A recent Federal Circuit decision has sustained an expansive judicial reading of what constitutes an expressly unallowable cost under FAR Part 31. This decision, reached in the context of lobbying expenses, provides the potential for expansive precedent for future disputes regarding what expenses constitute expressly unallowable costs. Including expressly unallowable costs in submissions to the government can result in penalties up to two times the amount of the disallowed cost. Taking into account this decision as well as the Defense Contract Audit Agency’s (“DCAA”) expressly unallowable cost guidance released earlier this year, contractors should review their policies and procedures for identifying and excluding unallowable costs from invoices and proposals on government contracts, and consider whether to broaden their policies. Continue reading “Federal Circuit Maintains That Contractors Must Read between the Lines to Determine Expressly Unallowable Costs”
According to a recent U.S. Government Accountability Office (“GAO”) report, the Defense Contract Audit Agency (“DCAA”) and the Defense Contract Management Agency (“DCMA”) have taken certain steps to improve the contractor business system (“CBS”) review process and are forecasting that CBS reviews will increase significantly over the next four years. Contractor business systems include a contractor’s accounting, earned value management, estimating, purchasing, material management, and property management systems. These systems require contractors to maintain internal controls that, as GAO noted, “act as the first line of defense against fraud, waste and abuse of federal funding.” Given their importance, the renewed focus on ensuring CBS reviews are conducted in a timely and consistent manner is not surprising, and contractors should prepare for a new wave of audit activity. Continue reading “Renewed Focus on Contractor Business System Reviews”
On July 1, 2018, the threshold for obtaining certified cost and pricing data increases substantially from $750,000 to two million dollars. The change was authorized by the Department of Defense pursuant to a class deviation, pending official rulemaking and publication in the Federal Acquisition Regulation (“FAR”). The class deviation implements Section 811 of the National Defense Authorization Act (“NDAA”) for Fiscal Year 2018, which raised the certified pricing threshold contained in the Truthful Cost or Pricing Data Act (still commonly referred to as “TINA” based on the former name of the relevant statute, the Truth in Negotiations Act). The Civilian Agency Acquisition Council recently followed suit, advising other federal agencies that they “may authorize a class deviation to implement the threshold change.” In addition to the increase under the NDAA, the TINA threshold is also subject to adjustment every five years to keep pace with inflation. See 41 U.S.C. § 1908. The last adjustment for inflation, made in 2015, raised the threshold by $50,000. Continue reading “Certified Cost and Pricing Data Thresholds to Increase July 1, 2018”
With yet another government shutdown looming, contractors face a number of uncertainties and challenges that warrant close attention—regardless of whether a shutdown takes place or how long it lasts. Among other challenges, contractors may face a lack of incremental funding; the inability to enter into new contracts or contract modifications; closed government facilities; furloughed government employees; delayed payments; increased indirect costs; and unexercised and deferred contract options. Below we offer six suggestions to help address key areas impacted by a shutdown, including contract funding, internal and external communications, recordkeeping, and deadlines. Continue reading “Government Contractor Shutdown Advisory”
Adam Proujansky and Ioana Cristei
The National Defense Authorization Act (“NDAA”) for Fiscal Year 2018 was signed into law on December 12, 2017, and authorizes a topline national defense budget of $700 billion. While the 2018 NDAA makes a number of changes to Department of Defense (“DOD”) policy and programs, in this article we explain five major changes to acquisition policy and how they will impact the way companies do business with DOD. Continue reading “New Year’s Resolutions: Top 5 Consequential Changes in the 2018 NDAA”
Pension and other post-retirement benefit expenses have long constituted a substantial obligation on the part of contractors under cost-type contracts and are often the subject to disputes with the government as to the calculation and allowability of such costs. While court and board decisions regarding pension-related disputes have tended to be a mixed bag, the decisions have more often sided with the government. However, the Armed Services Board of Contract Appeals’ (“ASBCA” or “Board”) July 13, 2017, decision in Northrop Grumman Corp., ASBCA No. 60190, may signal a more favorable trend for contractors in connection with such issues. In this case, Northrop filed a claim for $253 million in retiree health benefits over an 11-year period from 1995 to 2006, which the Defense Contract Management Agency (“DCMA”) disallowed because Northrop used an outdated accounting practice for accruing such costs under the relevant Federal Acquisition Regulation (“FAR”) cost accounting requirements. Continue reading “ASBCA Grants $253 Million Northrop Post-Retirement Benefits Claim”
Last month, the General Services Administration (“GSA”) finalized a rule marking what the agency describes as the most significant development to its Schedules program in over two decades. The rule completely changes how GSA will analyze vendor pricing for products and services.
Under the rule, vendors will eventually be required to submit monthly transactional data reports with information related to orders and prices under certain GSA Schedule contracts and other vehicles. Along with the implementation of the new Transactional Data Reporting (“TDR”) requirement, GSA will relieve vendors from two preexisting compliance burdens—eliminating the Commercial Sales Practices (“CSP”) and Price Reductions Clause (“PRC”) reporting requirements when vendors begin submitting transactional data.
While vendors should welcome the relief provided from the elimination of two burdensome regulations, the shift to TDR will not be without cost and risk; and, the eventual efficiencies promised by GSA remain to be seen. Indeed, the impact of the change will likely extend beyond compliance burdens, with potential effects varying from the nature of False Claims Act suits to the potential publication of competitive information.
We summarize these and other key takeaways from the new rule below, and answer questions important to vendors as GSA rolls out this significant development. Continue reading “GSA’s Transactional Data Reporting Rule Ushers in a New Era”