Don't bank on relief from DCAA audits.

• Author: Fenster, Herb
• Position: Government Contracting Insights

* The Truth in Negotiations Act is a statute with which defense contractors are likely familiar. It requires contractors to submit current, accurate and complete cost or pricing data when negotiating certain contracts with the government.

Gathering and producing this data can be an arduous process and can result in the inadvertent disclosure of information that does not entirely satisfy the TINA standard. In such situations, contractors often will voluntarily notify the government of the issue and seek to resolve it.

In such situations, it is only reasonable for the contractor to expect the government not to conduct a full-scope audit by the Defense Contract Audit Agency (DCAA) but rather to recognize the contractor's good-faith conduct and agree to a limited review. Such has not been the case, however, resulting in industry calls for regulatory action to rein in the agency.

On Nov. 20, the Defense Department responded to these calls and published a proposed rule to amend the Defense Federal Acquisition Regulation Supplement. The change would require contracting officers to request a limited-scope audit if a contractor voluntarily discloses that cost or pricing data was inaccurate, incomplete or not current when submitted, unless a full-scope audit is "appropriate for the circumstances." In theory, the proposed rule would give a contracting officer the flexibility to focus an audit on the inaccurate portions disclosed by the contractor. But as currently drafted, the rule offers no meaningful assurance of relief for contractors.

The proposed rule amends the DFARS to:

* Require contracting officers to request a limited-scope audit, unless a full-scope audit is appropriate under the circumstances, when a contractor voluntarily discloses inaccurate or otherwise defective pricing after contract award;

* Require the contracting officer to consult with the DCAA to determine the appropriate scope of an audit following a voluntary disclosure, based on an evaluation of the completeness of the contractor's disclosure; the accuracy of the contractor's cost impact calculation for the affected contract; and the potential impact on existing contracts, task orders, delivery orders or other proposals submitted by the contractor; and

* Clarify that voluntary disclosure of defective pricing does not waive government entitlement to the recovery of any overpayments, or the rights to pursue claims based on inaccurate, incomplete or outdated cost or pricing data.

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