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DCMA Seal Defense Contract Management Agency (DCMA) Defense Contract Management Agency (DCMA)
Instructions Guidebook POCs COP
Process Tools & Additional Guidance Performance Successful Practices Pre-Process Information Training
 
Process
Flowchart
Guidebook
Public Vouchers
Process - Process Description
 
1. Overview
   
1.1  DOD's policy is to reimburse contractors for costs incurred on cost-reimbursement type contracts to the extent they are reasonable, allocable, and determined to be allowable. Allowability of costs is based on the guidance contained in FAR 31.205, Selected costs. Contractors also are entitled to be paid earned fee in accordance with the terms of the contract.

2. Review the Contract.

    2.1. Identify Contracts Requiring Public Vouchers. The CMO operations team normally should review prime contracts and modifications to determine if they contain a requirement for public voucher submission. Contractors use public vouchers to bill on cost-reimbursement contracts, including Time and Materials and Labor Hour (T&M and LH) contracts. (DCAM 6-1004 and FMR Volume 10, Chapter 8)
Approving Payments under Cost-Reimbursement, Time-and-Materials and Labor-Hour Contracts (INFORMATION)
    2.2. Identify Contracts with Special Payment Instructions. The CMO operations team normally should review prime contracts and modifications to determine if they contain special payment instructions. If specific payment instructions are in the contract (normally in Section G) to prevent proration of ACRNs, the ACO should verify that they have been entered into MOCAS (DFARS 204.7107).  If the special payment instructions are not entered into MOCAS, the CMO should put them in.  Otherwise, Automated Payment of Invoices (API) by MOCAS for interim cost vouchers distributes the payment proportionally against all available unliquidated obligations on the contract, instead of according to the payment instructions.  Special payment instructions may have been put in the contract to reduce risks related to management of expenditure rates by the program office, management of canceling funds, or alignment of disbursements with actual performance.
  

3.  Understand the Auditor's role in the Public Voucher Process. 

    3.1. ACO's Authorized Representative for Designated Functions. In accordance with
DFARS 242.803(b), the contract auditor is the authorized representative of the contracting officer for:

  • Receiving vouchers
  • Approving interim vouchers (including vouchers for fee and for T&M and LH contracts)
  • Authorizing direct submission of interim vouchers for provisional payment to the disbursing office
  • Reviewing completion/final vouchers and sending them to the ACO for approval
  • Issuing DCAA Forms 1, "Notice of Contract Costs Suspended and/or Disapproved."

    3.2.  Limitations on the Auditor's Role. The contract auditor's role in the public voucher process has limitations.  For example, auditors have only minimal involvement with technical performance considerations; they do not administer limitation of cost or funds requirements; they make no judgments on fee issues; they have no involvement with MOCAS; and they are often not the approval authority for many contractor systems and processes. In addition, auditors are not authorized to approve completion/final vouchers or make decisions regarding appeals on the notice of contract costs suspended and/or disapproved. 
    3.3. Exceptions for Certain International CMOs. For international CMOs supported by a local Host Contract Administration Services Audit Authority, applicable international agreements determine the specific role of the contract auditor. See
FAR 1.405, Deviations Pertaining to Treaties and Executive Agreements.
    3.4. Auditor Determination of Contractor Eligibility for Direct Billing Authority. The contract auditor evaluates the contractor's Billing System and determines the contractor's eligibility for direct billing authority. Any input provided by the ACO is required to be considered in the auditor's evaluation. The ACO and the contract auditor should communicate regularly about risks affecting the contractor's billing system (DCAM 6-1007).
    3.4.1.  Authorization Process. After approving the contractor's billing system and authorizing direct submission of interim vouchers, the contract auditor notifies the contractor that it may submit cost vouchers, (except first and completion/final vouchers) direct to the payment office. The contract auditor gives a copy of the authorization to the ACO and to the payment office. Since contractors may submit interim vouchers directly to the payment office based on approval from the contract auditor, contract modifications to permit direct billing are not needed.
   3.4.2. Withdrawal of Authorization. If the contract auditor withdraws direct billing authorization, the auditor then notifies the contractor, the ACO and the payment office, and also directs the contractor to submit vouchers to the contract auditor for review and approval.
   3.4.3.  Process for Contractors Without Authorization. Contractors not determined to be eligible for direct billing are required to submit interim vouchers to the contract auditor for approval.
 

4.  Track and Evaluate Contractor Performance 

   4.1. Contract Performance. The CMO ACO team or functional specialists should track and evaluate the contractor's performance relating to systems and key processes that influence contract performance and billing. As a minimum, the ACO team should track contractor performance, taking the following into consideration:

  • Past Performance
  • Functional Specialist Input
  • Auditor Determination of Contractor Eligibility for Direct Billing Authority
  • Audit Reports
  • DACOs, CACOs, and DCEs Input
  • Any Notices of Contract Costs Suspended and/or Disapproved
  • Status of Earned Value Management System, if applicable
  • Status of Contractor Purchasing System
  • Status of Contractor Material Management and Accounting System
  • Status of Contractor Estimating System
  • Status of Contractor's Cost Accounting System
  • Status of Financial Surveillance Information

   4.2. Compliance with Limitation of Cost/Funds Requirements (applicable to cost-type contracts). Ensure that any potential problems with voucher preparation, cost control, or timely notification associated with the "Limitation of Cost/Funds" requirements of the contract, are promptly identified. 
   4.3. Compliance with Fee Withholding Requirements for Cost-Type Contracts. Ensure that any actual or potential voucher problems involving fee withholding requirements, e.g. invoicing for fee amounts required to be withheld, are promptly identified.  Include periodic reviews of vouchers for fee withholdings commensurate with the risk assessed.
  4.4. Compliance with Withholding Requirements for T&M/LH Contracts. (See special considerations for T&M/LH contracts.) Ensure that any actual or potential voucher problems associated with the withholding requirements or cost controls are promptly identified. Include periodic reviews of vouchers for withholdings commensurate with the risk assessed.
  4.5. Obtain Business System Status Updates.  The ACO normally should obtain regular business system status updates from the DACO, CACO, DCE, DCAA, other ACO, as applicable. Communicate specific concerns with the other Government representatives.  If necessary, obtain additional system reviews focusing on the concerns identified. 
  4.6.  Periodic Review of Paid Vouchers.  The ACO normally should include a requirement for periodic review of paid vouchers, including vouchers for fee (
FAR 52.216-7, FAR 52.232-7). (See special considerations for T&M/LH contracts and for CPFF contracts. There are also special considerations for fee earned on cost-type contracts.)  Tailor the depth of reviews to the potential impact from the system(s) that have been identified as problems.  It may be necessary to obtain the Standard Form 1035, Public Voucher for Purchases and Services Other than Personal (Continuation Sheet) from the contractor. 
  4.7.  Obtain Financial Condition Status Updates.  The ACO normally should obtain regular financial condition status updates from the DACO, CACO, DCE, DCAA, other ACO, as applicable. Communicate specific concerns with the other Government representatives.  If necessary, the ACO should obtain additional financial surveillance reviews focusing on the concerns identified.      

5.  Review and Approval of Completion/Final Voucher.

   5.1. Prior to approving the completion/final voucher, the ACO should:

  • Verify that obligation records are accurately recorded in MOCAS (FMR Volume 5, Chapter 33).
  • Verify that total amounts claimed for reimbursement represent allowable costs and fee in accordance with the contract (FAR 52.216-7 and FAR 52.232-7).  
  • Ensure that all issues on suspended or disallowed costs are resolved (FAR 4.804-5).
  • Perform a bottom-line review of the MOCAS total disbursed amount.
    • If total MOCAS disbursements match the contractor claimed previous paid amount stated in the final voucher, then the ACO can assume that the claimed amount is accurate and approve the final amount due.
    • If discrepancies exist between the total MOCAS disbursed amount and contractor claimed previous paid amounts, this indicates that the ACO should request a contract reconciliation, and:
      • If  the contractor has been evaluated as "low risk" in the key process of Management of Business Systems and Management of Company Financial Condition, then the ACO should rely on the capability of the contractor's billing system to generate accurate information, including claimed previous amounts paid and approve the final voucher.
      • If the contractor has been evaluated as "moderate" or "high risk" in the key process of Management of Business Systems and Management of Company Financial Condition, then the ACO should wait for the final contract reconciliation to be completed prior to approving the final voucher.
  • Ensure that all closing documents have been obtained, are in order and properly executed (FAR 4.804-5).  Particularly, ensure that the contractor has submitted the Release of Claims and the Assignment of Refunds, Rebates and Credits, and that they are accurate and complete.  The audit report, Release of Claims and the Assignment of Refunds, Rebates and Credits are kept in the official contract folder.  They are not forwarded to the payment office.

    5.2.  The ACO signs and dates the completion/final voucher, and forwards it to the payment office.  ACO approval of a final/completion voucher signifies that all administrative contract settlement actions are complete (FAR 52.216-7 and FAR 52.232-7).   

6.  Special Considerations

    6.1. Special Considerations for Withholding Requirements

        6.1.1. Time-and-Materials and Labor-Hour Contracts.

            6.1.1.1. Alternate A should be used in the clause at
FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts.  With this alternate, the ACO may unilaterally modify the contract to withhold up to five percent of the billing amount (up to a maximum of $50,000) be withheld from the contractor's billings for direct labor hours. Normally there should be no need to withhold payment for a contractor with a record of timely submittal of the contractor's release.
            6.1.1.2.  The ACO should be aware that the withholding percentage might vary from the standard five percent called for in
FAR 52.232-7, which allows the PCO the latitude to adjust the percentage.
            6.1.1.3.  For orders placed under Indefinite-Delivery Type Contracts (FAR 16.5), the withholding does not apply to each order separately, but to the contract as a whole.  For orders placed under basic ordering agreements (BOAs) (FAR 16.703), the withholding requirements apply separately to each order under the BOA, since each order is a separate contract.
            6.1.1.4. The
FAR 16.601 requires government surveillance of contractor performance to give reasonable assurance that efficient methods and effective cost controls are being used. ACOs should request performance of periodic audits of contractor's billings and periodic floor checks by the contract auditor.

        6.1.2. Cost-Plus-Fixed-Fee Contracts.

            6.1.2.1. In accordance with
FAR 52.216-8, "Fixed Fee," under CPFF contracts, after payment of 85 percent of the fixed fee, the ACO may withhold further payment of fee until a reserve is set aside in an amount that the Government considers necessary to protect the Government's interest.  This reserve may not exceed 15 percent of the total fixed fee or $100,000, whichever is less.
            6.1.2.2.  The ACO should release 75 percent of all fee withholds after receipt of the certified final indirect cost rate proposal covering the year of physical completion of the contract, provided the contractor has satisfied all other contract terms and conditions, including the submission of final patent and royalty reports, and is not delinquent in submitting completion/final vouchers on prior years' settlements.
            6.1.2.3.  The ACO may release up to 90 percent of the fee withholds based on the contractor's past performance related to the submission and settlement of final indirect cost rate proposals.

    6.2.  Special Considerations for Fee.

        6.2.1. Term-Form contracts - If additional hours are added to the contract, the contractor may continue to earn fee.
        6.2.2. Completion-Form contracts - The contractor does not earn the full fixed fee until the work, as specified, has been satisfactorily completed. If a completion form contract is in an overrun status, the contractor is not entitled to additional fee. If contract line items numbers (CLINs) are priced separately, any overruns occur at the CLIN level.
        6.2.3. Fee Based on Deliveries of Completed End Items or Percentage of Physical Completion - This occurs when the amount of interim fee is based upon deliveries of completed end items or percentage of physical completion. In this situation, the ACO should verify that the contractor's progress on the contract is commensurate with the fee the contractor has requested. This situation would most frequently apply to completion-form contracts with two or more separately priced CLINs. In this case, fee is earned at the CLIN level rather than at the contract level.
        6.2.4. Special Fee Provisions - If the Procuring Contracting Officer (PCO) has included special, nonstandard fee requirements in the contract, the fee should be paid in accordance with these special requirements.

    6.3.  Special Considerations for Reviews of Contractor Appeals on Auditor's Notice of Contract Costs Suspended and/or Disapproved.
       
        6.3.1. If the contract auditor has issued a notice of contract costs suspended and/or disapproved (e.g., DCAA Form 1) and the contractor disagrees, the contractor may:

            6.3.1.1. Submit a written request to the ACO to consider whether the costs should be paid and to discuss the findings with the contractor;
            6.3.1.2. File a claim under the Disputes clause, which the ACO processes in accordance with the Disputes clause of the contract;
            6.3.1.3. Do both of the above.

        6.3.2.  When the ACO's planned course of action is not consistent with the auditor's recommendations, the level of review should be based on the disputed costs identified by the auditor and should be as specified in Pricing and Negotiation. If the audit or DCAA Form 1 is not specific, the ACO should consult with the auditor to determine the potential value of the disallowance (FAR 42.8).

 

 
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