DCMA mandatory requirements that are not appropriate for CMO Commander/Center Director deviation approval authority are preceded by the Letters "ND" - See Deviations - FAR, DFARS, DoD Directive, Other Regulatory/Government Documents and DCMA Instructions

1.  Identify Defective Cost and Pricing Data:

    1.1.  Before Contract Award (see FAR 15.407-1(a)).  If the Administrative Contracting Officer (ACO) learns that any cost or pricing data submitted are inaccurate, incomplete, or noncurrent, the ACO shall immediately bring the matter to the attention of the contractor and the Procuring Contracting Officer (PCO), regardless of whether the defective data increases or decreases the contract price.  For ACO negotiated actions, the ACO shall:

        1.1.1.  Consider any new data submitted by the contractor to correct the deficiency, or consider the inaccuracy, incompleteness, or noncurrency of the data when negotiating the contract price.
        1.1.2.  Document the adjustments made to the data or the corrected data used to negotiate the contract price in the price negotiation memorandum (PNM).

    1.2.  After Contract Award (see FAR 15.407-1(b)).  If after award, the ACO learns or suspects that the data furnished were not adequate, complete, or current, or were not adequately verified by the contractor at the time of negotiation, the ACO shall request an audit to evaluate the accuracy, completeness, and currency of the data.  DCAA performs defective cost and pricing audits on all fixed price and incentive actions over $100 million as well as other pricing actions based on risk assessment.

2.  Determine Responsibility for Resolution: 

    2.1.  If the ACO receives an audit report with defective cost or pricing data findings and recommendations, the ACO shall immediately discuss the findings and recommendations with the PCO to determine whether the ACO or the PCO will be responsible for the resolution.

        2.1.1.  If the PCO delegates resolution responsibility to the ACO, the ACO shall make a determination as to whether or not the data submitted were defective and relied upon.
       2.1.2.  If the PCO does not delegate resolution responsibility to the ACO, the ACO shall support the PCO as, requested, and the remainder of this instruction does not apply.

3.  Evaluate Audit Findings and Contractor Comments:

    3.1.  The ACO shall review and obtain a complete understanding and give full consideration to all audit findings and recommendations.
    3.2.  The ACO shall give the contractor an opportunity to support the accuracy, completeness, and currency of the data in question.  Generally, DCAA incorporates the contractor's comments on its findings and recommendations and DCAA's rebuttal to those comments in the audit report.  If DCAA incorporates the contractor's comments, the ACO should obtain additional information from the contractor, as needed.  If DCAA did not incorporate the contractor's comments, the ACO shall request comments from the contractor.  The ACO shall request the contractor to provide its comments on the findings within 30 days.  The date may be extended for an additional 30 day period; however, defective pricing audits are reportable audits subject to the requirements of Contract Audit Follow-up (CAFU) in accordance with the DCMA Instruction on CAFU and are required to be resolved within 180 days.  Consequently, ACOs shall resolve all audit findings and recommendations within 180 days.

4.  Make Defective Cost or Pricing Determination:

    4.1.  If the ACO finds the cost or pricing data accurate, complete, and current as of the date of the final agreement on price or an earlier agreed to date on the contractor's Certificate of Current Cost or Pricing Data, the ACO shall:

        4.1.1.  Not pursue a price adjustment.
        4.1.2.  Document the determination and supporting rationale in the CAFU System and in a memorandum to the contract file.  See DCMA Instruction on CAFU for policy and procedures for resolving reportable audits.
        4.1.3.  Provide in the documentation sound rationale to resolve each audit or other specialist's finding and recommendation.  The rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS, and DCMA policy and instructions related to the issues or questions raised by DCAA.

    4.2.  If the ACO finds the cost and pricing data to be inaccurate, incomplete, or noncurrent as of the date of the final agreement on price or an earlier agreed to date on the contractor's Certificate of Current Cost or Pricing Data, the ACO shall:

       4.2.1.  Pursue a price adjustment, including profit or fee, for the amount the price increased due to defective cost or pricing data.
       4.2.2.  Pursue the interest and penalty associated with the over payment. (The ACO shall obtain the advice of legal counsel before taking any contractual actions concerning actions concerning a penalty assessment, in accordance with FAR 15.407-1(b)(7)).
       4.2.3.  Develop Prenegotiation Objectives as indicated below.

5.  Develop Prenegotiation Objectives (PNO):

    5.1.  The PNO represents the ACO's initial negotiation position.  The scope and depth of the analysis supporting the PNO should be directly related to the dollar value, importance, and complexity of the defective cost and pricing issue.  The ACO shall document in the PNO:  

       5.1.1.  An affirmative statement that the ACO agreed or disagreed with each audit finding and recommendation or other specialist's (cost/price analyst, legal counsel) finding and recommendation.
       5.1.2.  Sound rationale to resolve each audit or other specialist's finding and recommendation.  The rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS, and DCMA policy and instructions related to the issues or questions raised by DCAA or other specialists (e.g., cost/price analyst, legal counsel, etc.).

6.  Obtain Approval of PNO:

    6.1.  (ND) The ACO shall obtain approval of the PNO from the Contract Management Office (CMO) Contracts Director and any required Contract Management Board of Review (BoR) approvals before entering into negotiation or verbal agreement with the contractor.  The CMO Contracts Director may delegate authority to approve the PNO to a level no lower than the contract team supervisor/team leader.
    6.2.  (ND) The CMO Contracts Director shall verify that the ACO followed the procedures for resolving the reportable audit before approving the PNO.  The CMO Contracts Director may delegate this action to a level no lower than the contract team supervisor/team leader.  See paragraph 6 of the DCMA Instruction on CAFU.

7.  Develop Price Negotiation Memorandum (PNM):

   7.1.   After negotiations with the contractor are completed, the ACO shall prepare a PNM.  The PNM documents the outcome of the ACO's negotiations with the contractor.  The ACO shall document in the PNM:

   7.1.1.  An affirmative statement that the ACO agreed or disagreed with each audit finding or other specialists (cost/price analyst, legal counsel) finding and recommendation.
   7.1.2.  Sound rationale to resolve each audit or other specialist's finding and recommendation (including offsets claimed by the contractor and interest and penalties owed to the Government due to overpayments).  The  rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS, and DCMA policy and instructions related to the issues or questions raised by DCAA or other specialists (e.g., cost/price analyst, legal counsel, etc.).

   7.1.3.  Identification of cost or pricing data submitted during the negotiations and relied upon in reaching settlement. 

8. Obtain Approval of PNM and Execute Final Settlement:

   8.1.  (ND) The ACO shall obtain approval of the PNM from the CMO Contracts Director before executing the settlement action.  The CMO Contracts Director may delegate authority to approve the PNM to a level no lower than the contract team supervisor/team leader.
   8.2.  If the PNO was subjected to a BoR, the CMO Contracts Director shall provide the BoR Chairperson with rationale supporting any changes that deviate by more than 10 percent (plus or minus) from the amounts approved in the PNO.
   8.3.  (ND) The CMO Contracts Director shall verify that the ACO followed the procedures for dispositioning the reportable audit before approving the PNM.  The CMO Contracts Director may delegate this action to a level no lower than the contract team supervisor/team leader.  See paragraph 7 of the DCMA Instruction on CAFU.

   8.2.  If agreement is reached with the contractor and if monies are owed to the Government, the ACO shall issue to the contractor:

        8.2.1.  A a SF Form 30 contract modification for the downward adjustment in price.
        8.2.2.  A demand letter for recoupment of the overpayment, interest and penalties in accordance with the DCMA Instruction on Contract Debt.  The demand for payment shall separately state the repayment amount, penalty amount (if any) and interest amount through a specified date in accordance with FAR 15.407-1(b)(7). 

   8.3.  If agreement cannot be reached and if monies are owed to the Government, after coordination with local legal counsel, the ACO shall make a demand for payment as part of a final decision in accordance with FAR 32.604 Demand for payment and FAR 32.605, Final decisions.  Also, the ACO shall follow the procedures in FAR 33.211, Contracting officer's decision and the DCMA Instruction on Contract Claims and Disputes.  Specifically, the ACO shall issue to the contractor:

        8.3.1.   A unilateral SF Form 30 contract modification for the downward adjustment in price.
        8.3.2.   A demand letter for recoupment of the overpayment, interest and penalties payment in accordance with the DCMA Instruction on Contract Debt.  The demand for payment shall separately state the repayment amount, penalty amount (if any) and interest amount through a specified date in accordance with FAR 15.407-1(b)(7).    

9.  Provide copies of the PNM, demand for payment and contract modification:

   9.1.  The ACO shall provide a copy of the PNM to both the DCAA auditor and the PCO.
   9.2.  The ACO shall also provide the PCO a copy of any demand for payment and contract modification. 

• FAR 15.407-1, Defective cost or pricing data.
• FAR 52.215-10, Price Reduction for Defective Cost or Pricing Data.
• FAR 52.215-11, Price Reduction for Defective Cost or Pricing Data -- Modifications.
• FAR 52.215-12, Subcontractor Cost or Pricing Data.
• FAR 52.215-13, Subcontractor Cost or Pricing Data -- Modifications.
• DoD Instruction 7640.02, Policy for Follow-up on Contract Audit Reports.

• Process Indicator/s:
  • TBD
• Workload Indicator/s:
  • TBD
• Resource Indicator/s:
  • TBD
• Supplier Indicator/s:
  • TBD

• PLAS Process code:  053

• MDO Etool application

None at this time