PGI Part 242 - CONTRACT

ADMINISTRATION

PGI 242.002 Interagency agreements.

PGI 242.3 -CONTRACT ADMINISTRATION OFFICE FUNCTIONS

PGI 242.302 Contract administration functions.

PGI 242.302 (a)(S-72) —Surveillance of the contractors implementation of the Synchronized

Predeployment and Operational Tracker (SPOT)

PGI 242.302 (a)(S-75) —Monitoring contractor costs

PGI 242.7 -INDIRECT COST RATES

PGI 242.705 Final indirect cost rates.

PGI 242.705-1 Contracting officer determination procedure.

PGI 242.12 -NOVATION AND CHANGE-OF-NAME AGREEMENTS

PGI 242.1203 Processing agreements.

PGI 242.70 - CONTRACTOR BUSINESS SYSTEMS

PGI 242.7000 Contractor business system deficiencies.

PGI 242.71 -VOLUNTARYREFUNDS

PGI 242.7100 General.

PGI 242.72 -CONTRACTOR MATERIAL MANAGEMENT AND ACCOUNTING SYSTEM

PGI 242.7203 Review procedures.

PGI 242.73 -CONTRACTOR INSURANCE/PENSION REVIEW

PGI 242.7303 Responsibilities.

PGI 242.74 -TECHNICAL REPRESENTATION AT CONTRACTOR FACILITIES

PGI 242.7401 Procedures.

PGI 242.75 -CONTRACTOR ACCOUNTING SYSTEMS AND RELATED CONTROLS

PGI 242.7502 Policy.

Parent topic: PGI Defense Federal Acquisition Regulation
PGI 242.002 Interagency agreements.

(S-70)(iii) Upon receipt of a request for contract administration services, the CCP shall—

(A) Determine whether the request is from a friendly foreign government or an international agency

in which the United States is a participant;

(B) Determine whether the services are consistent with the DoD mutual security program policies

(the Assistant Secretary of Defense (International Security Affairs) is the source of information for

questions as to the eligibility of foreign governments to receive services);

(C) Ensure that the reimbursement arrangements are consistent with DFARS 242.002(b);

(D) Coordinate with appropriate contract administration offices to determine whether DoD can

provide the services;

(E) Notify the request or that the request is accepted, or provide reasons why it cannot be accepted;

(F) Distribute the acquisition documents and related materials to contract administration offices;

and

(G) Receive statements of costs incurred by contract administration offices for reimbursable services

and forward them for billing to the Security Assistance Accounting Center.

PGI 242.3 -CONTRACT ADMINISTRATION OFFICE

FUNCTIONS

PGI 242.302 Contract administration functions.

(a)(13)(B)(1) For contracts assigned to DCMA for contract administration, designate as the payment

office—

(i) The cognizant Defense Finance and Accounting Service (DFAS) payment office as specified in the

Federal Directory of Contract Administration Services Components, available at

https://piee.eb.mil/pcm/xhtml/unauth/index.xhtml , for contracts funded with DoD funds;

(ii) The department or agency payment office, if authorized by defense financial management

regulations or if the contract is funded with non-DoD funds; or

(iii) Multiple payment offices under paragraphs (a)(13)(B)(1)(i) and (ii) of this section, if the contract

is funded with both DoD and non-DoD funds.

(2) For contracts not assigned to DCMA, select a payment office or offices under department/agency

procedures.

(3) When the Governmentwide commercial purchase card is the method of payment for a contract or

order, enter “CRCARD” in the payment office code block.
(56) Assignment of a Government flight representative (GFR) may require execution of a secondary

contract administration delegation, which is used to transfer contract administration responsibilities

(see FAR 42.302(a)) from one contract administration office to another office or command.

Secondary contract administration delegations are appropriate when, for example, contract work is

performed at locations geographically separated from the contract administration office. In lieu of

transferring contract administration responsibility through a secondary contract administration

delegation, a GFR from one unit may be delegated GFR responsibility from an outside contract

administration organization that has retained contract administration responsibility. This is

accomplished through the use of a formal letter of agreement functionally assigning the GFR to the

outside contract administration organization for the limited purpose of performing contract

administration under FAR 42.302(a)(56).

PGI 242.302 (a)(S-72) —Surveillance of the contractors implementation of the

Synchronized Predeployment and Operational Tracker (SPOT)

(1) For suggested criteria to assess a contractor’s implementation of SPOT, see SPOT Compliance

Checklist at http://www.acq.osd.mil/log/PS/ctr_mgt_accountability.html.

(2)(i) For visibility into certain discrepant records in SPOT, use the following audit compliance

reports (ACRs) available via the Total Operational Picture Support System (TOPSS):

(A) Deployment Status Report (ACR–01). Lists all deployment requests that were submitted less than

10 days prior to the estimated deployment start date.

(B) In-Theater Arrival Date (ITAD) Report (ACR–02). Lists all records where the ITAD was entered

more than one day after the actual ITAD.

(C) Primary Duty Station Report (ACR–03). Lists all deployments where the primary duty station

arrival date was entered more than three days after the actual duty station arrival date.

(D) Closeout Deployment Report (ACR–05). Lists all deployments where the actual deployment end

date was entered more than three days after the actual deployment end date.

(E) Open/Blank In-Theater Arrival Date (ITAD) Report (ACR– 06). Lists where the ITAD was not

entered into SPOT within 15 days after the estimated deployment start date.

(ii) Contracting Officers shall obtain a TOPSS account by following the TOPPS PKI Certificate

Registration instructions at http://www.acq.osd.mil/log/PS/ctr_mgt_accountability.html.

(3) Contracting Officers shall–

(i) Take immediate action to notify contractors of non-compliance with SPOT (e.g., issue one of the

delinquency notices identified at FAR 49.607).

(ii) Document performance deficiencies related to SPOT non-compliance that will be relevant to past

performance evaluations for future contract opportunities in accordance with FAR Subpart 42.15.

PGI 242.302 (a)(S-75) —Monitoring contractor costs

(a) Scope.
This section provides guidelines for—

(1) Monitoring the policies, procedures, and practices used by contractors to control direct and

indirect costs related to Government business; and

(2) Eliminating duplication in Government monitoring of contractors' costs.

(b) Policy.

Effective management of contract costs is essential to the efficient and economical performance of

Government contracts. Contractors are responsible for managing and controlling their direct and

indirect costs; however, DoD must systematically monitor the management of contractors' costs to

ensure these responsibilities are met.

(c) Responsibilities.

(1) Departments and agencies.

(i) Departments and agencies should conduct a formal program of Government monitoring of

contractor policies, procedures, and practices for controlling costs (cost monitoring) at contractor

locations where—

(A) Sales to the Government, as determined by the contract administration offices, during the

contractor's next fiscal year are expected to exceed $200 million in contracts—

(1) Based on costs incurred; or

(2) Negotiated based on projected costs.

(B) The contract administration office determines the cost benefits derived from monitoring the

individual contractors with less than $200 million in other than firm fixed-price and fixed-price with

economic price adjustment contracts to be warranted; or

(C) Significant Government business exists and is specifically directed by the head of the contracting

activity.

(ii) Departments and agencies are responsible for designating the cost monitoring sites and

discontinuing them when the criteria are no longer met.

(2) Contract administration offices.

(i) Contract administration offices (CAOs), which are designated as cost monitoring sites, are

responsible for—

(A) Assigning a cost monitoring specialist (CMS) to conduct the program. The CMS may be the

administrative contracting officer (ACO) or any other CAO employee whose normal function relates

to evaluation of contractor performance.

(B) Reviewing and approving the cost monitoring plan for the next fiscal year and the cost

monitoring report from the concluding fiscal year.

(ii) The ACO is responsible for—

(A) In the absence of a CMS, ensuring completion of the CMS duties referenced in paragraph (iii) of
this section;

(B) Considering review results in direct and indirect rate negotiations and contract negotiations;

(C) Ensuring the contractor implements corrective action recommended in the cost monitoring

review reports; and

(D) Resolving disputes with the contractor regarding cost monitoring review findings, conclusions,

or recommendations.

(iii) The CMS is responsible for managing the cost monitoring effort within the CAO and

coordinating planned effort with the contract auditor. This includes—

(A) Preparing and maintaining an annual written cost monitoring plan for reviewing contractor

operations (see paragraph (d));

(B) Maintaining an inventory of planned and completed CAO, Defense Contract Audit Agency

(DCAA), and other Government reviews and audits in order to mitigate duplication of efforts;

(C) Monitoring contractor direct and indirect rates and factors during the year, making comparisons

to historical actual costs and to contractor proposed or negotiated forward pricing rates and factors,

and providing rate recommendations based on their analysis;

(D) Performing approved functional reviews of contractor activities, to include assisting Government

personnel in obtaining access to pertinent contractor policies, procedures, and related data;

(E) Advising the ACO and CAO management of corrective action recommended to improve inefficient

or uneconomical contractor conditions, policies, or practices, to include preparing, for the ACO's

consideration when appropriate, a Notice of Intent to Disallow or Not Recognize Costs;

(F) Continuously tracking the status of recommendations made to the contractor concerning cost

performance stemming from all Government reports;

(G) Keeping the contracting officer, program manager, contract auditor, and other responsible

officials informed of issues affecting economical contract performance;

(H) Maintaining current organizational charts of the operations identifiable to the contractor's

functional centers of its cost control functions; and

(I) Preparing a final cost monitoring report summarizing all of the cost monitoring functions

performed during the Government fiscal year.

(3) Audit and other organizations.

(i) The contract auditor is responsible for assisting the CMS by performing the portion of cost

monitoring plan and related analyses that requires access to the contractor's financial and

accounting records supporting the cost or pricing data. (This does not preclude the program

manager, contracting officer, ACO, CMS, or other representatives from reviewing contractor records

and data necessary to the performance of their duties.)

(ii) Audit organizations, program offices, contracting activities, and any other DoD organizations

with responsibility for reviewing contractor operations for the purpose of monitoring contractor

policies, procedures, and practices to control costs, shall submit to the CMS—
(A) An annual schedule of planned and tentative visits, oversight reviews, and audits to be performed

at cost monitoring locations; and

(B) Revisions to scheduled visits or audit plans, within 30 days of issuance.

(d) Annual cost monitoring plan.

(1) Description.

The annual cost monitoring plan is a strategy for monitoring, reviewing, negotiating, and approving

contractor’s direct and indirect rates, business systems, corrective actions to deficient processes,

and cost controls by coordinating the capabilities of the CAO, DCAA, and other Government

representatives in an effort to reduce unreasonable, erroneous, or improper costs to Government

contracts.

(2) Contents of the plan.

(i) The plan should—

(A) Provide coverage for each significant activity of the contractor over a period of five to ten years;

(B) Provide coverage for contractor future years dependent on the period of forward pricing years

the contractor proposes and the expected length of executed Government programs;

(C) Be updated to reflect changed conditions as the year progresses; and

(D) Be consistent with the approved schedule, and any deviations should be explained in the final

cost monitoring report.

(ii) The plan must identify the organizations having the primary responsibility for performing the

reviews.

(iii) The plan should include reviews required by the ACO and DFARS. Reviews will be performed by

the assigned organization during the coordination phase of the cost monitoring plan, except when

DFARS makes a specific organizational assignment. For example, Subpart 244.301 makes the ACO

responsible for leading contractor purchasing system reviews and 215.407-5 -70(c)(3) makes the

DCAA auditor responsible for leading estimating system reviews on behalf of the ACO.

(3) Selecting the activities.

(i) The CAO selects the activities for the cost monitoring plan. DCAA will complete its annual audit

plan independently and communicate the approved audit plan to ensure the most effective

monitoring approach. To ensure all Government interests are considered in the selection, the CMS

should invite CAO, DCAA, and other interested Government representatives to a meeting before the

beginning of each Government fiscal year to identify and prioritize the areas to be reviewed during

the coming year, to ensure a fully communicated Government cost monitoring plan.

(ii) The selection team should consider the following data and assign primary responsibility in the

selection process—

(A) Contractor forecasts for the coming years supporting direct and indirect costs by functional

centers of its cost control system and the results of the latest survey performed of such systems;

(B) Organizational charts for the contractor's entire operation;
(C) Outline of the contractor's accounting system showing the flow of costs by function;

(D) Determination of Government participation in the dollars attributable to the operations and cost

accounts under consideration;

(E) List of recent reviews and audits performed by CAO, DCAA, and other Government

representatives; list should show outstanding weakness and deficiencies in the contractor's

operations that will be considered for follow-up reviews or audits;

(F) Evidence of contractor under or over staffing;

(G) Significant departures from established contractor productivity standards;

(H) Major financial variances from forecasts in prior years;

(I) Evidences of idle or under-used capacity;

(J) Any visits or audit plans scheduled by other Government organizations and identified to the CMS;

and

(K) Any other significant information or business changes which could have an adverse effect or

cause a significant change to on the contractor’s management of contract costs.

(4) Prioritizing the plan.

(i) The CMS should prioritize the plan to review contractor activity by considering—

(A) The extent of competition in awarded contracts;

(B) The contractor's operating methods;

(C) The nature of the work;

(D) Acquisition cycle stage;

(E) Business and industry practices;

(F) Types of contracts involved;

(G) Degree of technical and financial risk;

(H) Previously reported findings and deficiencies;

(I) Ratio of Government/commercial work;

(J) Significant changes in the level (dollars) of the contractor’s work and backlog; and

(K) The extent performance efficiencies have been previously demonstrated.

(5) Plan approval and submission.

(i) The local DCAA office will provide an approved annual audit plan to the ACO within 30 days after

the first day of each fiscal year.

(ii) The CMS will submit an adequate cost monitoring plan to the head of the local CAO within 45
days after the first day of each fiscal year.

(iii) The head of the local CAO, or designee, will approve the annual cost monitoring plan within 15

days of an adequate submission. The head of the local CAO will ensure that adequate coordination of

the cost monitoring plan was performed with the DCAA and other responsible Government

representatives.

(6) Reviews and analysis.

(i) Perform functional reviews and audits as scheduled in accordance with the cost monitoring plan.

(ii) Hold interim meetings with the contractor as necessary to clarify information. Hold an exit

conference at the conclusion of reviews.

(iii) Prepare reports at the conclusion of reviews. The ACO will determine whether a Government

review or audit report will be provided to a contractor based on specific regulatory requirements or

the impact to pending negotiations or litigation.

(iv) Prepare periodic reports on the results of the CMS analysis and monitoring of the contractors

rates and factors, which should address the causes for significant deviations from historical and

negotiated forward pricing rates and factors.

(e) Annual cost monitoring report.

(1) Description.

The annual cost monitoring report is a culmination of the Government activities performed during

the fiscal year in an effort to conduct and maintain a formal monitoring program of contractor

policies, procedures, and practices for controlling costs charged to Government contracts.

(2) Contents of the report.

(i) The report should—

(A) Provide a brief introduction of the contractor and the products it provides to the Government;

(B) Summarize each review and audit completed during the reporting period along with any

deviations from the cost monitoring plan;

(C) Highlight open deficiencies, corrected deficiencies, and any newly reported deficiencies; and

(D) Include the current status of all final, billing, and forward pricing rates.

(ii) The annual cost monitoring report is the primary responsibility of the CAO. Incorporate the final

DCAA audit reports by summary and reference.

(3) Report approval and submission.

(i) The head of the local CAO, or designee, will approve the annual cost monitoring report within 60

days of the end of the Government fiscal year.

(ii) A copy of the approved report will be provided to the head of the local DCAA office within 15

days of approval.
PGI 242.7 -INDIRECT COST RATES

PGI 242.705 Final indirect cost rates.

PGI 242.705-1 Contracting officer determination procedure.

(a) Applicability and responsibility.

(1) When negotiations are conducted on a coordinated basis, individual administrative contracting

officers are responsible for coordinating with the corporate administrative contracting officer to

ensure consistency of cost determinations.

PGI 242.12 -NOVATION AND CHANGE-OF-NAME

AGREEMENTS

PGI 242.1203 Processing agreements.

(1) For contracts awarded by the military departments, provide notices to the following addressees

instead of individual contracting or contract administration offices:

Army usarmy.pentagon.hqda-asa-alt.list.saal-ps-staff@army.mil

Navy usn.pentagon.asstsecnavrdadc.mbx.pabt@us.navy.mil

Air Force AFMC.PK.Workflow-02@us.af.mil

National Aeronautics and Space

Administration

National Aeronautics and Space Administration

ATTN: Office of Procurement, Program Operations Division

300 E Street, SW

Washington, DC 20546-0001

(2) Lists of affected contracts accompanying a notice of successor in interest should include the

information at FAR 42.1204(e)(2).

(3) Lists of affected contracts accompanying a notice of a name change should include the

information at FAR 42.1205(a)(3).

(4) On notices sent to the addressees in paragraph (1) of this section, include a consolidated list for

all subordinate contracting offices of the addressee.

(5) Before making any substantial alterations or additions to the novation agreement format at FAR

42.1204(i), coordinate with the addressees in paragraph (1) of this section that have contracts with
the contractor. Resolve any objections before executing the agreement.

(6) If the National Aeronautics and Space Administration (NASA) wants a separate agreement with

the contractor, continue to process the agreement only for DoD.

(7) In addition to the requirements of FAR 42.1203(g) and PGI 204.201 , make distribution to—

(i) The physical address or a copy to the email addresses in paragraph (1) of this section; and

(ii) The appropriate Military Surface Deployment and Distribution Command area command for

agreements affecting contracts and basic agreements for storage and related services for personal

property of military and civilian personnel — two copies:

Commander

Eastern Area

Military Surface Deployment

and Distribution Command

ATTN: MTE-LO

Bayonne, NJ 07002

Commander

Western Area

Military Surface Deployment

and Distribution Command

Oakland Army Base

ATTN: MTW-LO

Oakland, CA 94626

(8) In addition to the distribution requirements of FAR 42.1203(h)(4) and PGI 204.201 –

(i) Send two copies to the physical address or a copy to the email addresses in paragraph (1) of this

section. The list of contracts may be confined to those issued by that department.

(ii) Do not send copies to NASA or the commands in paragraph (7)(ii) of this section. They will issue

their own modifications.

(9) Report the novation agreement or name change modification for each of the affected contracts to

FPDS (see PGI 204.606 (4)(iv) and (v)).

(10) The contracting officer responsible for execution of a change-of-name agreement (see FAR

Subpart 42.12) must submit the agreement to DLIS-SBB. If there are no current contracts, each

contracting and contract administration office receiving notification of changes from the commercial

entity must forward a copy of the change notice annotated with the CAGE code to DLIS-SBB unless

the change notice indicates that DLIS-SBB already has been notified.

PGI 242.70 - CONTRACTOR BUSINESS SYSTEMS

PGI 242.7000 Contractor business system deficiencies.

(b) Determination to withhold payments. The following are sample formats for written notifications

of contracting officer determinations to initiate payment withholding, reduce payment withholding,

and discontinue payment withholding in accordance with the clause at DFARS 252.242-7005,

Contractor Business Systems:
(1) Use this sample format for written final determinations to implement payment withholding:

Payment Withholding

(i) The purpose of this final determination is to disapprove your [identify the contractor business

system(s)] and implement payment withholding per the terms of the DFARS clause at 252.242-7005,

Contractor Business Systems.

(ii) It is my final determination that XXX System(s) contains the following significant deficiencies:

—[list all significant deficiencies]

(iii) Effective immediately, five percent (or a lesser percentage if five percent will exceed the

withhold limitations in the DFARS clause at 252.242-7005) of each request for payment under the

contracts in Attachment A will be withheld as described below for significant deficiencies in XXX

system. Upon receipt of an acceptable corrective action plan and my determination that this

corrective action plan is being effectively implemented, I will issue a notification with respect to

reducing the percentage being withheld to two percent until I determine that all significant

deficiencies, as identified in this final determination, have been corrected. Failure to follow the

accepted corrective action plan will result in an increase in the percentage withheld against each

payment under this contract to five percent (or a lesser percentage if five percent will exceed the

withhold limitations in DFARS 252.242-7005).[Repeat this paragraph, as necessary, if multiple

withholds are being applied to multiple systems in accordance with 252.242-7005( d)]

(iv) For payments under cost, labor-hour, or time-and-material contracts: The Contractor shall apply

a five percent (or a lesser percentage if five percent will exceed the withhold limitations in DFARS

252.242-7005) withhold to the amount being billed and prepare a cost voucher in Wide Area

WorkFlow (WAWF) for the net amount due. The Contractor shall show the amount withheld on the

current billing, as well as the cumulative amount withheld to date on this contract in accordance

with DFARS clause 252.242-7005, in the Comments block of the Miscellaneous Info Tab in WAWF.

(v) For progress payments: The Contractor shall prepare the request in WAWF without applying any

withhold percentage. The Contracting Officer will reduce the approved amount by five percent (or a

lesser percentage if five percent will exceed the withhold limitations in DFARS 252.242-7005) and

record the amount being withheld on the progress payment request, as well the cumulative amount

withheld on this contract in accordance with DFARS clause 252.242-7005, in the Comments block of

the Miscellaneous Info Tab in WAWF.

(vi) For performance-based payments: The Contractor shall prepare the request in WAWF without

applying any withhold percentage to the performance based payment event schedule amounts. The

Contracting Officer will reduce the amount approved by five percent (or a lesser percentage if five

percent will exceed the withhold limitations in DFARS 252.242-7005) and record the amount being

withheld on the performance based payment as well as the cumulative amount withheld on this

contract in accordance with the DFARS clause 252.242-7005 in the Comments block of the of the

Miscellaneous Info Tab in WAWF.

(2) Use this sample format for determinations to reduce payment withholding:

Reduction of Temporary Payment Withholding

(i) The purpose of this determination is to reduce the payment withholding percentage per the terms

of the DFARS clause at 252.242-7005, Contractor Business Systems, as a result of receiving an

acceptable corrective action plan from the contractor, dated YYYY/MM/DD, for resolving deficiencies
in its XXX system(s) as identified in the Contracting Officer’s determination, dated YYYY/MM/DD.

This reduction is prospective and previous amounts withheld will not be reduced or released at this

time.

(ii) Effective immediately, two percent of each request for payment under this contract will be

withheld as described below. The two percent being withheld will remain in effect until the

Contracting Officer determines that the Contractor has corrected all significant deficiencies as

directed by the Contracting Officer’s determination. Failure to follow the accepted corrective action

plan will result in an increase in the percentage withheld against each payment under this contract

to five percent (or a lesser percentage if five percent will exceed the withhold limitations in DFARS

252.242-7005).

(iii) For payments under cost, labor-hour, or time-and-material contracts: The Contractor shall apply

a two percent withhold to the amount being billed and prepare a cost voucher in Wide Area

WorkFlow (WAWF) for the net amount due. The Contractor shall show the amount withheld on the

current billing, as well as the cumulative amount withheld to date on this contract in accordance

with DFARS clause 252.242-7005, in the Comments block of the Miscellaneous Info Tab in WAWF.

(iv) For progress payments: The Contractor shall prepare the request in WAWF without applying any

withhold percentage. The Contracting Officer will reduce the approved amount by two percent and

record the amount being withheld on the progress payment request, as well the cumulative amount

withheld on this contract in accordance with DFARS clause 252.242-7005, in the Comments block of

the Miscellaneous Info Tab in WAWF.

(v) For performance-based payments: The Contractor shall prepare the request in WAWF without

applying any withhold percentage to the performance-based payment event schedule amounts. The

Contracting Officer will reduce the amount approved by two percent and record the amount being

withheld on the performance-based payment as well as the cumulative amount withheld on this

contract in accordance with the DFARS clause 252.242-7005 in the Comments block of the of the

Miscellaneous Info Tab in WAWF.

(3) Use the sample format below if payment withholding is discontinued pending receipt of auditor

or functional specialist verification and based on evidence that the Contractor has corrected all

significant deficiencies, in accordance with DFARS clause 252.242-7005, Contractor Business

Systems:

Discontinuation of Payment Withholding Pending Verification

(i) The purpose of this determination is to approve your [identify system(s)] pending verification,

discontinue the payment withhold as identified in the Contracting Officer’s determination dated

YYYY/MM/DD, and release previous amounts withheld on the contracts in Attachment A, in

accordance with DFARS clause 252.242-7005, Contractor Business Systems.

(ii) The discontinuation of the payment withhold is made pending receipt of verification and based on

my review of the evidence submitted by the Contractor that all the Contractor’s system(s)

deficiencies identified in the Contracting Officer’s determination dated YYYY/MM/DD have been

corrected.

(iii) The Contractor is authorized to submit a bill in the amount of $XXXXXXXX. The billed amount

should be submitted on the same type of invoice as the withhold was originally taken, as

appropriate.

(4) Use the sample format below if payment withholding is discontinued after auditor or functional
specialist verification that the Contractor has corrected all significant deficiencies, in accordance

with DFARS clause 252.242-7005, Contractor Business Systems:

Discontinuation of Payment Withholding

(i) The purpose of this determination is to approve your [identify system(s)], discontinue the payment

withhold as identified in the Contracting Officer’s determination dated YYYY/MM/DD, and release

previous amounts withheld on the contracts in Attachment A, in accordance with DFARS clause

252.242-7005, Contractor Business Systems.

(ii) The discontinuation of the payment withhold is made based on verification that all the

Contractor’s system(s) deficiencies identified in the Contracting Officer’s final determination dated

YYYY/MM/DD have been corrected.

(iii) The Contractor is authorized to submit a bill in the amount of $XXXXXXXX. The billed amount

should be submitted on the same type of invoice as the withhold was originally taken, as

appropriate.

PGI 242.71 -VOLUNTARYREFUNDS

PGI 242.7100 General.

(1) A voluntary refund may be solicited (requested by the Government) or unsolicited.

(i) Generally, request voluntary refunds only after determining that no contractual remedy is readily

available to recover the amount sought.

(ii) Acceptance of unsolicited refunds does not prejudice remedies otherwise available to the

Government.

(2) Before soliciting a voluntary refund or accepting an unsolicited one, the contracting officer

should have legal counsel review the contract and related data to—

(i) Confirm that there are no readily available contractual remedies; and

(ii) Advise whether the proposed action would jeopardize or impair the Government's rights.

(3) Request voluntary refunds only when—

(i) The contracting officer concludes that the contractor overcharged under a contract, or

inadequately compensated the Government for the use of Government-owned property, or

inadequately compensated the Government in the disposition of contractor inventory; and

(ii) Retention of the amount in question by the contractor or subcontractor would be contrary to

good conscience and equity.

(4) Do not solicit voluntary refunds without approval of the head of the contracting activity, or as

provided in department/agency regulations.

(5) Voluntary refunds may be requested during or after contract performance.
(6) A contract modification, rather than a check, is the preferred means of effecting a solicited or

unsolicited refund transacted before final payment.

(i) For modifications, adjust the price for the refund and credit the refund to the applicable

appropriation cited in the contract.

(ii) For checks—

(A) Advise the contractor to—

(1) Make the check payable to the agency that awarded the contract;

(2) Forward the check to the contracting officer or, when the contract is assigned to another office

for administration, to that office; and

(3) Include a letter with the check—

(i) Identifying it as a voluntary refund;

(ii) Giving the contract number involved; and

(iii) Where possible, giving the appropriation and account number to be credited; and

(B) Forward the check to the office responsible for control of funds.

PGI 242.72 -CONTRACTOR MATERIAL MANAGEMENT AND

ACCOUNTING SYSTEM

PGI 242.7203 Review procedures.

(c) Disposition of findings.

(2) Initial determination.

(ii)(A) Within 10 days of receiving the report, if the contracting officer makes a determination that

there is a significant deficiency, the contracting officer should provide an initial determination of

deficiencies and a copy of the report to the contractor and require the contractor to submit a written

response.

(C) Evaluation of contractor's response. Within 30 days of receiving the contractor’s response, the

contracting officer, in consultation with the auditor or cognizant functional specialist, should

evaluate the contractor’s response and make a final determination.

(3) Final Determination.

(ii)(A) Monitoring contractor's corrective action. The contracting officer, with the assistance of the

auditor, shall monitor the contractor's progress in correcting deficiencies. If the contractor fails to

make adequate progress, the contracting officer shall take whatever action is necessary to ensure

that the contractor corrects the deficiencies. Examples of actions the contracting officer can take

are: disapprove the contractor's MMAS; bringing the issue to the attention of higher level
management; implementing or increasing the withholding in accordance with 252.242-7005,

Contractor Business Systems, if applicable; and recommending non-award of potential contracts.

(B) Correction of significant deficiencies.

(1) When the contractor notifies the contracting officer that the contractor has corrected the

significant deficiencies, the contracting officer shall request that the auditor review the correction to

determine if the deficiencies have been resolved.

(2) The contracting officer shall determine if the contractor has corrected the deficiencies.

(3) If the contracting officer determines the contractor has corrected the deficiencies, the

contracting officer's notification shall be sent to the auditor; payment office; appropriate action

officers responsible for reporting past performance at the requiring activities; and each contracting

and contract administration office having substantial business with the contractor as applicable.

PGI 242.73 -CONTRACTOR INSURANCE/PENSION REVIEW

PGI 242.7303 Responsibilities.

(1) The ACO is responsible for—

(i) Determining the need for a CIPR in accordance with the procedures at DFARS 242.7302;

(ii) Requesting and scheduling the reviews with the appropriate DCMA activity;

(iii) Notifying the contractor of the proposed date and purpose of the review, and obtaining any

preliminary data needed by the DCMA insurance/pension specialist or the DCAA auditor;

(iv) Reviewing the CIPR report, advising the contractor of the recommendations contained within the

report, considering contractor comments, and rendering a decision based on those

recommendations;

(v) Providing other interested contracting officers copies of documents related to the CIPR;

(vi) Ensuring adequate follow-up on all CIPR recommendations; and

(vii) Performing contract administration responsibilities related to Cost Accounting Standards

administration as described in FAR Subparts 30.2 and 30.6.

(2) The DCMA insurance/pension specialist is responsible for—

(i) Issuing a technical report on the contractor’s insurance/pension plans for incorporation into the

final CIPR report based on an analysis of the contractor’s pension plans, insurance programs, and

other related data;

(ii) Leading the team that conducts the review. Another individual may serve as the team leader

when both the insurance/pension specialist and that individual agree. The team leader is responsible

for—

(A) Maintaining complete documentation for CIPR reports;
(B) To the extent possible, resolving discrepancies between audit reports and CIPR draft reports

prior to releasing the final CIPR report;

(C) Preparing and distributing the final CIPR report;

(D) Providing the final audit report and/or the insurance/pension specialist’s report as an attachment

to the CIPR report; and

(E) Preparing a draft letter for the administrative contracting officer's use in notifying the contractor

of CIPR results; and

(iii) When requested, advising administrative contracting officers and other Government

representatives concerning contractor insurance/pension matters.

(3) The DCAA auditor is responsible for—

(i) Participating as a member of the CIPR team or serving as the team leader (see paragraph (2)(ii)

of this section);

(ii) Issuing an audit report for incorporation into the final CIPR report based on an analysis of the

contractor’s books, accounting records, and other related data; and

(iii) Performing contract audit responsibilities related to Cost Accounting Standards administration

as described in FAR Subparts 30.2 and 30.6.

PGI 242.74 -TECHNICAL REPRESENTATION AT

CONTRACTOR FACILITIES

PGI 242.7401 Procedures.

(1) When the program, project, or system manager determines that a technical representative is

required, the manager shall issue a letter of intent to the contract administration office commander

listing the assignment location, starting and ending assignment dates, technical duties assigned,

delegated authority, and support required from the contract administration office. Any issues

regarding the assignment of a technical representative should be resolved promptly. However, final

decision on the assignment remains with the program manager. Issues regarding the assignment of

technical duties that cannot be resolved between the program office and the on-site DoD contract

administration office will be elevated.

(2) The program, project, or system manager will furnish the designated technical representative a

letter of assignment of delegated technical duties, with copies to the contract administration office,

the contracting officer, and the contractor, at least 30 days before the assignment date (or

termination date). Any changes to the requirements of the assignment letter will be made by a new

letter of intent and processed in accordance with paragraph (1) of this section.

(3) The contract administration office normally provides the technical representative with office

space, equipment, supplies, and part-time clerical support. The program, project, or system manager

provides supervision, technical direction, administrative services (e.g., pay, travel, maintenance of

personnel records), and, when required, full-time clerical support.
(4) The program manager or designee and the contract administration office, at the local level, shall

negotiate a memorandum of agreement (MOA) delineating their functional administrative

interrelationships, with annual updates as necessary. The agreements may be included in an existing

MOA, if one exists, or as a separate MOA.

(5) The technical representative shall keep the contract administration office commander fully

informed of matters discussed with the contractor. The contract administration office shall also keep

the technical representative fully informed of contractor discussions that relate to technical matters

within the purview of the technical representative's assigned duties.

PGI 242.75 -CONTRACTOR ACCOUNTING SYSTEMS AND

RELATED CONTROLS

PGI 242.7502 Policy.

(d) Disposition of findings.

(2) Initial determination.

(ii)(A) Within 10 days of receiving the report, if the contracting officer makes a determination that

there is a significant deficiency, the contracting officer should provide an initial determination of

deficiencies and a copy of the report to the contractor and require the contractor to submit a written

response.

(C) Evaluation of contractor's response. Within 30 days of receiving the contractor’s response, the

contracting officer, in consultation with the auditor or cognizant functional specialist, should

evaluate the contractor’s response and make a final determination.

(3) Final Determination.

(ii)(A) Monitoring contractor's corrective action. The auditor and the contracting officer shall

monitor the contractor's progress in correcting deficiencies. If the contractor fails to make adequate

progress, the contracting officer shall take whatever action is necessary to ensure that the

contractor corrects the deficiencies. Examples of actions the contracting officer can take are:

disapproving the system; bringing the issue to the attention of higher level management;

implementing or increasing the withholding in accordance with 252.242-7005, Contractor Business

Systems, if applicable; and recommending non-award of potential contracts.

(B) Correction of significant deficiencies.

(1) When the contractor notifies the contracting officer that the contractor has corrected the

significant deficiencies, the contracting officer shall request that the auditor review the correction to

determine if the deficiencies have been resolved.

(2) The contracting officer shall determine if the contractor has corrected the deficiencies.

(3) If the contracting officer determines the contractor has corrected the deficiencies, the

contracting officer's notification shall be sent to the auditor; payment office; appropriate action

officers responsible for reporting past performance at the requiring activities; and each contracting
and contract administration office having substantial business with the contractor as applicable.

(g) Mitigating the risk of accounting system deficiencies on specific proposals.

(2) In the event that a contractor’s accounting system contains deficiencies, even if it has been

disapproved, a cost reimbursement contract is not prohibited if the contracting officer determines

that the contractor’s accounting system is adequate for determining costs applicable to the contract

or order.