audit | The Contracting Education Academy

June 2, 2020 By cs

GSA terminates McKinsey & Co.’s schedule contract

The General Services Administration has terminated the multiple award schedule contract of McKinsey and Company.

The company and the agency’s inspector general confirmed GSA’s decision in separate emails to Federal News Network.

The decision comes 10 months after a critical inspector general report found McKinsey’s prices were 10% higher than originally proposed, meaning the government paid as much as $65 million in additional costs.

The IG recommended at the time to cancel McKinsey’s schedule contract in part because they didn’t cooperate with the pre-award audit.

“We are disappointed with the GSA’s decision, and that a GSA schedule is not available to our clients at this time,” a McKinsey spokesman said in an email statement. “We attempted to negotiate in good faith and disagree with the GSA’s evaluation. We will nevertheless continue to serve the public sector in the United States.”

Keep reading this article at: https://federalnewsnetwork.com/acquisition-policy/2020/05/gsa-terminates-mckinsey-co-s-schedule-contract/

December 2, 2019 By cs

Pentagon nearly doubles use of Other Transaction Authority purchases

The Defense Department is embracing the alternative procurement method but could use more oversight of the deals, a Government Accountability Office audit found.

The Pentagon upped its use of purchases through other transaction authority, or OTAs, significantly over the past fiscal year, nearly doubling both the number of total OTA contracts and total investment.

In fiscal 2017, the Defense Department issued 384 new awards, modifications or orders for OTA contracts totaling $2.1 billion in obligations. In 2018, the Defense Department contracted 618 OTA awards totaling $3.7 billion, according to a Government Accountability Office audit released this week.

Based on data from the Federal Procurement Data System, the audit indicates the Pentagon has more than tripled its use of OTA contracts since it received enhanced authorities from the 2016 National Defense Authorization Act. In that year, Defense agencies issued only 248 OTA awards for approximately $1.4 billion.

Keep reading this article at: https://www.nextgov.com/emerging-tech/2019/11/pentagon-nearly-doubles-use-other-transaction-authority-purchases/161504/

November 28, 2019 By cs

Federal Circuit issues controversial decision involving expressly unallowable costs

In its second significant cost allowability decision of the year, the Federal Circuit held that salaries associated with lobbying activities are expressly unallowable under Federal Acquisition Regulation (FAR) 31.205-22.

Although the decision is limited to salary costs associated with lobbying activities, its rationale creates uncertainty for other types of costs subject to a FAR Part 31 Cost Principle that uses similar “associated with” language. Contractors should anticipate closer scrutiny from auditors, who may feel emboldened by the Federal Circuit’s decision to characterize costs as expressly unallowable. The decision may also have implications for compliance with Cost Accounting Standard 405.

Although many types of cost may be generally unallowable, a smaller subset of costs are expressly unallowable. An expressly unallowable costs is “a particular item or type of cost which, under the express provisions of an applicable law, regulation, or contract, is specifically named and stated to be unallowable.” Contractors are subject to penalty if they submit to the government any expressly unallowable cost. Congress made clear that the penalty was intended for limited circumstances where the regulations explicitly prohibit inclusion of a type of cost; providing alcohol as an example.

FAR 31.205-22(a) provides that costs “associated with” a list of lobbying and political activities are unallowable. FAR 31.205-22 does not specifically name and state salary, or any other type of cost; it merely states “associated with.” The narrow question presented to the Federal Circuit was whether salary costs of employees engaging in such lobbying activity qualify as expressly unallowable costs.

Keep reading this article at: http://www.mondaq.com/unitedstates/x/860020/

November 21, 2019 By cs

DoD’s second financial audit uncovers 1,300 new deficiencies

The results of the Pentagon’s second-ever full financial audit are a decidedly mixed bag: Although officials were able to point to some areas of significant progress in managing the Defense Department’s finances over the past year, overall, auditors are uncovering new problems faster than the department is fixing them.

At this time a year ago, auditors had made 2,410 separate findings and recommendations during the department’s first-ever financial audit. In the 2019 financial report DoD issued Friday evening, officials said 556 of those had been resolved. But besides the more than 1,800 problems the department is still wrestling with from 2018, auditors made more than 1,300 new findings during the course of the latest audit.

In addition, the audit turned up a larger number of material weaknesses this year.

Keep reading this article at: https://federalnewsnetwork.com/defense-main/2019/11/dods-second-financial-audit-uncovers-1300-new-deficiencies/

August 27, 2019 By cs

10 areas for no-nonsense contractor auditing

An audit is a systematic, independent, and documented process for obtaining objective evidence and evaluating it to determine the extent to which program criteria (policies, procedures or requirements) have been fulfilled.

There are three types of audits.

First-party audit, performed within an organization to measure its strengths, weaknesses and conformity with established standards. This also is called an internal audit. Internal audits satisfy internal requirements and audit results remain in-house.

Second-party audit, an external audit performed on a supplier by a customer or by a contracted organization on behalf of a customer. In second-party audits (for our purposes) Department of Defense (DoD) program managers (PMs) measure and evaluate the DoD contractor’s ability to conform to contract requirements and specifications.

Third-party audit is performed by an audit organization independent of both the contractor and DoD and is free of all conflicts of interest. Third-party audits (e.g., by an International Standards Organization [ISO] Registrar) may result in certification, registration or award certificate issued by the third party.

This article discusses second-party audits; specifically, wherein DoD PMs audit their contractors’ ability to execute the contract. I strongly recommend that PMs incorporate second-party audits into DoD contacts, regardless of contract size, scope or final deliverable.

Like the organizations or contracts that they address, the audits themselves must have objectives, scope and criteria. Anything less is a waste of time.

**Figure 1. Second-Party Audit of DoD Contracts by DoD Program Managers**

Figure 1 summarily describes a comprehensive program of second-party audits. Note especially the inclusion of “operators and warfighters.” This inclusion alone distinguishes effective second-party auditing from routine program management. Participation by experienced, credible operators/end-users helps to ensure that programs do not stray from the goals of the contract or the purpose of the end products.

Keep reading this article at: https://www.dau.mil/library/defense-atl/blog/Second-Party-Audit-

The General Services Administration has terminated the multiple award schedule contract of McKinsey and Company.

The Defense Department is embracing the alternative procurement method but could use more oversight of the deals, a Government Accountability Office audit found.

In its second significant cost allowability decision of the year, the Federal Circuit held that salaries associated with lobbying activities are expressly unallowable under Federal Acquisition Regulation (FAR) 31.205-22.

An audit is a systematic, independent, and documented process for obtaining objective evidence and evaluating it to determine the extent to which program criteria (policies, procedures or requirements) have been fulfilled.

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