Background and characters

A large U.S. defense contractor provides innovative and high-quality technologies, solutions, and services. They obtained a contract that triggered the $50 million threshold for an Estimating System audit that meets the Defense Federal Acquisition Regulation Supplement (DFARS) criteria.

The purpose of these audits is to determine if a contractor’s system meets the 17 specific criteria requirements of DFARS 252.215-7002 for compliant estimates on government contracts. Failure of the audit criteria could result in withholding of payments and/or not being awarded a contract.

The Defense Contract Audit Agency (DCAA) is an auditor for many federal government agencies, and the Contracting Officer (CO) makes the determination of adequacy from the DCAA audit results.

Storyline (Our role)

After developing an Estimating System Manual along with policies and procedures to prepare for their first DCAA Estimating System audit, the defense contractor needed an experienced external team to assess their ability to pass the audit.

CohnReznick’s Government Contracting Industry practice helps government contractors optimize performance by providing strategic advice on compliance and federal regulations, while also providing a range of audit, tax, and advisory services, including government Business System audits and audit readiness.

We helped the contractor review its system audit readiness by:

Performing a real-time assessment: CohnReznick reviewed the contractor’s Estimating System training and oversight programs, estimating policies and procedures, and estimating file repository system. We also interviewed the contractor’s employees to assess their knowledge of the overall Estimating System policies and procedures.

Providing agile implementation: During the real-time assessment, CohnReznick provided a gap analysis for areas that could be strengthened. This allowed for real-time implementation and reassessment to make sure that all gaps were eliminated.

Completing estimating files for audit readiness: In addition to evaluating the estimating file repository system and structure for completeness, CohnReznick sampled estimating files to confirm that all estimating support was centrally located, properly labeled, in compliance with the contractor’s policies and procedures, and inclusive of all necessary details to support an audit.

As a result of these steps, CohnReznick and the contractor were able to create a strategic and methodical roadmap to audit readiness.

Action (The audit)

DCAA engaged with the defense contractor to perform an Estimating System audit. Throughout the ten-month audit engagement, DCAA submitted 57 different requests for information which resulted in 220 questions from six different auditors. Due to the tight timeline to complete the audit, each auditor worked independently on various parts of the audit to keep it moving smoothly.

To keep up with the data requests and the number of auditors involved in the engagement, the contractor:

• Developed an RFI list to manage the multiple requests
• Held weekly meetings with the DCAA primary auditors to discuss outstanding items and audit status and resolve any issues
• Held monthly meetings with the ACO and supervisory auditors to review audit status
• Coordinated with DCAA until all parties agreed that all requested items were provided

It’s a wrap (Results)

At the end of the audit, there were two minor findings noted in the DCAA report. The contractor proactively implemented corrections to address these minor findings, and the ACO determined adequacy of the contractor’s Estimating System with no exceptions or notations.

The keys to the contractor’s success included:

1. Engaging CohnReznick to help ensure its Estimating System was ready for audit
2. Managing the audit requests for information through one central point of contact to support consistency and accountability of audit requests and responses
3. Engaging in weekly meetings with DCAA to keep communication lines open and speed fulfillment of information requests

Contact our team for more information on how we can help you assess any of your business systems’ audit readiness.

Plus: See our 2023 GAUGE Report for more information on all things government contracting.