There has been some movement on the allowability of professional services and consultants costs. DCAA seems to be tweaking its audit guidance to better reflect the FAR rule (FAR 31.205-33). I think it is a good move by DCAA. In summary I have provided below the criteria to meet this standard.
The government auditors need to understand what the professional services are for, the work product and the reasonableness of the compensation. Below I have highlighted some pointers.
1. This rule applies to professional services and consultant costs. This rule does not apply to contract labor. It applies to those that are members of a particular profession meeting the definition contained in FAR 31.205-33 it excludes temporary assignments or contract labor as well as employee relationships.
2. Secure evidence that there was an agreement. A written agreement is preferred.
3. Maintain evidence of the services provided by the consultant such as a scope of work and work product.
4. Acquire evidence of the compensation or billing rate.
5. Verification that the consultant met the terms of the agreement.
6. Provide evidence or explanation of what was accomplished for fees paid.
The DCAA audit guidance seems to emphasize that the form of the evidence is not controlling, it is the substance of the evidence that matters. It recognizes the special circumstances of the contractor may warrant differing forms of evidence. The bottom line is there must be evidence to support the above items. However, DCAA is now not requiring any specific form of evidence. DCAA is instructing its auditors to question costs under FAR 31.205-22 when this evidence is not available or not provided.
My advice is this.
1. Have agreements with all professional consultants, accountants and attorneys. These agreements should spell out scope of work, work product and compensation.
2. Maintain evidence of the scope of work, work product and compensation especially where this is not clearly spelled out in agreements or invoices.
3. It is my opinion that to play it safe have all consultants provide invoices of hours, rates and reimbursed expenses. with detail regarding the services provided. In the event of fixed priced services, require that the pricing for these services be spelled out with scopes of work.
4. Secure work product information and be able to answer the question of what was the end result of the fees paid.
5. The form of all of the above may vary, but it is very important that you have the evidence and be able to provide it to DCAA when requested. That is answer the questions, what were the services for, what was the work product, what was the end result as compared to the fee paid and what was the rate of compensation.
In summary, DCAA is no longer instructed to dictate the form of evidence, just that the evidence be provided to permit government evaluation of the services provided and the cost.