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    1. The FAR reference quoted below in pertinent part is applicable to this response.

    FAR 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;

    2. The DFARS references quoted below in pertinent part are applicable to this response:

    DFARS Subpart 209.1 -- Responsible Prospective Contractors
    DFARS 209.104-1 -- General standards.
    (e) For cost-reimbursement or incentive type contracts, or contracts which provide for progress payments based on costs or on a percentage or stage of completion, the prospective contractor's accounting system and related internal controls must provide reasonable assurance that- (ii) The accounting system and cost data are reliable;

    DFARS Subpart 242.75 -- Contractor Accounting Systems and Related Controls
    DFARS 242.7501 -- Definitions
    As used in this subpart-- "Acceptable accounting system," and "accounting system" are defined in the clause at 252.242-7006, Accounting System Administration.

    DFARS 242.7502 Policy.
    (a) Contractors receiving cost-reimbursement, incentive type, time-and-materials, or labor-hour contracts, or contracts which provide for progress payments based on costs or on a percentage or stage of completion, shall maintain an accounting system.

    (b) The cognizant contracting officer, in consultation with the auditor or functional specialist, shall-
      (1) Determine the acceptability of a contractor's accounting system and approve or disapprove the system; and
      (2) Pursue correction of any deficiencies

    (c) In evaluating the acceptability of a contractor's accounting system, the contracting officer, in consultation with the auditor or functional specialist, shall determine whether the contractor's accounting system complies with the system criteria for an acceptable accounting system as prescribed in the clause at 252.242-7006, Accounting System Administration.

    DFARS 242.7503 Contract clause
    Use the clause at 252.242-7006, Accounting System Administration, in solicitations and contracts when contemplating-
    (a) A cost-reimbursement, incentive type, time-and-materials, or labor-hour contract;

    DFARS 252.242-7006 Accounting System Administration
    (a) Definitions. As used in this clause- ` 
      (1) "Acceptable accounting system" means a system that complies with the system criteria in paragraph (c) of this clause to provide reasonable assurance that-
      (i) Applicable laws and regulations are complied with;
      (ii) The accounting system and cost data are reliable;
      (iii) Risk of misallocations and mischarges are minimized; and
      (iv) Contract allocations and charges are consistent with billing procedures.

      (2) "Accounting system" means the Contractor's system or systems for accounting methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for reporting in compliance with applicable laws, regulations, and management decisions, and may include subsystems for specific areas such as indirect and other direct costs, compensation, billing, labor, and general information technology.

    DFARS 234.201 - Policy
    (1) DoD applies the earned value management system requirement as follows:
      (ii) For cost or incentive contracts and subcontracts valued at $50,000,000 or more, the contractor shall have an earned value management system that has been determined by the cognizant Federal agency to be in compliance with the guidelines in ANSI/EIA-748.

    3. Pursuant DoD Policy set forth in DFARS 234.201(1)(ii), EVM compliance by a small business concern will be required for this acquisition because the estimated value will exceed $50 million.

    4. Pursuant to FAR 16.301-3(a)(3) and the other DFARS references described above, any contractor, including a small business concern, must have an approved accounting system in order to be eligible for the award of a cost-reimbursement contract.

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