEM and in the DCAA Manual No. 7641.90 INFORMATION FOR CONTRACTORS (both can be found at: http://www.dcaa.mil/audit_process_overview.html ).
    “What is acceptable evidence to ensure the Subcontractors accounting system has been audited to determine if a Cost type contract can be awarded? “ 

    Acceptable evidence that a Subcontractor’s accounting system has been audited, include, are not  limited to, a copy of the relevant audit report or alternatively copies of documents demonstrating the cognizant contracting officer’s receipt and concurrence in such audit recommendations.

    “Is there a difference between  an accounting system being deemed  "acceptable" vs. "adequate" (Verbiage in DCAA audit reports)? In determining if a Cost type subcontract is allowable...”

    As pointed out above, in order to use a cost-reimbursement type contract, FAR requires a determination, by the cognizant contracting officer,  that “The contractor’s accounting system is adequate for determining costs applicable to the contract or order.”  It is noted that the terms “adequate” and “acceptable” are used by DCAA as follows:

    “The preaward survey report provides an opinion on whether the design of the accounting system is acceptable, not acceptable, or acceptable with a recommendation that a follow-on accounting system audit be performed after contract award. “

    “The post award accounting system report provides an opinion on whether the accounting system is adequate or inadequate.”  [See DCAA CAM at 5-204]


    Although the question seems to be limited to the selection of the contract type it may also be relevant to mention, when the clause at
    DFARS 252.242-7006 is appropriately included in a contract, it requires the establishment and maintenance of an “acceptable accounting system.”   

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