Business System Adequacy and Review

Business System Adequacy and Review

Presented by: Derek Shaw Managing Director ? Government Contracts

BDO USA, LLP, a Delaware limited liability partnership, is the U.S.

member of BDO International Limited, a UK company limited by

guarantee, and forms part of the international BDO network of

independent member firms. BDO is the brand name for the BDO

network and for each of the BDO Member Firms.

1

Business System Adequacy and Review

DFARS Business System Rule 252.242-7005 Contractor Business Systems

Page 2

Types of Business Systems

1. Accounting System 2. Estimating System

? Control Environment ? Billing ? Labor Reporting ? Indirect/ODC ? IT ? Compensation

3. Purchasing System

4. Earned Value Management Systems (EVMS)

5. Material Management and Accounting System (MMAS)

6. Property Management System

Page 3

Definitions

Acceptable Contractor Business Systems Contractor business systems that comply with the terms and conditions of applicable business system clauses listed in the definition of "contractor business system" in this clause.

Significant Deficiency A shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes

Page 4

Definitions (continued)

Significant Deficiency (continued) DCAA MRD (12-PAS-012(R)) ? Audit Guidance on Auditing Contractor Business

Systems and Contractor Compliance with DFARS 252.242-7006, Accounting System Administration "If there is a reasonable possibility that the identified noncompliance

with the DFARS criteria will result in a material noncompliance with other applicable Government contract laws and regulations, either individually or in combination, it is a significant deficiency/material weakness."

DCAA MRD (14-PAS-009(R)) ? Audit Guidance on Reporting Business System Deficiencies Report less severe noncompliance separate from significant deficiencies Either separate section in the same audit report or in a memorandum to the ACO

Page 5

Withholding Payments

"If the Contracting Officer issues the final determination with a notice to withhold payments for significant deficiencies in a contractor business system required under this contract, the Contracting Officer will withhold five percent of amounts due from progress payments and performancebased payments, and direct the Contractor, in writing, to withhold five percent from its billings on interim cost vouchers on cost-reimbursement, labor- hour, and time-and-materials contracts until the Contracting Officer has determined that the Contractor has corrected all significant deficiencies..."

"The total percentage of payments withheld... shall not exceed

Five percent for one or more significant deficiencies in any single contractor business system; and

Ten percent for significant deficiencies in multiple contractor business systems."

DCMA is maxing this out by applying on contract-by-contract basis when multiple systems are disapproved

ACO can reduce withhold to two percent with acceptable CAP

Page 6

Business System Requirements

When do the Business System Rules Apply?

Any DoD contracts or subcontracts awarded subsequent to May 18, 2011, for which no exemptions from CAS are available

DoD CAS covered contract that contain the clause at 252.242-7005, Contractor Business Systems, and one of the following clauses: 252.215-7002, Cost Estimating System Requirements 252.234-7002, Earned Value Management System 252.242-7004, Material Management and Accounting System 252.242-7006, Accounting System Administration 252.244-7001, Contractor Purchasing System Administration 252.245-7003, Contractor Property Management System Administration

Page 7

Business System Requirements

When do the Business System Rules Apply? (Cont.)

252.215-7002, Cost Estimating System Requirements: The clause is prescribed when the contract award is based on certified cost or pricing data However, the system requirements and withhold authority only applies to large businesses that received DoD prime contracts and subcontracts totaling more than $50M (sometimes $20M) in their prior fiscal year based on certified cost or pricing data

252.234-7002, Earned Value Management System: When the contract requires the contractor to use EVMS However, in DoD, EVMS is only applicable to cost or incentive contracts valued at $20,000,000 or more

Page 8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download