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By Curt Finch
The Federal Acquisition Regulations (FAR), are a series of regulations issued by the Federal government that concern the requirements of contractors for selling to the government, the terms under which the government obtains ownership, title and control of the goods or services purchased, and rules on specifications, payments and conduct and actions regarding solicitation of bids and payment of invoices. Many of the DCAA documents found at www.dcaa.mil refer to FAR.
The FAR consists of tens of thousands of pages and consists of two parts: the general acquisition regulations that govern all transactions with the government in general, and the specific regulations issued by a specific federal agency that govern transactions with that agency. One of the best-known examples of the latter is the Defense Federal Acquisition Regulation Supplement (DFARS) which is used by the Department of Defense.
The purpose of the FAR is to specify exactly how the government is to acquire a particular product or service, how it is to be judged in terms of quality and price, and to ensure the government does not pay for certain prohibited practices such as cost of lobbying, cost of financing, and to prevent kickbacks, undue influence, corruption and other misconduct. It may also include requirements for purchases to be made in the United States, for large organizations to use smaller ones (including women- and minority-owned and disadvantaged business enterprises) as subcontractors, to not discriminate against certain classes of people, to engage in certain practices such as minority hiring and affirmative action, and other requirements depending on the type of contract and its dollar value.
DCAA regulations are often very specific about how adherence to FAR will be audited.
An additional term often used is CAM. This stands for the DCAA Contract Audit Manual. It is an instruction book for auditors who work on behalf the government. It is available at http://www.dcaa.mil/cam/Chapter_00_-_Introduction_to_the_DCAA_Contract_Audit_Manual.pdf and is also thousands of pages. It discusses standards for auditing, how to plan for an audit, cost accounting standards, auditing of estimates and proposals, statistical sampling techniques for audits, who can obtain audit reports, how they’re distributed and what they should look like.
If all this sounds daunting, that’s because it is. However, many small companies pass DCAA audits all the time and there are people and technologies that can help you do so. Like most things in business, it’s cheaper to solve the problems in advance of an audit when the pressure and time criticality of the exercise are less onerous.
It is important to remember that one of the most critical portions of a DCAA audit concerns detailed labor and cost center tracking. Technology solutions can automate the costly process of capturing and reporting contract-specific data and provide critical supporting documentation for DCAA audits. Defense contractors must have labor systems with the following internal controls:
* Effective method to monitor the overall integrity of the system;
* Effective employee awareness training program;
* Effective procedures for labor approvals; and
* Effective procedures for labor cost accounting (cost accounting standards, contract terms).
Getting a system in place to monitor these issues is a requirement if you intend to sell services to the government. The sooner you start, the better.
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