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NCMA March Workshop March 16, 2011

NCMA March Workshop March 16, 2011. Andy Habina Director, Internal Audit & Compliance Draper Laboratories, Inc. . Agenda. Proposed Business System Rules CAS Legal Decisions Cost Principles Cases DCAA/DCMA Updates. Proposed Business Systems Rules . Latest Proposal Issued Dec. 3, 2010

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NCMA March Workshop March 16, 2011

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  1. NCMA March WorkshopMarch 16, 2011 Andy Habina Director, Internal Audit & Compliance Draper Laboratories, Inc.

  2. Agenda • Proposed Business System Rules • CAS Legal Decisions • Cost Principles Cases • DCAA/DCMA Updates

  3. Proposed Business Systems Rules • Latest Proposal Issued Dec. 3, 2010 • DFAR 242.70 • Business Systems defined as: • Accounting system • Estimating System • Purchasing System • Earned Value Management (EVMS) System • Material Management and Accounting (MMAS) System • Property Management System • Contracting Officers can withhold 5-20% of payments if business systems contain deficiencies.

  4. Proposed Business Systems Rules • Process followed once a system deficiency is reported to the contracting officer (CO): • Contractor is given 30 days to respond to finding. • If CO does not agree with contractor, a final decision is issued by CO and a mod is issued withholding 5% of payment requests. • If contractor submits acceptable remediation plan, the CO can reduce the withholding to 2% on a prospective basis. • Once contractor completes remediation plan, auditor or functional specialist will review and if satisfied deficiency has been corrected, all withholdings will be released.

  5. Proposed Business Systems Rules Comments • All business systems currently have requirements. • Only change is requirement for CO to withhold rather than discretionary as it is today. • Concerns • Will CO disagree with auditor? • Will review of corrective action be timely? • What is a “deficiency”?

  6. CAS Decisions • Cost Impact • Michael B. Donley, Secretary of the Air Force v. Lockheed Martin Corp., Fed Cir. No.2009-1261, 6/10/10. • CAS 413 • Raytheon -COFC No.05-448C, 1/26/11. • General Electric- COFC No.99-172C, 4/29/10.

  7. Cost Principles- IR&D • ATK Thiokol. Inc. v. United States, No, 2009-5036 (Fed. Cir., 3/19/10. • Provides clarity on several key issues: • Commercial IR&D • “Parallel” IR&D • Contract language impact • “Required in the performance of the contract”

  8. Cost Principles- Legal Costs • Boeing v. Dept. of Energy CBCA 337,338,339,978, 12/14/10. • Issue involved “common “legal costs. • Key concepts • Contractor prevailed in some counts but not all. • Each count was considered a separate “proceeding.” • Where contractor prevailed- legal costs were allowable. • Where it did not prevail, costs were not allowable. • The “common” costs were not allowable.

  9. DCAA/DCMA Changes to DCAA Audits • DCAA will only do proposal audits on Cost-type awards >$100M and Fixed price awards >$10m. • DCMA Price Analysts will review all other proposals. • Allows DCAA to focus on higher risk work. • DCAA will no longer do Financial Capability Reviews. • DCAA will no longer perform purchasing system reviews. • DCMA will issue all FPRAs and FPRRs.

  10. DCAA/DCMA Changes to DCAA Audits • Concerns • Incurred cost audits are not being done. • Backlog of closeouts. • DCAA hiring many new people. • Reaction to GAP audits on DCAA still ongoing.

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