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Improving the Contract Cost/Price Analysis Function

This presentation, delivered at the "Future of DoD Pricing Conference" on January 9-10, 2007, addresses critical issues in contract cost and price analysis within the Department of Defense (DoD). It outlines the mission of the Defense Contract Audit Agency (DCAA), highlights current audit trends, and identifies a significant gap in pricing analysis. The discussion emphasizes the DCAA's vital role in contract audits, common challenges faced in obtaining cost data, and the impact of contracting officer hesitance on procurement. Suggestions to bridge the analysis gap are also provided.

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Improving the Contract Cost/Price Analysis Function

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  1. Improving the Contract Cost/Price Analysis Function The Future of DoD Pricing Conference January 9-10, 2007

  2. Outline of Presentation • DCAA Mission • Audit Trends • Pricing Analysis Gap • Typical DCAA Involvement in Pricing • DCAA Observations

  3. Agency Mission The DCAA Charter - DoD Directive 5105.36 states DCAA shall: • Perform all necessary contract audits for the Department of Defense and provide accounting and financial advisory services regarding contracts and subcontracts to all Department of Defense components responsible for procurement and contract administration. These services will be provided in connection with negotiation, administration and settlement of contracts and subcontracts. • Provide contract audit service to other Government agencies as appropriate.

  4. Full Audits of Contractor’s Proposals Number of Audits

  5. Pricing Analysis Gap • Substantial decrease in requests for full audits of contractor’s proposals leading to increased demand for command pricing function • Traditional command pricing function decreased • Results in analysis gap that puts Government at risk • DCAA should be involved when access to and analysis of contractor’s data and systems is needed to perform pricing function • FLAs try to fill the vacuum on limited critical needs as requested by the command, but we cannot bridge the majority of the gap

  6. Typical DCAA Involvement in Pricing • Audit Services for Pricing Proposals as requested • Other Field Pricing Support including indirect rate checks, payroll verifications, system status, etc. • Financial Liaison Auditors (FLAs) • 105 assigned to Commands (Navy-27; Air Force-35; Army-34; Others-19) • Source Selection Evaluation Boards (especially sections L and M) • Market Research • Training of command acquisition staff Contractor financial responsibility • Determining needed DCAA services (when to request audit and what type of services to request)

  7. DCAA Observations • Contracting Officer reluctance to request cost or pricing data/audits • FAR use of language relating to cost/price data such as “prohibited” and “last resort” leading to interpretations by many in the acquisition community that only price analysis should be used. • Unfounded belief that audit will unduly delay procurement actions

  8. Improving the Contract Cost/Price Analysis Function The Future of DoD Pricing Conference January 9-10, 2007

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