Summary
Department of Defense contracting officers must accept either a Defense Contract Audit Agency (DCAA) audit report or a DCAA memorandum to satisfy incurred cost audit requirements. The DCAA memorandum documents a risk assessment and adequacy evaluation under Federal Acquisition Regulation (FAR) 42.705-1(b)(1)(iii). This risk-based sampling process has been in use since 1994 and includes safeguards against unacceptable risk.
Contracting Officer Actions
1
Accept a DCAA audit report or a DCAA memorandum documenting a risk assessment and adequacy evaluation to satisfy audit requirements at FAR 4.804-5(a)(12), 42.705-1(b)(2) and 42.705-2(b)(2)(i).
2
Rely on the DCAA memorandum as sufficient documentation that an incurred cost proposal was deemed low-risk and not selected for further audit.
Backlog Relief
Low-risk proposals with ADV of $1 million or less received before October 1, 2011 will not be selected for audit. DCAA will issue a memorandum to the CO for these proposals.
Mandatory Audit Cycle
Proposals between $100 million and $250 million require a mandatory incurred cost audit once every three years. If no proposal is selected in a three-year cycle, the FAO must select one in the third year.
Duration
This deviation remains in effect until incorporated into the FAR or DFARS or otherwise rescinded.