American Conference Institute’ 4th Advanced Forum on

Government Contract Cost & Pricing

Wednesday, April 17 to Thursday, April 18, 2013
Hilton Crystal City, Washington, DC


7:30 Registration Opens & Continental Breakfast

8:30 Co-Chairs’ Opening Remarks

Nicole J. Owren-Wiest
Wiley Rein LLP (Washington, DC)

Neil Gardner
Vice President, Ethics & Compliance
Orbital Sciences Corporation (Washington, DC)

8:45 KEYNOTE ADDRESS: DCAA Speaks on the Incurred Cost Audit Backlog and Expectations for “Adequate” Submissions

John Shire
Deputy Assistant Director
DCAA Policy & Plans Directorate (Washington, DC)

Benefit from a worthwhile opportunity to hear first-hand insights and ask your questions to a senior DCAA decision-maker. Gain updates on the latest incurred cost audit policies and learn about DCAA's compliance expectations. Attendees will have ample opportunity for Q & A, so come prepared!

9:30 Preparing for Executive Compensation Reviews in the Wake of the J.F. Taylor and Metron Decisions: What Recent Experiences Reveal about DCAA’s Current Statistical Methodology

Patrick J. Higgins
Supervisory Auditor Mid-Atlantic Region – Compensation Team (RST-6)
Defense Contract Audit Agency (Southern New Jersey Office)

John J. Bentz, Jr.
Program Manager, Policy Programs Division (PPD)
DCAA Policy and Plans (Southern New Jersey Office)

Christine Flanagan
Director, Federal Regulatory Compliance
URS Corporation, Corporate Headquarters (San Francisco, CA)

Jimmy J. Jackson
JJ Jackson Consulting, Inc. (Arlington, VA)
Developer of methodology accepted by the ASBCA in decision #56105 (J. F. Taylor, Inc.)
Sole J.F. Taylor Expert Witness in the J.F. Taylor case

Nicole J. Owren-Wiest
Wiley Rein LLP (Washington, DC)

  • Practical impact of ASBCA decisions #56105 (J. F. Taylor, Inc.) and #56624 (Metron, Inc.): What the decisions say about stati sti cal methodology of DCAA reviews
  • Status report on DCAA’s statistical methodology and audit approach post-J.F. Taylor and Metron decisions: How DCAA is now using compensation surveys and defining what is “reasonable”
  • Which aspects of the DCAA Contract Audit Manual on compensation are still in effect
  • How to respond to DCAA audits with these recent decisions in mind
  • What is “reasonable”, and how to prove it vs. what is “unreasonable”
  • Using survey data to support compensation
  • Challenging DCAA methodologies: Examples of successful and unsuccessful rebuttals during compensation reviews
  • Status of Congressional Bills to limit executive compensation: Post-election update and anti cipated initiatives going forward

10:45 Networking Coffee Break

11:00 Defining “Materiality” and “Significant Deficiency”: Key Qualitative and Quantitative Factors

John Brannock
Director of Government Finance and Risk Management
United Launch Alliance (Centennial, CO)

Bradley Waters
KPMG LLP (Tysons Corner, VA)

  • Defining a “significant deficiency”
  • Degree of materiality for identifying a significant deficiency: Quantitative and qualitative factors guiding DCAA’s risk assessment
  • Meeting standards for materiality
  • When deficient subcontractor data can lead to an “inadequacy” finding
  • How DCAA verifies the adequacy of estimating and other systems
  • Key weaknesses to avoid in contractor business systems
  • Applying FAR’s guiding principles under Part 1
  • What leads to payment withholdings and other remedies: Key system inadequacies and deficiencies
  • Recent examples of what is “material”
  • What can lead to additional costs of non-compliance, including lost business and other forms of financial liability
  • What level of documentation is required for compliant business systems

12:00 Recordkeeping and Imaging in an Era of DCAA Backlog: Revisiting How Long to Retain Records, and Whether or Not to Change Your Timeline, Policies and Procedures

Amy Hernandez
Government Compliance Director
Balfour Beatty Construction (Fairfax, VA)
Former Financial Liaison Auditor & Investigative Support Auditor, DCAA

David J. Roll
Vice President-Industry Compliance
ManTech International Corporation (Fairfax, VA)
Former Chief, Technical Audit Services Division, DCAA

Stu Nibley
K&L Gates LLP (Washington, DC)

  • The latest DCAA record retention guidance: DCAA expectations for your retention practices
  • How long to retain supporting records: Pros and cons of using the FAR vs. a longer timeframe
  • Determining how far beyond the FAR requirements to keep records due to DCAA backlog
  • When to change retention practices and shorten your retention period to FAR timeline
  • What happens when you can’t produce old records during an audit
  • Weighing the need for “adequate” support for costs vs. when to destroy supporting records
  • When to keep originals
  • If, when and how DCAA is auditing documents created outside the FAR timeframe
  • How DCAA audits document retention, scanned imaging and hard copy records
  • Record destruction requirements under the FAR

1:00 Networking Luncheon

2:15 Refining Your Incurred Cost Audit Management and Rate Negotiation Strategy: Operating Amid Increased Sampling, Submission and Supporting Documentation Requirements

Kelly G. Peters
Director, Government and Corporate Compliance
BAE Systems Land and Armaments, GTS

Richard Martinez
Vice President, Government Compliance
Serco (Reston, VA)

James W. Thomas
PwC (McLean, VA)

  • How incurred cost audits have become more detailed and complex: How DCAA and DCMA assess reasonableness, allowability, and allocability
  • Incurred cost rate negotiations: Best practices for forecasting rates, closing out contracts and reducing delays
  • Identifying areas of increased risk through internal evaluations of previous audits
  • Recent examples of what can trigger disagreements with DCAA
  • When to re-submit rates, and avoiding disruptions to customers
  • What has triggered penalty, disqualification from direct billing, and civil/ criminal penalties for claiming unallowable costs
  • Working closely with the auditor and Contracting Officer to provide information in a timely, efficient manner

3:30 Networking Coffee Break

3:45 Statute of Limitations under the Contract Disputes Act: When the Clock Starts and Stops Running for DCAA Audits and Disallowed Costs

James J. McCullough
Fried, Frank, Harris, Shriver & Jacobson LLP (Washington, DC)

Paul Pompeo
Arnold & Porter LLP (Washington, DC)

  • Represented Raytheon Company in statute of limitations case, Raytheon Company v. US, 104 Fed. Cl. 327 (2012)
  • When does a claim accrue under the Contract Disputes Act
  • Recent cases, and their practical impact
  • Application of the statute of limitations to contractors’ final indirect rates
  • How DCAA has interpreted the six-year limitation: How far back can DCAA claim costs based on incurred cost proposals more than six years ago?

4:45 Partial Terminations, Deductive Changes and Contract Restructurings: Applying Varying Cost and Termination Principles for Assessing Allowability and Reasonableness VADM

Lou Crenshaw USN (Ret.) CDFM
Grant Thornton LLP (Alexandria, VA)

Josh Tambor
McGladrey LLP (Baltimore, MD)

  • Partial termination for convenience vs. deductive change: Differences in treatment of costs
  • Partial terminations:
    • contrasting partial termination principles vs. full terminations
    • when indirect costs become direct
    • treatment of severance costs by DCAA
    • adjusting accounting systems in response to a partial termination notice
  • Unique considerations for deductive changes
  • Which costs to include in a termination proposal, including:
    • indirect costs and re-classifying them as direct
    • dealing with cost overrun on contracts
    • constructive changes
    • tracking individual costs
    • building up costs (rate and burdens) and the necessary systems to have in place
    • determining overhead rates
  • Common areas of cost disagreements in the context of terminations
  • Negotiating a termination settlement: Successful strategies
  • Cost or pricing data required to support a termination proposal, and how to demonstrate reasonableness
  • How strictly you need to follow FAR cost principles in the context of a restructuring
  • What to do if your program is on the brink: How to work with the U.S. Government to “lean out” a program and manage the impact of cost overrun

5:30 Conference Adjourns

DAY 2 – THURSDAY, APRIL 18, 2013

7:30 Continental Breakfast

8:30 Co-Chairs’ Opening Remarks

8:35 DCAA Access Rights to Your Internal Audit Reports and Workpapers: Status Report on Contractors’ Rights and Obligations Post-DCAA Guidance

John Russell
Assistant General Counsel
Northrop Grumman Corporation (Baltimore, MD)

Deborah Nixon
Partner – Government Contract Services
Ernst & Young LLP (McLean, VA)

Donald J. Carney
Perkins Coie LLP (Washington, DC)

  • Status of Congressional action to overrule Newport News case and grant DCAA statutory authority
  • Recent DCAA guidance and changes to accounting manual
  • What triggers DCAA requests for the reports
  • When an executive summary report is a sufficient response to an access request
  • Recent examples of DCAA requests
  • Managing the legal aspects of granting/denying access requests, including privilege
  • Revisiting your policies regarding government requests for internal audit reports and workpapers
  • Working with your internal audit department on policies for reviewing reports and workpapers
  • Defining the reporting relationships between internal audit and other corporate departments
  • Fostering company-wide adherence to policies
  • Ensuring internal audit departments are clearly documenting objectives, procedures, findings and remediation steps
  • Reducing the risks associated with poorly documented internal audit reports and workpapers

9:45 Q & A with DPAP, DCAA and DCMA: The Latest on Auditor Training Initiatives, the DCAA-DCMA Relationship, Role of the Contracting Officer and Priorities Going Forward

Shay Assad
Director, Defense Pricing
Defense Procurement and Acquisition Policy
U.S. Department of Defense (Washington, DC)

John Shire
Deputy Assistant Director
DCAA Policy & Plans Directorate (Washington, DC)

Ronald J. Youngs
Director, Cost and Pricing Center
Defense Contract Management Agency (Washington, DC)

11:00 Networking Coffee Break

11:15 When Your Estimates and Contract Bids Can Become “False Claims”: How to Strengthen Your Cost and Price Proposal Practices to Reduce New Prosecution, Penalty, Suspension and Debarment Risks

Rodney W. Mateer
Director, Government Contracting Services
Deloitte Financial Advisory Services LLP (McLean, VA)

Joseph D. West
Gibson, Dunn & Crutcher LLP (Washington, DC)

  • Practical impact of the recent 9th Circuit decision in United States ex rel. Hooper v. Lockheed Martin Corp., No. 11-55278: When contract bids or estimates can be “false claims”
  • Defining a “false estimate” in the context of a cost reimbursement contract
  • Adjusting your approach to cost and price proposals in the wake of the Hooper decision
  • When a contractor can be deemed to have acted with “reckless disregard” or “deliberate ignorance”
  • What is a deemed as an honest mistake vs. intentional error
  • Growing, creative government theories to assert false claims, and DOJ success levels for prosecutions and securing settlements for cost or pricing violations
  • Successful defenses
  • How DCAA assesses fraud during an audit and investigates mistakes
  • Presenting evidence of good faith to pre-empt a fraud referral
  • When fraud referrals from DCAA can result in DOJ prosecutions

12:15 Networking Luncheon

1:30 Year-In-Review: Update on CAS and Board Interpretations

Charlie Kerr
Senior Manager, Government Compliance
KBR, North American Government & Logistics (Houston, TX)

Bill Walter
Dixon Hughes Goodman, LLP (Tysons Corner, VA)

  • CAS Activities: Review of CAS pronouncements, updates and decisions over the past year
  • Update on CAS Board agenda, and priorities
  • Impact of cost or pricing data requirements and CAS exemptions on prime contractors, and first and second tier subcontractors
  • Recent trends in B&P and IR&D: Practical impact of IR&D changes by Congress and the Department of Defense, and the impact of reduced Federal spending on B&P costs and the alignment with the Fundamental Requirements of CAS 420
  • Harmonization of CAS with the Pension Protection Act, and how existing pension standards and contract prices are impactes
  • Best practices to ensure that home office allocations comply with the Fundamental Requirements of CAS 403
  • Strategies for small businesses to be proactive in addressing the increased burden associated with transitioning to performing on CAS covered awards

2:30 Verifying Subcontractor Cost or Pricing Compliance at the Pre- and Post-Award Stages: The Scope of Prime and Sub Responsibilities for Ensuring Adequate Data and Price Reasonableness

Kent Sharp
Purchasing Compliance Officer
Quality Audit Manager
Rolls-Royce North America (Indianapolis, IN)

Liz Novak
Director, Regulatory Compliance
Booz Allen Hamilton, Inc. (Herndon, VA)

  • The scope of a prime contractor’s obligation to conduct cost or price analyses of subcontractor proposals, and key pitfalls to avoid
  • Subcontractor responsibilities to certify and submit cost or pricing data
  • Expected level of prime monitoring of subcontractor compliance at the pre- and post-award stages
  • To what extent a prime contractor can access a subcontractor’s records, including the status of their accounting systems, and when a subcontractor’s denial of access to records can be justified
  • When and how to request assistance from the contracting officer to ensure a subcontractor’s compliance with CAS and FAR
  • Applying global indemnity clauses and contractual audit rights: To what extent a prime needs to emulate DCAA audit processes, and how to meet DCAA expectations
  • Distinction between “price analysis” vs. “cost analysis”, and what is required for each
  • Ensuring that your purchasing system processes can identify responsible prospective subcontractors and vendors
  • Key pitfalls to avoid in evaluating “price reasonableness” of subcontractor cost or pricing data
  • Extent to which DCAA requests subcontractor cost or pricing data that is not required by regulation
  • Negotiating with a contracting officer regarding the scope of required cost or pricing data
  • Monitoring and tracking overhead, G & A and other charges over the life of a subcontract

3:30 Networking Coffee Break

3:45 Forward Pricing Rate Proposals: How to Comply with New Criteria for Forecasted Data, BOEs and Adequacy

Steve Trautwein
Deputy Director
Cost and Pricing Center
Defense Contract Management Agency (Washington, DC)

Nicole M. Mitchell
Aronson LLC (Rockville, MD)

  • New criteria for forward pricing rate proposals- more required detail for forecasting- how to manage rates by pool
  • How audits of forward pricing rate proposals are conducted, including the use of proposal walk-throughs
  • Requisite level of detail in a forward pricing rate proposal, and how much is too much
  • What triggers findings of inadequacies: How auditors have determined if the data provided adequately supports the contractor’s proposed rates
  • Completing forward pricing rate negotiations in a timely manner
  • How auditors have determined if the data provided adequately supports the contractor’s proposed rates
  • Requirements for cost-plus, time & material and sub-tier proposals
  • Computing and applying indirect rates, including cost breakdowns
  • Supporting the reasonableness of the rates under FAR Part 15
  • Completing forward pricing rate negotiations in a timely manner
  • Close-out proposal requirements
  • Coordinating and ensuring your proposals are consistent

4:45 Evaluating Your Audit Readiness: Conducting an Internal Assessment to Correct Internal Control and Compliance Weaknesses before It’s Too Late

Terry A. Carlson
Managing Director
Capital Edge Consulting, Inc. (Reston, VA)

Josh Tambor
McGladrey LLP (Baltimore, MD)

  • Who should perform the assessment: Building the most effective assessment team
  • Selecting frequency and scope of internal reviews
  • Who should conduct the assessment: When to use in-house compliance and legal groups vs. outside counsel and forensic accountants
  • How to structure the internal assessment, including designating an internal auditor to each system
  • Documenting information and rationale for your risk assessment approach
  • How to work effectively with the internal audit department
  • Best practices for identifying weak internal controls
  • Protecting attorney-client privilege: When and how to assert privilege
  • Identifying and implementing corrective measures, including tightened systems and targeted training
  • Updating policies and procedures for CAS, FAR and DFARS compliance
  • Recordkeeping requirements
  • Sharing the findings: Determining whether or not to disclose to DCAA and DCMA, and how

5:30 Conference Concludes