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    The contractor submits monthly Format 1 as part of their EVM requirement. The Government confronts the contractor that monthly and cumulative ACWP (Actuals) should reflect when obligations were committed to their books. The contractor explains that actuals are a reflection of their invoices and not when obligations are booked. Who is correct? The contract PoP ends. Because the contractor has informed us that they only reflect actuals when they receive invoices from their subcontractors (vendors), $5M to $10M on a contract, in which the negotiated cost is $50M, are expended and invoiced after the PoP. It is believed the work is LOE, with no antecedent documentation to support the obligations before the PoP ends. Are these cost allowable? Is the contractors charge (network) number that is opened to support a task, allowed to remain open for charging cost after the contract PoP ends? In other words, it is my belief the contractor is using charge (network) numbers as support to continue charging after the contract PoP ends and because the charge (network) number for certain tasks were opened before the PoP ended on the contract. The contractor believes they can continue charging to the charge (network) number and the cost are allowable because the obligation was initiated before the PoP ended and therefore is allowed to continue until the task is completed (even if that means completion is after the contract PoP ends)? Thank you for your time.


    Please note this DAU response is only based on the information from the original request with some assumptions being made.
    "In response to the question, there must be a common understanding of and distinction between Earned Value Management (EVM) terms/concepts and general Financial Management (FM) terms/concepts.  EVM is an integrated management tool that integrates the work scope, schedule, and cost parameters of a program.  Contractors should report EVM data, when EVM is applied on contracts, to the Government via the Integrated Program Management Report (IPMR).  Although there are 7 formats as a part of the IPMR deliverable, EVM data and the info reported via the IPMR is at "cost" (not price) and does not include any contract profit or fee).  From a general FM perspective, contractors may be required to submit reports to the Government for certain contractual efforts.  For example, the Contract Funds Status Report (CFSR) is a formal report completed by the contractor that supplies funding data to the Government.  This report provides FM information at "price" (not cost), and includes information such as contract price, funding authorized, net funds required, open commitments, accrued expenditures, forecast of billings to the Government, and estimated contract termination costs. 
    Response to EVM term Actual Cost of Work Performed (ACWP):  The ACWP should represent costs actually incurred by the contractor accomplishing work on a contract with the Government.  Since this is an EVM data point, ACWP is measured at cost and does not include the contractor's profit or fee.  Further, ACWP should not represent a contractor's entire commitment or obligation for work planned for the entire contract period of performance (PoP), as it should only represent the contractor's accruals or work performed from one month to the next (and cumulative data).  A distinction must be made between work performed and invoiced amounts.  Although it is possible for a contractor's work performed to equal invoiced amounts, there is greater possibility the work performed amounts exceeds the contractor's invoiced amounts (especially when a prime contractor has various subcontractors performing work as a part of the contract effort and the contract is a CPFF contract).  ACWP shall measure work performed, not the exact amount invoiced to the Government.  The reason behind this is that, depending on the specific contract, invoices may not be submitted from subcontractors to the prime contractor or prime contractor to the Government until several months after the work was actually performed.  The main takeaway here is that ACWP should measure cost of work performed, not invoices submitted for payment of work performed.
    Response to determination of allowable or unallowable costs on a Government contract:  The Government's Contracting Officer is responsible for the determination of costs being allowable or unallowable based on FAR guidance and specifics to the contract in question.  Further, the Government's Contracting Officer Representative is responsible for approving contractor invoices within Wide Area Workflow, which is the Government's most widely used system for contractors to submit invoices for Government approval.  Although the FM team should not make the determination of costs being allowable/unallowable, the FM team has a direct interest in regards to contract requirements and associated funding to ensure fiscal laws (purpose/time/amount) are not violated.
    Response to timing of contract invoices and expenditures with O&M appropriated funds:  Since O&M funds are involved for this contract, the annual funding policy applies (annual budget request should be limited to obligation authority necessary to cover all expenses during the 12 month budget period (FY)).  There is an exception to this policy that allows funding a severable service contract/task beginning in one FY and ending in the next FY, all in the first year, if the contract period does not exceed 12 months.  The annual funding policy includes the term "expenses," but this term is synonymous with work performed or accruals.  As mentioned above, it is likely some invoicing or expenditure activity may not take place until several months after work is performed.  This scenario is more likely when cost plus type contracts are involved and when prime contractors use various subcontractors to assist in completing the contractual requirements.  O&M appropriated funds have a one-year period of availability where funds are available for new obligations, payments, and adjustments.  The five-year expired period which follows the one-year availability period allows for payments and obligation adjustments to the original obligated amount during the period of availability.  Contractors should not charge the Government for work performed against a specific contract where the scope was unrelated to the contact or outside of the current contractual period of performance.
    The question asked spans across several career fields, including EVM/FM and Contracting.  We hope the information provided above is both easy to understand and helpful to your team.  Further, we strongly encourage you contact your Contracting Officer, Chief Financial Officer/Comptroller, or Legal Team for additional clarification and for final determinations."

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