Cost Type Contract Requirements

Adequate Accounting System

Per FAR 16.301-3, there are limitations to when the government can award a cost type contract to a prospective contractor. Of note is; item (3) which states, "The contractor's accounting system is adequate for determining cost applicable to the contract or order

DFAR 209.1 - Responsible Prospective Contractors (Revised December 7, 2011) addresses the general standards for responsible contractors. Per DFAR 209.104-1(e) “… prospective contractor’s accounting system and related internal controls must provide reasonable assurance that—

• (i) Applicable laws and regulations are complied with;
• (ii) The accounting system and cost data are reliable;
• (iii) Risk of misallocations and mischarges are minimized; and
• (iv) Contract allocations and charges are consistent with invoice procedures.” (ie, billed the same way as accounted for)

Also See DFAR 242.75 - Contractor Accounting Systems and Related Controls

What does this mean?

This means that if a contractor has an inadequate system, the Contracting Officer(CO) cannot award a contract to that contractor. How does the Contracting Officer make that determination? There are several ways. They are:

• 1) The ACO has previously determined the system to be inadequate or adequate.
• 2) If that determination has not been made, then,
  • (a) The CO must do a pre-award survey.

About the PreAward Survey

• DCMA conducts it. See [1]

There are several Pre-Award Surveys. The one related to the Accounting System is SF 1408 - PreAward Survey of Prespective Contractor Accounting System.

Purpose

To protect the Government's interest and to ensure timely delivery of items of the requisite quality, contracting officers, prior to award, must make an affirmative determination that the prospective contractor is responsible, i.e., capable of performing the contract. Before making such a determination, the contracting officer must have in his possession or must obtain information sufficient to satisfy himself that the prospective contractor

• (i) has adequate financial resources, or the ability to obtain such resources, *
• (ii) is able to comply with required delivery schedule,
• (iii) has a satisfactory record of performance, *
• (iv) has a satisfactory record of integrity, and *
• (v) is otherwise qualified and eligible to receive an award under appropriate laws and regulations.

If such information is not in the contracting officer's possession, it is obtained through a preaward survey conducted by the contract administration office responsible for the plant and/or the geographic area in which the plant is located. The necessary data is collected by contract administration personnel from available data or through plant visits, phone calls, and correspondence. This data is entered on to Standard Forms 1403, 1404, 1405, 1406, 1407, and 1408 in detail commensurate with the dollar value and complexity of the procurement.