The whole idea under a cost reimbursable contract is to submit an Incurred Cost Submission at year end and firm up the billings to actual rates. However, DCAA has fallen far behind on its audits to finalize rates at year end. In some cases as much as three years. This situation is not addressed in the Allowable Cost and Payment clause. This is unfortunate for contractors. Unfortunately situation places contractors in a delay position on collecting any amounts due as a result of final indirect cost rates. It results in an under-recovery and the inability to collect until DCAA gets around to auditing the Incurred Cost Submission. Some suggestions to minimize this situation include:
1. Get submissions into DCAA as soon as you possibly can to get the ball rolling.
2. Go on offense pressure both DCAA and the Contracting Officer to make the audit a priority.
3. Get provisional rate proposals and agreements in place as soon as possible.
4. Remain conservative on forecasting the provisional rates knowing it may take years for DCAA to finalize the final rate. Do not understate these rates. Understating these rates is in essence an interest free loan that you are offering the government. This loan may take years to unravel.
To get caught up, I hear DCAA is hiring special audit travel teams to come in and get caught up in areas where DCAA is unreasonably behind. I have found this situation to be favorable to contractors. Get your submissions in so your rates can be audited and settled.
Most important is get the Incurred Cost Submissions into DCAA. Failing to do so puts the obligation on you. This further delays finalizing these rates and unltimately getting what your entitled to for indirect costs. Remember, you can only recover costs for indirect rates if there is funding available. The sooner you get the rates submitted, the more likely you can make certain there is adequate funding. If you have a funding issue, solicit additional funds sooner versus later. It is difficult to secure these funds late in a fiscal year or late in the contract’s period of performance.