McNew & Associates, Inc. Blog

Determining Allowability For Meal & Meeting Expenses

When preparing expense reports, and ultimately claimed expenses on the annual incurred cost submission, it is important to understand how an auditor will be looking at your expenses, and what FAR rules and regulations they will measures those expenses against.  Specifically, we aim to focus here on meals and meetings.  DCAA is taking a very objective view at these items with an eye towards measuring claimed expenses against four (4) objective attributes for meal and meeting expenses.  To help bring clarity to this area, below are the FAR guidelines for determining allowabllity of meals and meetings.

According to FAR 31.201(a), a cost is allowable only when the cost complies with all of the following requirements:

1)    The cost is reasonable (see FAR 31.201-3)
2)    Allocability (see FAR 31.201-4)
3)    Standards promulgated by the CAS Board, if applicable, otherwise, generally accepted accounting principles and practices appropriate to the circumstances.
4)    Terms of the contract.
5)    Any limitations set forth in this subpart.

FAR 31.201 (d) further states, “A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements. The contracting officer may disallow all or part of a claimed cost that is inadequately supported.”

Lastly, when trying to determine if meetings and meals are allowable, uses four (4) attributes for determining allowability IAW the Joint Travel Regulations and the FAR:

1)    Date, name of establishment, and location.
2)    Employee names and the names of all guests.
3)    Purpose of the meeting/meal
4)    Cost of meeting by item (including itemized meal receipts).

If any of the four attributes are missing, the auditor will have no choice but to disallow the entire expense.  As seems to be a recurring theme in our blogs lately, DCAA is trying to catch up on incurred cost submissions.  As a result, DCAA has taken a new focus on specific areas within the submission to include major focus in labor, subcontracts, and travel (including meals).  As auditors catch up, they are looking systematically at reasonableness criteria as identified above.  It is important to spend the extra little time on expense reports to ensure all appropriate information is included as part of the claimed expenses…because as we have seen lately, every disallowed expense, no matter how small, will add up very quickly, sometimes into the tens of thousands of dollars.


DCAA Changes Impacting Federal Contractors
April 25, 2012, 7:02 PM
Filed under: Uncategorized

DCAA Changes Impacting Federal Contractors

Everyone seems to roll their eyes back in their heads these days when you start talking about the Defense Contract Audit Agency (DCAA) and the changes that are “forthcoming” as a result of the latest push for DoD to get a handle on contract audits.  Resist the urge to do this — DCAA is continuing down the “reform highway” with some major undertakings that have the potential to impact company cash flows & competitive standing in obtaining DoD contracts.  Contractors across the spectrum of Federal acquisition truly need to be prepared & aware -read on to take a quick look at the top five DCAA changes impacting a contract you may own or support!

#1 Incurred Cost Audits

* Outstanding Audit Catch-Up:  Years 2007 & below targeted for completion by end of 2012.

According to discussions with DCAA, they are establishing a slew of new virtual incurred cost teams charged with ensuring that all outstanding years 2007 & below incurred cost audits are completed by the end of 2012.  Regardless of business size, contractors must prepare to support timely responses to due dates for reports on the older outstanding audits.  These will be monitored by DCAA and supporting contractors will be at an added associated risk for time & resource demands – posture now!

*Increasing Incurred Cost Proposal Scope & Adequacy: Increase scope of walkthrough, strict requirements for format/inclusions areas, improved audit steps, enhanced risk assessment, & new DCAA Guide for Determining Adequacy of Contractor Incurred Cost Proposal.

DCAA will also be increasing the scope of the walkthrough of the Incurred Cost Submission (ICS) in order to ensure compliance with the criteria of FAR 42.703 ( Indirect Cost Rates – General) and FAR 52.216-7 (Allowable Cost & Payment). For contractors, this will drive a comprehensive response of more detailed requirements to support all facets of the process surrounding the incurred cost submission & audit process. DCAA’s Incurred Cost Electronically (ICE) Model (contractors can access this on DCAA’s site, under DCAA publications) is “recommended” for use, & offers an electronic medium to capture ICS in the correct format.  Regardless of whether contractors are using the ICE or their own model, contractors must follow the format & include the areas identified in the Information for Contractors Pamphlet incurred cost submission as these are required for an adequate incurred cost audit ICE package (see FAR 52.216-7).

Companies preparing the ICS should also read and heed the highlights of the November 2011, DCAA issued Audit Guidance Memorandum 11-PPD-020(R), Revised Audit Program for Major Incurred Cost Audits and Guide for Determining Adequacy of Incurred Cost Proposal.  It provides for:

-Improved detailed audit steps covering areas such as direct labor costs, contractor compensation costs, & excessive pass-through costs.
-Expanded risk assessment procedures to include a step to obtain a walk-through of the incurred cost proposal with the contractor to facilitate the process for the auditor to gain an understanding of the basis of the claimed costs & related supporting documentation, significant controls, & the relevant policies/procedures & processes related to significant cost elements.
-Revised the Guide for Determining Adequacy of Contractor Incurred Cost Proposal to use in determining the adequacy of final indirect cost rate proposals at both major & non-major contractors.
valuation of the incurred cost proposal for adequacy upon receipt & immediate notification to the contracting officer, and contractor, in writing, of significant inadequacies.

*Sample Items for Compliant Audit Examination: Certain sample areas require more detail.

In the past few years, the DoD Inspector General has identified deficiencies with DCAA’s  sampling applications. This included deficiencies in documentation & clarity in sampling plans, in addition to calling for increased detail in audit reports. Other issues centered on sample sizes & sampling reliability parameters used in sampling applications. In response, DCAA has instituted significant increases to the number of sample items required to support a compliant audit examination.  The three sampling areas impacted are: (1) establishing sample size, (2) evaluating sample results, and (3) reporting sample results in audit reports.  For contractors, this drives more attention to the areas that are highlighted below.  Contractor will need to satisfy data requirements that are more significant & equate to more time/effort. (See DCAA 11-OTS-001, Guidance on Variable Sampling Policy)

-Air Travel: FAR 31.205-46(b) and (c) limit allowable costs to “the lowest airfare available to the contractor.”  In support, DCAA is analyzing costs of airfare to determine if contractors have negotiated directly with airlines/travel agents for lower priced fares in support of the contract.  Contractors will need to demonstrate advance planning & consideration of nonrefundable fares, unless citing one of the exceptions in FAR 31.205-46(b).  (See DCAA 10-PAC-010, Audit Guidance on Revision to FAR –

31.205-46(b) and (c) – Limiting Airfare to the Lowest Airfare Available to the Contractor)

 -Lobbying:  FAR 31.205-22 and FAR 52.203-12 provides that the costs of lobbying activities, as well as any directly associated costs, are unallowable. DCAA is reviewing contractor proposals to determine if these costs have been identified & accounted for appropriately. Because of the potential for contractors to have costs tied to the time & effort spent securing earmarks, DCAA is validating that the contractor’s procedures for properly identifying and accounting for costs associated with lobbying activities are separately identified in the indirect rate submissions, and to maintain adequate records to support their certification.  Inadequate contractor procedures can cause systems to be deemed inadequate. See DCAA 11-PAC-015, Audit Guidance on Lobbying Costs Related to Legislative Earmarks.

Subcontract Costs: Because subcontract surveillance after award is a critical effort, DCAA is looking for prime assurance that the subcontract billings received are verified prior to passing billings to the Government.  To support this assessment, prime contractors should maintain the subcontractor briefing, FAR 31 testing, & administration of subcontract. Remember, because subcontract costs are now getting extensive scrutiny, this also includes the adequacy of the subcontract ICE.  Primes must also ensure consultants have adequate support for costs. Possible solutions for prime contractors in support of these more rigorous reviews include engaging with third-party audit firms to support auditing of subcontractor proprietary cost information prior to incurred cost submissions. Primes might want to consider using time cards for consultants, along with evidence of prime monitoring activities. Regardless, primes must ensure they can demonstrate compliance with FAR 9.103 (Responsible Prospective Contractors – Policy), FAR 15.404-3 (Subcontracting Pricing Considerations), and FAR 31 (Contract Cost Principles & Procedures). (See DCAA 11-PSP-003, Audit Guidance on Limitations on Pass-Through Changes FAR 52.215-22, 52.215-23, 31.203(i))

-Labor & Material (if no concurrent Mandatory Annual Audit Requirement or MAAR was accomplished): This is another area that DCAA is behind in performing.  As such, if MAAR 6 (labor floor checks) & 13 (material reviews) haven’t been accomplished, DCAA is working hard to get years 2005-2007 accomplished.  Most small contractors will be hit hardest in supporting these due to their respective smaller resource pools.  In addition, DCAA is taking hard look at the reconciliation process supporting Federal Form 941s (Employers Quarterly Federal Tax Return).  Be prepared! 

#2 Targeted Audit Efforts:  Focused DCAA resources on smaller audit population encompassing contracts at $10 million (Firm Fixed Price) & $100 million (Cost Plus).

In the fall of 2010, in response to DCAA’s backlog of audits, dwindling resources, & cries from the acquisition community, DCAA’s audit responsibility was redirected to focus on high risk audits across DoD.  Subsequently, the Defense Federal Acquisition Regulation (DFAR) was revised to to narrow DCAA’s auditing efforts to a smaller population encompassing contracts at $10 million (Firm Fixed Price contracts) & $100 million (Cost Plus contracts).  In response, contractors with these dollar value contracts are seeing a reinvigorated DCAA focus on adequate audit packages.  This impacts those contractors pricing proposals, in these dollar thresholds.  For those contractors with smaller dollar contracts, be prepared for a little chaos as the lower dollar contract audits have been divested to the Defense Contract Management Agency (DCMA).  While simultaneously working within the parameters of their new area of responsibility, DCMA is hiring & training pricing/auditing as fast as they can!  Standing up Pricing Centers of Expertise is one of the mechanisms they are using to support this new found responsibility. How does this translate to contractors?  Know your thresholds, identify which agency you will be dealing with, and work within their established processes!  (See DCAA 10-PPS-030, Increased Thresholds for Price Proposal Audits)

#3 Denial of Access:  DCAA needs access to contractor documentation & personnel to conduct efficient audit.

Access to records remains a big issue & concern across DCAA! There has been quite a bit of discussion, policy, reporting, over the years, but generally, documentation supporting the contractor’s assertion (e.g., the cost records, policies and procedures, management reports, contractor’s proposal) should be readily available.  Beyond the documentation, auditors also want access to personnel.  Think about it — unless the request requires analysis by the contractor, or there are extenuating circumstances (e.g., the request is for a voluminous amount of data or for data stored at an off-site location), the contractor should provide the documentation upon request and should allow access to personnel.  In determining the sufficiency of evidence needed, DCAA must consider the audit objective, the risk, and materiality of an error or misstatement in the area being audited and the effect on the audit opinion.  According to DoD guidance, auditors must be prepared to discuss the basis for the request and to explain the underlying audit need.  Simply having DCAA stating “because I want it” is not satisfactory or compliant with DoD guidance. “Unusual or extensive requests,” a term that isn’t defined by DoD or DCAA, must be made in writing by someone higher than the auditor.  Remember, DCAA auditors are not permitted to remove original records from the contractor premises. They can make (or request) copies of pertinent records for working paper documentation. However, auditors should not request contractors to reproduce records so that he/she can work at home (or another worksite).  Contractors that deny proper access will surely cause delays to the audit process, extending lead times for audit & ultimately contract award.  Making sure your team of professionals understands what is reasonable & making that available (reading personnel/systems to be responsive to DCAA’s records access requests) will make great strides in the efficiency of the process. That said, if your company determines there is a need to deny access, make sure you get legal guidance! (DCAA Contract Audit Manual, 1-504.36.a)

#4 Systems Audits & the Pilot Program: Large contractors need to pay attention to the requirements in DFARs.

Changes to the DFARS rules for systems have evolved for accounting systems, estimating systems, purchasing systems, Earned Value Management Systems (EVMS), Material Management & Accounting Systems (MMAS), & property management systems. DCAA has started its pilot program on audits of large contractors, & while DCAA has been slow to implement, the supporting data requirements for contractors are extensive. Contractors have found these systems to be complex and very painful to navigate. Because old system reviews are very outdated, DCAA is attempting to update new reviews. In support of this, DCAA is looking for real time contractor-led system demonstrations (e.g., show how the billing (voucher) actually gets produced, reviewed, entered, etc.).  Because of the division of responsibility for some of these system reviews has DCMA as the lead, this can also contribute to further confusion during the system audits.  Contractors with upcoming system reviews must be mindful of these issues & formulate sound strategies to demonstrate compliance.

#5 Timely Audit Responses & Timelines:  Milestones are important & measured!

Due dates for audit service is now at a premium again!  Because of this renewed emphasis on timely responses & meeting acquisition timelines, the due dates DCAA provides to their customers will leverage added stress on contractors in support. Contractors must be prepared for due dates & more accountability if failing to meet agreed to milestones.  Preparation for supporting audit visits, timely responses to requests for data, & open lines of communication will become paramount.  Failure to recognize DCAA’s seriousness in this area may impact the negotiation schedule & contract award dates. (See DCAA 12-PPS-001, Audit Guidance on Milestone Plans & DCAA 12-PPS-005, Audit Guidance on Agreed-to Dates Performance Measure for Forward Pricing Audits)

Want to Know More and/or Need Help?

Check out the McNew & Associates (MAI) Website where businesses can find “the solution” to all of your DCAA compliance and Government contracting needs. Our goal at MAI is to help Government Contractors navigate their way through the many obstacles found in contract clauses and DCAA audits by providing cost-effective solutions. Our services range from Government Cost Accounting & Bookkeeping to Bid & Proposal Support, Contract Management, and DCAA Audit Support.  Whether you need full time, part time, or less time spent on supporting the wide range of acquisition related functions/activities, MAI offers support when you need it, with the right mix of expertise to fully respond to your needs.

MAI offers a suite of services to support your business needs in complying with all the ever-evolving DCAA requirements – everything from:

a)    Supporting all aspects of DCAA audits including

  • DCAA Audit Support
  • DCAA Mock Audits
  • Internal Control Implementation
  • Cost Accounting Theory Application
  • Indirect Rate Development & Monitoring
  • Policy & Procedure Development
  • CAS, FAR & DFARS Guidance and Interpretation
  • EVMS Setup and Support
  • Project/Program Management Analysis Tools
  • Cost/Price Analysis

b)    Designing surge support when DCAA requests become burdensome to existing personnel expertise depth & breadth

FAC 2005-58 Published FAR Case 2009-038
April 19, 2012, 4:35 PM
Filed under: Uncategorized

FAC 2005-58 Published

FAR Case 2009-038 – Justification & Approval of Sole-Source 8(a) Contracts

FAR Case 2009-038 was published as an interim rule to the Federal Register at 76 FR 14559 on March 16, 2011. Long and short is that Section 811 prohibits the award of a sole-source contract to under the 8(a) program authority above $20 million without first obtaining a Justification & Approval (J&A) approved by a qualified official AND making the J&A and related information available for public viewing. This interim rule does not prohibit awards over $20 million nor does it increase the qualification requirements of 8(a) firms.

Reminder: Provisional Billing Rates / Incurred Cost Submissions
March 21, 2012, 10:09 PM
Filed under: Uncategorized

For those of you with prime contracts containing the clause at FAR 52.216-7, you have an obligation to submit both your provisional billing rates and incurred cost submissions on a yearly basis. For provisional billing rates you are required to submit within 90 days of your fiscal year end. For those of you with a standard calendar December 31st year end,  your provisional rate submission is due to DCAA by march 31st… so you are running out of time! For incurred cost, this clause requires you to submit your incurred cost submission within 6 months of your fiscal year end, so the December 31st fiscal year end submission is due June 30th… you better get started!  Consider this your one and only reminder!

1099 Independent Contractor or Employee – The Age-Old Question
February 24, 2012, 8:58 PM
Filed under: Uncategorized | Tags: , , , , , , , ,

Year after year this question comes up, both in end of year tax reporting functions and during proposal pricing and contract performance.  It goes without saying that many times personnel are often mis-classified, mainly because the payer doesn’t know the specific rules governing what constitutes an employee versus a 1099 Independent Contractor, all for the purpose of getting “cheaper” labor since the payer does not have to pay payroll taxes for the labor (FICA, FUTA, SUTA, etc.).  In this highly competitive area (Lowest Price Technically Acceptable) of Government contracting, contractors are looking for as many ways as possible to reduce their overall price to the government, and many resort to the 1099 concept, without understanding the repercussions for improperly classifying personnel by the IRS.

So who qualifies as a 1099 Independent Contractor?  The IRS defines Independent Contractors as being people such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public.  The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.  The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.  You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

Deciding who is an independent contractor falls under 3 Common Law Rule categories that should be weighed when making the determination (IRS Form SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding provides a full breakdown of questions):

Behavior:  Does the payer have control, or right to control, what the worker does or how the work gets completed?

Financial:  Are business elements of the worker’s job under the payer’s control?  This includes how the person is paid, whether expenses are reimbursed, and who provides the tools/equipment required to get the job done, among other variables.

Relationship:  Does the person have a written contract in place with the payer?  Does the person receive benefits from the payer, including payment for holidays?  Will the work continue long term and is the work a key element of your business.

Of course there are no specific answers to the above that definitively determine whether the person is an employee or a 1099 Independent Contractor, but it is safe to say that answering yes to most of the few questions listed above qualifies the person as an employee, and therefore, taxes should be withheld as you would any other employee.

So how exactly does this affect you, the contractor?  Well, most companies who have operated using what they classified as independent contractors, who do not technically meet the definition of an independent contractor as defined by the IRS so as to keep costs low, may find themselves on the bad end of a Defense Contract Audit Agency (DCAA) audit once DCAA get’s its incurred cost audits back up to date.  Currently DCAA’s 2012 agenda is to get incurred cost submissions caught up through 2007 by the end of FY 2012.  As DCAA begins catching up on these audits, one of the focus areas will be subcontractor and independent contractor costs.  If DCAA determines that subcontractors and independent contractors have been mis-classified by the contractor, not only could those costs potentially be questioned (disallowed), but it will be DCAA’s responsibility to notify other appropriate government agencies (i.e. IRS and SBA) of the mis-classification.  This will come with potential repayment of unpaid payroll taxes (FICA, FUTA, SUTA) by the contractor for the wages paid.

In the end, it is your responsibility as a government contractor to ensure that you are appropriately classifying personnel.  Don’t get caught up trying to cut costs in your pricing by using ICs who are not appropriately classified…it could come back to bite you.

DCAA Audit Plan – 2012

To our valued clients:

In an effort to keep everyone apprised of the most recent information regarding:

Incurred Cost Audits

DCAA is establishing new virtual incurred cost teams managed by a new virtual branch manager (Denver Vicki Deleon) that will assure that all incurred costs though 2007 will be completed by the end of 2012. This may or may not be successful since there are a lot of audit compliance efforts required by DCAA to perform incurred cost audits.  However, DCAA has established this as a primary audit goal.  Due dates for reports must now be met and will be monitored.  DCAA is putting itself under the gun and therefore, the contractor will be at added risk and time demands

One area of increased scope appears to be a walkthrough of the incurred cost submission to assure compliance with the criteria of FAR 42.703 and 52.216-7.  The requirement for the ICE shows each area included in the Information for Contractors Pamphlet incurred cost submission as a requirement for an adequate incurred cost audit ICE package under 52.216-7 — Allowable Cost and Payment.  The November 4, 2011 11-PPD-020(R) requires:

The most significant changes to the audit program include improved detailed audit steps covering areas such as direct labor costs, contractor compensation costs, and excessive pass-through costs. In addition, the risk assessment procedures have been expanded to better assist in establishing the audit scope and designing the required audit procedures. The risk assessment includes a step to obtain a walk-through of the incurred cost proposal with the contractor to facilitate the process for the auditor to gain an understanding of the basis of the claimed costs and related supporting documentation, significant controls, and the relevant policies/procedures and processes related to significant cost elements.

Policy also has revised the Guide for Determining Adequacy of Contractor Incurred Cost Proposal to provide a more comprehensive guide for use in determining the adequacy of final indirect cost rate proposals at both major and non-major contractors (Enclosure). The auditors must evaluate the contractor’s incurred cost proposal for adequacy upon receipt and immediately notify the contracting officer and contractor, in writing, of significant inadequacies.

This requirement will make the process more detailed.

In addition, DCAA has established significant increases to the number of sample items required to allow a compliant audit examination.  These requirements significantly take more time and effort to provide support data.

Highlights of costs under added scrutiny include:

  • Air Travel
  • Lobbying
  • Subcontract Costs
  • Labor & Materials if no concurrent MAAR was accomplished

Subcontract surveillance after award is a critical effort.  DCAA is looking for prime assurance the subcontract billings received are verified prior to passing the billings to the Government.  Prime contractors should maintain subcontractor briefing, FAR 31 testing, and proper admin of subcontract.  Subcontract costs are now getting extensive scrutiny and the adequacy of the subcontract ICE is critical.    Consultants must have adequate support for costs.  Time cards will be a very good idea for consultants and evidence of prime monitoring.  Demonstrating that the prime has evaluated its subcontract costs will be a future emphasis.  Possible solutions for prime contractors include engaging with third-party audit firms to support auditing of subcontractor proprietary cost information prior to incurred cost submissions.

Reconciliation of labor/payroll to 941s now will not be overlooked or minimized.

Pricing Proposals and FPRAs

DCAA audit effort will be expanded on proposal effort over $10 million FFP and $100 million cost type.  Pre audit “walk though” of pricing proposals is required and causes added burden on the contractor to have an adequate package.  The support of subcontracts on major proposals is a significant audit issue that is causing issues for proposal activity.  Review of prime responsibility for subcontract cost or pricing data is now extensive.  The prime must assess all subcontractors to ensure the sub is responsible and that the price is reasonable.  In general, unless DCAA has current incurred costs audits it will audit prior costs to assure reasonableness of the accounts used for proposal purposes.  FPRAs will require testing back to actual costs as well.  Direct trace to the internal budget for FPRA will be more detailed.  Added internal reviews for DCAA internal compliance will mandate added time and effort.  Due dates for audit service is now at a premium again.  Due dates for DCAA to its customer will put added stress on timely support and submittal of documents.

Denial of Access

This is still a big DCAA concern and push.  Access to records is a continuing big issue.  Generally, documentation supporting the contractor’s assertion (e.g., the contractor’s proposal or other submission) should be readily available. Therefore, unless the request requires analysis by the contractor or there are extenuating circumstances (e.g., the request is for a voluminous amount of data or for data stored at an off-site location), the contractor should provide the documentation upon request. For example, support for proposed labor hours should be provided the same day requested, given the information would have been generated by the contractor prior to submitting the bid proposal.

Systems Audits

New DFARS rules for systems now exists for accounting systems, estimating systems, purchasing systems, earned value management systems (EVMS), material management and accounting systems (MMAS), and property management systems.  DCAA has started its new systems audits on large contractors with the kick off of its new billing and accounting system audits.  The pilot programs for billing and accounting have been slow to implement and the data required is extensive.  The accounting system pilot is difficult to demonstrate.   These are complex and have been very painful for the major contractors.  DCAA is looking for real time system demonstrations.  Example, show how the billing (voucher) actually gets produced, reviewed, entered, etc on a real time basis.  Old system reviews are very outdated and now DCAA is attempting to update new reviews.

January 13, 2012, 7:26 PM
Filed under: Uncategorized | Tags: , , ,

A recent article in the National Contract Management Magazine highlighted that trends by the Federal Government to bundle many requirements has made the ability to compete at this level very challenging for smaller companies.  As such, many of these companies are now considering joint ventures as a way to pull resources together to meet the larger requirements being solicited.  In many cases, these Joint Ventures are formed as an “unpopulated JV” where a separate Limited Liability Company (LLC) is created. Under this arrangement, the founding companies enter into a subcontract with the LLC to fulfill the prime contract requirements. 

The challenge with an Unpopulated JV/LLC arrangement has always been “who’s in charge” in respect to policies, procedures, cost accounting, contract administration, etc.  The unpopulated JV/LLC, after all, is the entity the government is contracted with.  They will expect the same level of contract administration functions and financial management as from a populated company. So what is a Unpopulated JV to do?

The current trend to solve this issue is to outsource the contract management, performance reporting, cost accounting, compliance responsibilities, etc, to a third party “Business Service Integrator” (BSI). The BSI has many advantages, which include:

1)            Proprietary information is protected and controlled

2)            Ensures “one face” contract administration/financial management to the government

3)            Policies and procedures are established for the LLC

4)            Cost Accounting Standards for the LLC are established and maintained

5)            Cost and schedule information is efficiently captured and reported

6)            EVMS requirements are centralized for efficient and accurate reporting

7)            Contract administration is efficient and DCAA audit compliant

Bottom line, the Unpopulated JV/LLC is held to the same standards as a “populated” entity.  Through the use of a BSI, the founding companies can ensure efficiency while maintaining compliance in the myriad of prime contract, FAR, and DCAA requirements.

 Get the entire article at