12.01.09

"To Brief or Not to Brief"

by Chris Wade, Business Consulting Manager

The Civilian Agency and Defense Acquisition Councils’ proposed amendment to FAR contract closeout procedures (FAR Case 2008-020) has a far greater reach than the outward appearance implies. Buried among a host of administrative updates, threshold revisions, and procedural changes, this rule would penalize contractors with overdue indirect rate cost proposals via fee withholds, and require contractors to mandatorily provide additional supplemental data in support of the audit of final indirect rate proposals. So just close your contracts on time, within 6 months of expiration of each Fiscal Year, right? This is easier said than done. Closing out contracts can be complex and time consuming. There is no uniformity or consistency between the many different government agencies when it comes to closing out contracts.

For all flexibly priced contracts, closing contracts first requires the submission, audit, and final settlement of the indirect rates for those contracts. And what do indirect rates mean…the dreaded Annual Incurred Cost Submission—data collection, rate computation, and reconciliations in all their glory. The proposed rule would now require that contractors provide certain supplemental data, including Schedule S, as a mandatory requirement for adequate completion of an Incurred Cost Submission (“ICE” model found at www.dcaa.mil or in Chapter 6 of the DCAAP 7641.90). Currently, the contract briefs, also known as Schedule S, are an optional, supplemental part of the Incurred Cost Submission. While the Councils note that this is not a “significant regulatory action,” the impact to industry could prove to be quite significant.

So, what is a contract brief and why is it important? Contract briefs come in a variety of forms. Briefs can be system generated via a Company’s accounting, billing, or contract management system, or could be comprised of a manually populated spreadsheet or form similar to Schedule S of the ICE model. A contract brief provides one-stop shopping for contract indicative data, funding, clauses, and provisions pertinent to a particular contract. Generally, briefs include contract provisions and clauses specific to the contract and incorporated by reference (such as TINA or CAS coverage). Contractors who use best practices ensure that comprehensive contract briefs include all information required to comply with the terms of the contract, including contract type, period of performance, rate and contract ceilings, basis of award, Cost Accounting Standards coverage status, advance approval requirements, and cost allowability and billing limitations, among other provisions.

The contract brief is useful in preparing the final indirect rate proposal because a fully briefed contract provides necessary information about the contract that is required to populate other Schedules in the ICE model. For example, the contract type is required to populate Schedule H and Schedule K. Ceiling limitations compared against total billings (Schedule I) for a contract would indicate over or under billings. The contract brief is a powerful tool for Government and businesses. An effective contract briefing process can increase the efficiency of contract management and financial reporting.

Contract briefs have been considered supplemental and optional data until this point for purposes of the final indirect rate proposal. While the data collected via briefs is useful for the preparation of an adequate final indirect cost proposal, not all government contractors collect or even have a process established for collecting, storing, and reporting contract data in a repeatable manner during their intake process. The result could be costly if contract briefs become required and contractors are ill-prepared to produce them. Retroactive contract data collection can prove time consuming causing delays, significant cost in terms of penalties from delays and labor required to collect and populate the briefs, and difficulty given the availability of records and personnel with the expertise required to accurately brief the contracts. The comment period for FAR Case 2008-020 closed on October 19, 2009. Should the Councils move forward with this rule, contract briefing may become a very real and required part of Government Contractors’ future.

---

Does your Company have an effective contract brief intake and reporting process? If you are a government contractor, contact Argy for assistance in dealing with this and other new DCAA directives.

You may contact the author of this article, Business Consulting Group Manager, Chris Wade, at cwade@argy.com, or 703.770.6360.

« Back to all Publications