Army contracting personnel didn’t adhere to a new rule during their work on contracts worth about $10.5 billion because they weren’t aware of it, a report from the Defense Department office of inspector general says.
The rule, first implemented on an interim basis in March 2011, affects cost-reimbursement contracts, where contractors are paid for costs incurred during the fulfillment of the contract–as opposed to fixed-price contracts. Under the Federal Acquisition Regulation, a cost-reimbursement contract is acceptable only when uncertainties surrounding the contract prevent an accurate estimate of its cost.
The rule requires that DoD contracting personnel obtain approval for cost-reimbursements contracts at one level above the contracting officer or higher. They also have to document that approval.
Additionally, contracting personnel have to justify the use of a cost-reimbursement contract and document its potential to transition to a fixed-price contract. The rule also requires documentation that there are adequate resources to manage a cost-reimbursement contract.
The interim rule became a final rule, without significant changes, in March 2012, but the OIG audit only covered the nearly year-long period where it was still an interim rule.
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