242.705 - Final indirect cost rates
See DoD Class Deviation 2012-O0013, DCAA Policy and Procedure for Sampling Low-Risk Incurred Cost Proposals, issued on July 24, 2012. Effective immediately, for the purposes of satisfying the audit requirements at FAR 4.804-5(a)(12), 42.705-1(b)(2), and 42.705-2(b)(2)(i), Department of Defense contracting officers shall continue to rely on either a DCAA audit report or a DCAA memorandum documenting that, based on a risk assessment and a proposal adequacy evaluation pursuant to FAR 42.705-1(b)(1)(iii), DCAA deemed the incurred cost proposal to be low-risk and did not select it for further audit in accordance with the attached DCAA Policy dated July 6, 2012. This deviation is effective until incorporated in the DFARS or rescinded.
242.7100 - General
A voluntary refund is a payment or credit (adjustment under one or more contracts or subcontracts) to the Government from a contractor or subcontractor that is not required by any contractual or other legal obligation. Follow the procedures at PGI 242.7100 for voluntary refunds.
242.7200 - Scope of subpart
(a) This subpart provides policies, procedures, and standards for use in the evaluation of a contractor's material management and accounting system (MMAS).
(b) The policies, procedures, and standards in this subpart—
(1) Apply only when the contractor has contracts exceeding the simplified acquisition threshold that are not for the acquisition of commercial items and are either—
(i) Cost-reimbursement contracts; or
(ii) Fixed-price contracts with progress payments made on the basis of costs incurred by the contractor as work progresses under the contract; and
(2) Do not apply to small businesses, educational institutions, or nonprofit organizations.
242.7201 - Definitions
“Acceptable material management and accounting system,” “material management and accounting system,” and “valid time-phased requirements” are defined in the clause at 252.242-7004 , Material Management and Accounting System.
“Significant deficiency” is defined in the clause at 252.242.7004, Material Management and Accounting System.
242.7202 - Policy
(a) DoD policy is for its contractors to have an MMAS that conforms to the standards in paragraph (d) of the clause at 252.242-7004 , Material Management and Accounting System, so that the system—
(1) Reasonably forecasts material requirements;
(2) Ensures the costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; and
(3) Maintains a consistent, equitable, and unbiased logic for costing of material transactions.
(b) The cognizant contracting officer, in consultation with the auditor and functional specialist, if appropriate, shall—
(1) Determine the acceptability of the contractor’s MMAS and approve or disapprove the system; and
(2) Pursue correction of any deficiencies.
(c) In evaluating the acceptability of the contractor’s MMAS, the contracting officer, in consultation with the auditor and functional specialist, if appropriate, shall determine whether the contractor’s MMAS complies with the system criteria for an acceptable MMAS as prescribed in the clause at 252.242-7004 , Material Management and Accounting System.
242.7203 - Review procedures
(a) Criteria for conducting reviews.Conduct an MMAS review when—
(1) A contractor has $40 million of qualifying sales to the Government during the contractor's preceding fiscal year; and
(2) The administrative contracting officer (ACO), with advice from the auditor, determines an MMAS review is needed based on a risk assessment of the contractor's past experience and current vulnerability.
(b) Qualifying sales. Qualifying sales are sales for which certified cost or pricing data were required under 10 U.S.C. 2306a, as implemented in FAR 15.403, or that are contracts priced on other than a firm-fixed-price or fixed-price with economic price adjustment basis. Sales include prime contracts, subcontracts, and modifications to such contracts and subcontracts.
(c) Disposition of findings—
(1) Reporting of findings. The auditor or functional specialist shall document findings and recommendations in a report to the contracting officer. If the auditor or functional specialist identifies any significant MMAS deficiencies, the report shall describe the deficiencies in sufficient detail to allow the contracting officer to understand the deficiencies.
(2) Initial determination. (i) The contracting officer shall review findings and recommendations and, if there are no significant deficiencies, shall promptly notify the contractor, in writing, that the contractor's MMAS is acceptable and approved; or
(ii) If the contracting officer finds that there are one or more significant deficiencies (as defined in the clause at 252.242-7004 , Material Management and Accounting System) due to the contractor’s failure to meet one or more of the MMAS system criteria in the clause at 252.242-7004 , Material Management and Accounting System, the contracting officer shall—
(A) Promptly make an initial written determination on any significant deficiencies and notify the contractor, in writing, providing a description of each significant deficiency in sufficient detail to allow the contractor to understand the deficiency;
(B) Request the contractor to respond, in writing, to the initial determination within 30 days; and
(C) Promptly evaluate the contractor's response to the initial determination in consultation with the auditor or functional specialist, and make a final determination.
(3) Final determination. (i) The ACO shall make a final determination and notify the contractor that—
(A) The contractor's MMAS is acceptable and approved, and no deficiencies remain, or
(B) Significant deficiencies remain. The notice shall identify any remaining significant deficiencies, and indicate the adequacy of any proposed or completed corrective action. The contracting officer shall—
(1) Request that the contractor, within 45 days of receipt of the final determination, either correct the deficiencies or submit an acceptable corrective action plan showing milestones and actions to eliminate the deficiencies;
(2) Disapprove the system in accordance with the clause at 252.242-7004 , Material Management and Accounting System; and
(3) Withhold payments in accordance with the clause at 252.242-7005 , Contractor Business Systems, if the clause is included in the contract.
(ii) Follow the procedures relating to monitoring a contractor's corrective action and the correction of significant deficiencies in PGI 242.7203 .
(d) System approval. The contracting officer shall promptly approve a previously disapproved MMAS and notify the contractor when the contracting officer determines that there are no remaining significant deficiencies.
(e) Contracting officer notifications. The cognizant contracting officer shall promptly distribute copies of a determination to approve a system, disapprove a system and withhold payments, or approve a previously disapproved system and release withheld payments to the auditor; payment office; affected contracting officers at the buying activities; and cognizant contracting officers in contract administration activities.
242.7301 - General
(a) The administrative contracting officer (ACO) is responsible for determining the allowability of insurance/pension costs in Government contracts and for determining the need for a Contractor/Insurance Pension Review (CIPR). Defense Contract Management Agency (DCMA) insurance/pension specialists and Defense Contract Audit Agency (DCAA) auditors assist ACOs in making these determinations, conduct CIPRs when needed, and perform other routine audits as authorized under FAR 42.705 and 52.215-2. A CIPR is a DCMA/DCAA joint review that—
(1) Provides an in-depth evaluation of a contractor's—
(i) Insurance programs;
(ii) Pension plans;
(iii) Other deferred compensation plans; and
(iv) Related policies, procedures, practices, and costs; or
(2) Concentrates on specific areas of the contractor’s insurance programs, pension plans, or other deferred compensation plans.
(b) DCMA is the DoD Executive Agent for the performance of all CIPRs.
(c) DCAA is the DoD agency designated for the performance of contract audit responsibilities related to Cost Accounting Standards administration as described in FAR subparts 30.2 and 30.6 as they relate to a contractor’s insurance programs, pension plans, and other deferred compensation plans.
242.7302 - Requirements
(a)(1) An in-depth CIPR as described at DFARS 242.7301 (a)(1) shall be conducted only when—
(i) A contractor has $50 million of qualifying sales to the Government during the contractor’s preceding fiscal year; and
(ii) The ACO, with advice from DCMA insurance/pension specialists and DCAA auditors, determines a CIPR is needed based on a risk assessment of the contractor’s past experience and current vulnerability.
(2) Qualifying sales are sales for which certified cost or pricing data were required under 10 U.S.C. 2306a, as implemented in FAR 15.403, or that are contracts priced on other than a firm-fixed-price or fixed-price with economic price adjustment basis. Sales include prime contracts, subcontracts, and modifications to such contracts and subcontracts.
(b) A special CIPR that concentrates on specific areas of a contractor’s insurance programs, pension plans, or other deferred compensation plans shall be performed for a contractor (including, but not limited to, a contractor meeting the requirements in paragraph (a) of this section) when any of the following circumstances exists, but only if the circumstance(s) may result in a material impact on Government contract costs:
(1) Information or data reveals a deficiency in the contractor's insurance/pension program.
(2) The contractor proposes or implements changes in its insurance, pension, or deferred compensation plans.
(3) The contractor is involved in a merger, acquisition, or divestiture.
(4) The Government needs to follow up on contractor implementation of prior CIPR recommendations.
(c) The DCAA auditor shall use relevant findings and recommendations of previously performed CIPRs in determining the scope of any audits of insurance and pension costs.
(d) When a Government organization believes that a review of the contractor’s insurance/pension program should be performed, that organization should provide a recommendation for a review to the ACO. If the ACO concurs, the review should be performed as part of an ACO-initiated special CIPR or as part of a CIPR already scheduled for the near future.
242.7400 - General
(a) Program managers may conclude that they need technical representation in contractor facilities to perform non-contract administration service (CAS) technical duties and to provide liaison, guidance, and assistance on systems and programs. In these cases, the program manager may assign technical representatives under the procedures in 242.7401 .
(b) A technical representative is a representative of a DoD program, project, or system office performing non-CAS technical duties at or near a contractor facility. A technical representative is not—
(1) A representative of a contract administration or contract audit component; or
(2) A contracting officer's representative (see 201.602 ).
242.7401 - Procedures
When the program, project, or system manager determines that a technical representative is required, follow the procedures at PGI 242.7401 .
242.7503 - Contract clause.
Use the clause at 252.242-7006 , Accounting System Administration, in solicitations and contracts when contemplating—
(a) A cost-reimbursement, incentive type, time-and-materials, or labor-hour contract; or
(b) A contract with progress payments made on the basis of costs incurred by the contractor or on a percentage or stage of completion.
242.770 - Reserved
242.771 - Independent research and development and bid and proposal costs
242.771-1 - Scope
This section implements 10 U.S.C. 2372, Independent research and development and bid and proposal costs: payments to contractors.
242.771-2 - Policy
Defense contractors are encouraged to engage in independent research and development and bid and proposal (IR&D/B&P) activities of potential interest to DoD, including activities cited in 231.205-18 (c)(iii)(B).
242.771-3 - Responsibilities
(a) The cognizant administrative contracting officer (ACO) or corporate ACO shall—
(1) Determine cost allowability of IR&D/B&P costs as set forth in 231.205-18 and FAR 31.205-18;
(2) Determine whether IR&D/B&P projects performed by major contractors (see 231.205-18 (a)) are of potential interest to DoD; and
(3) Notify the contractor promptly of any IR&D/B&P activities that are not of potential interest to DoD.
(b) The Defense Contract Management Agency or the military department responsible for performing contract administration functions is responsible for providing the Defense Contract Audit Agency (DCAA) with IR&D/B&P statistical information, as necessary, to assist DCAA in the annual report required by paragraph (c) of this subsection.
(c) DCAA is responsible for submitting an annual report to the Director of Defense Procurement and Acquisition Policy, Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics) (OUSD(AT&L)), setting forth required statistical information relating to the DoD-wide IR&D/B&P program.
(d) The Office of the Assistant Secretary of Defense for Research and Engineering (OASD R&E), is responsible for establishing a regular method for communication—
(1) From DoD to contractors, of timely and comprehensive information regarding planned or expected DoD future needs; and
(2) From contractors to DoD, of brief technical descriptions of contractor IR&D projects.