1.1.  Applicability.  The Administrative Contracting Officer, Corporate Administrative Contracting Officer or Divisional Administrative Contracting Officer (hereafter, ACO)  shall apply the disclosure, maintenance and review requirements to large business contractors that meet the regulatory requirements.  A contractor is a large business contractor for estimating system disclosure, if in its preceding fiscal year, the contractor received DoD prime contracts or subcontracts totaling $50 million or more for which cost or pricing data were required.  The ACO shall apply the same requirements to any other contractor if in the preceding fiscal year the contractor received DoD prime contracts or subcontracts totaling $10 million or more (but less than $50 million) for which cost or pricing data were required and when the ACO determines it to be in the best interest of the Government (e.g. significant estimating problems are believed to exist or the sales are predominantly Government).  The ACO shall not apply the disclosure, maintenance and review requirements to other than large business contractors.

2.  Ensure Contractors' Disclosure, Maintenance and Review Requirements. The ACO shall:

   2.1.  Determine the acceptability of the disclosure and system.

   2.2.  Pursue corrective action of any deficiencies.

   2.3.  Ensure that contractors subject to estimating system disclosure:

        2.3.1.  Maintain an acceptable system.

        2.3.2.  Describe the system to the ACO.

        2.3.3.  Provide timely notice of changes in the system.

        2.3.4.  Correct system deficiencies identified by the ACO

    2.4.  Characteristics of an acceptable estimating system and examples of potentially significant estimating deficiencies are identified at DFARS 215.407-5-70.

3.  Conduct Review.  The ACO shall work with DCAA to establish and manage a regular program for reviewing the contractor's estimating system and support the work of DCAA, as required, in conducting the review (PGI 215.407-5-70).  The ACO shall request DCAA to lead a review every three years unless the ACO and DCAA agree to lengthen or shorten the review cycle based on a documented joint risk assessment. 

  3.1.  DCAA shall lead the review team and prepare the team's written report.

  3.2.  The ACO shall:

        3.2.1.  Identify qualified technical specialists to participate on the review (e.g. price/cost analyst, industrial specialist, engineers that are used to evaluate proposal estimates).

        3.2.2.  Coordinate the DCMA technical specialists review activity.

        3.2.3.  Consolidate the DCMA technical specialists findings and recommendations.

        3.2.4.  Prepare a comprehensive written report to DCAA outlining the findings and recommendations of the DCMA technical specialists.

4.  Receive DCAA Audit Report.  When the ACO receives the DCAA audit, the ACO shall ensure that the DCMA technical specialists' findings and recommendations are addressed in the DCAA audit report.

  4.1. The ACO shall make a determination whether the audit report identifies significant deficiencies described in sufficient detail to to allow the ACO to understand the deficiencies.      

5.  Notify Contractor of the Results of the Review   

  5.1.  LATEST CHANGE Make Initial Determination.

       5.1.1.  No Significant Deficiencies. The ACO shall review all findings and recommendations and if there are no significant deficiencies shall promptly notify the contractor in writing that the contractor's estimating system is acceptable and approved. This notification is both an initial and final determination. For approval requirements for the initial notification refer to paragraph 6 below.

      5.1.2. One or More Significant Deficiencies.  If the ACO determines that there are one or more significant deficiencies due to the contractor's failure to meet one or more of the estimating system criteria the ACO shall:

            5.1.2.1. Promptly make a written determination to the contractor that the findings are significant and provide a description of each deficiency in sufficient detail to allow the contractor to understand the deficiency. 

           5.1.2.1. Request that the contractor respond in writing to the initial determination within 30 days. The ACO shall provide the contractor a copy of DCAA's report.Generally, DCAA incorporates contractor comments on its findings and recommendation and its rebuttal to the comments in the audit report. If DCAA incorporated the contractor's comments in the audit report, the ACO should request that the contractor provide any additional information that would assist the ACO in making a final determination.   

    5.1.3. Documentation.  The ACO shall include the following in a supporting memorandum to file:   

          5.1.3.1  An affirmative statement that the ACO agreed or disagreed with each audit and technical specialist's finding and/or recommendation.
          5.1.3.2.  Sound rationale to resolve each audit or technical specialist's findings and recommendations. The rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS and DCMA Instructions related to the issues or questions raised.

6..  Obtain Approval of Contractor Initial Determination Letter and Supporting Memorandum.

  6.1. LATEST CHANGE  The ACO shall obtain approval of the initial determination letter and supporting memorandum to file from the CMO Contracts Director or the the Director, Corporate/Divisional Administrative Contracting Officer Group.  Either Director may delegate this action to a level no lower than the contract team supervisor/leader.  If the ACO does not agree with each audit or technical specialist's findings and recommendations, the action is subject to Contract Management Board of Review approval.

  6.2.  LATEST CHANGE The CMO Contracts Director or the Corporate/Divisional Administrative Contracting Officer  Group Director shallverify that the ACO followed the procedures for resolving the reportable audit before approving the notification letter.  Either Director may delegate this action to a level no lower than the contract team supervisor/leader.  Refer to paragraph 6 of DCMA Contract Audit Follow-Up Instruction.

7.  Distribute the Initial Determination Letter

   7.1.  A copy of the ACO's initial determination shall be provided to DCAA, each contracting activity that has substantial business with the contractor, and the Contractor Business Analysis Repository eTool (CBAR) will be updated immediately to reflect the current status of the estimating system. 

8. LATEST CHANGE Make Final Determination.  

    8.1. No Continuing Significant Deficiencies. The ACO shall promptly evaluate the contractor's response to the initial determination in consultation with the the auditor and functional specialist and make a final determination as to the acceptability of the system. The ACO shall notify the contractor that the estimating system is acceptable and approved and that no significant deficiencies remain.

    8.2. One or More Continuing Significant Deficiencies. If it is determined that significant deficiencies remain, the ACO shall:

        8.2.1. Identify any remaining deficiencies and indicate the adequacy of any proposed or completed corrective actions;

        8.2.2. Request 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;

       8.2.3. Disapprove the system in accordance with the clause at DFARS 252.215-7002, Cost Estimating System Requirements;

        8.2.4. Withhold payments in accordance with the clause at DFARS 252.242-7005, Contractor Business Systems, if the specific clause is included in a contract.           

  8.3. Documentation.  The ACO shall document the following in a supporting memorandum to file:   

      8.3.1.  An affirmative statement that the ACO agreed or disagreed with each audit and technical specialist's finding and/or recommendation.
      8.3.2.  Sound rationale to resolve each audit or technical specialist's findings and recommendations. The rationale must demonstrate that the ACO has considered all appropriate FAR, DFARS and DCMA Instructions related to the issues or questions raised.

9.  Obtain Approval of Contractor Final Determination Letter and Supporting Memorandum

    9.1.  LATEST CHANGE  The ACO shall obtain approval of the determination letter and supporting memorandum to file from the CMO Contracts Director or the Director, Corporate/Divisional Administrative Contracting Officer Group  before sending it to the contractor or requesting a Contractor Business Systems Review Panel.  Either Director may delegate this action to a level no lower than the contract team supervisor/leader.

    9.2.  LATEST CHANGE  The CMO Contracts Director or the Director, Corporate/Divisional Administrative Contracting Officer Group shall verify that the ACO followed the procedures for the disposition of the reportable audit before approving the notice of disapproval. Either Director may delegate this action to a level no lower than the contract team supervisor/leader. Refer to paragraph 7 of DCMA Contract Audit Follow-Up Instruction.