Auditor Strikes Back: The Proof is in the Pudding – Defending Professional & Consultant Services Cost

March 29, 2017

As we reported in October, the Defense Contract Audit Agency (“DCAA”) Contract Audit Manual (“CAM”) was recently updated. One of the 13 areas of cost updated related to the allowability of professional & consultant costs. This topic is covered in Chapter 7 of both the previous version and new version of the CAM.

The new guidance provides more insight into the evidence required to defend the costs incurred by the contractor. The evidence required by DCAA is to help prove the true nature of the professional services costs and clear up any “gray area” or concerns. Specifically, the guidance states contractors need to retain the following to be considered allowable:

1)    Details of all agreements.

a.    An agreement that explains what the consultant will be doing for the contractor.

2)    Invoices or billings.

a.    A copy of the bill for the actual services rendered. This should include evidence as to the time accumulated for the work and nature of the services provided to determine what was done in exchange for the payment, and that the terms of the agreement were satisfied. This documentation does not need to be included on the actual invoice and can be supported by other evidence provided by the contractor.

3)    Consultant work product and related documents.

a.    Explanation of what the consultant accomplished for the fees paid; this could be information on the invoice, a drawing, a power point presentation, final deliverable or some other evidence of the service provided.

Retention of all three documentation types is essential as DCAA will take the position that the costs are unallowable without the supporting documentation even if it is clear that the work was performed. What used to be an unsupported cost is now identified as QUESTIONED.

Over the next few months, Cherry Bekaert’s Government Contractor Services Group will continue to provide information regarding the updated areas of cost within the CAM. If you have any questions, please do not hesitate to contact one of our experienced GovCon professionals for assistance.