Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

Contract Compliance and Audit Volume 1

Recommendation 8: Establish statutory time limits for defense oversight

activities.

Problem

Financial and business system oversight of DoD’s contractors often starts too late and takes too long. 

These delays cause problems for both contracting officers and defense contractors and reduce the 

utility of oversight findings. To be effective and efficient, DoD’s system of internal controls must 

operate in a timely manner.

Background

Time limits are commonplace in both private industry and the federal government concerning 

performance of audits and other forms of advisory engagements. IPAs must complete audits by 

financial reporting deadlines established by the Securities Exchange Commission.1

Auditors for federal agencies must complete agency financial statement audits under deadlines 

established by the Chief Financial Officers Act of 1990.

2 GAO must also complete congressionallyrequested audits and reviews in accordance with statutory due dates.3 These professional service 

providers both in and out of government complete their work in accordance with professional 

standards within timeframes established before work begins.

Findings

DCAA’s work is untimely, which causes delays in contract awards, as well as other negative effects on 

the contract life cycle, through and including contract closeout. For example, in FY 2016, DCAA did not 

begin work on final indirect cost rate proposals until more than 2 years after contractors’ submissions.

4

Contracting officers need DCAA’s work to close out flexibly priced contracts.

Conclusions

DoD’s system of acquisition internal controls operates most effectively when controls are applied in a 

timely way. Statutory time limits for various oversight activities will improve their effectiveness. 

Currently, contractors must submit to DoD a wide variety of reports and other documents in 

accordance with strict regulatory time limits.5 There are fewer time limits for DoD to perform its 

oversight responsibilities.

 

1 Financial Industry Regulatory Authority (FINRA) Information Notice, 2017 and First Quarter 2018 Report Filing Due Dates, accessed 

November 17, 2017, http://www.finra.org/sites/default/files/notice_doc_file_ref/Information-Notice-120516.pdf. 2 “OMB BULLETIN NO. 98-08 – Audit Requirements for Federal Financial Statements,” OMB, accessed November 17, 2017, 

https://www.whitehouse.gov/omb/bulletins_98-08. 3 For examples of statutory due dates for Comptroller General (GAO) audits and reviews, see sections 147, 224, 235, 238, 536, 578, 751, 

and 1670 et al. in the FY 2017 NDAA, Pub. L. No. 114-328 (2016). https://www.congress.gov/114/bills/s2943/BILLS-114s2943enr.pdf. 4 GAO, Federal Contracting: Additional Management Attention and Action Needed to Close Contracts and Reduce Audit Backlog, 

GAO-17-738, 27, accessed November 17, 2017, https://www.gao.gov/assets/690/687497.pdf. 5 For example, Final indirect costs rates, FAR 42.705 and Contracting officer determination procedure, FAR 42.705-1. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

Contract Compliance and Audit Volume 1

Congress should establish basic statutory oversight time limits for each of the following contractor 

submissions to accomplish the following:

§ Focus on the oversight function’s mission by providing contracting officers what they need to 

do their jobs in a timely manner.

§ Focus on what matters most (i.e., risk management, rather than risk avoidance) by exercising 

reasonable professional judgment.

§ Better manage audits, engagements, and other services.

§ Forge more cooperative working relationships among contracting officers, compliance 

professionals, and contractors. The expectation is that both contractor and government actions 

will be consistent with the objective of completing audits and advisory services within 

established time limits.

On-Demand Activities 

DoD’s oversight activities, relative to contractor submissions, are either on-demand or predictable.

These oversight activities are necessary to provide timely information to a procuring contracting officer 

in connection with awarding or administering a particular contract. To ensure contracting officers can 

help prioritize work requested of DCAA, time limits should be established during which the activities

must be completed.

Table 2-4. On-Demand Oversight Time Limits

Matter for DCAA Review DCAA Time Limit 

Contractor submission of preaward cost proposal 90 days from date of contracting officer request for review

Contractor submission of invoices for direct 

contract costs 90 days from date of contracting officer request for review

Any other contractor submission in connection 

with awarding, administering, or terminating a 

particular contract

180 days from date of contracting officer request for 

review

Predictable Activities

These oversight activities are necessary to provide timely information to an administrative contracting 

officer in connection with administering compliance requirements that affect contractors’ portfolio of 

contracts.

Table 2-5. Predictable Oversight Time Limits

Matter for DCAA Review DCAA Time Limit

Contractor submission of forward pricing rate proposal 90 days from date of contracting officer request for 

review
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

Contract Compliance and Audit Volume 1

Matter for DCAA Review DCAA Time Limit

Contractor submission of provisional billing rate 

proposal

30 days from date of receipt of the contractor submission 

CAS disclosure statement If the contracting officer requests DCAA review of the 

adequacy of the CAS disclosure statement, 60 days from 

date of contracting officer request for review

Contractor submission of cost accounting practice 

changes referred to as a General Dollar Magnitude 

(GDM) proposal

90 days from date of contracting officer request for 

review

Contractor submission of cost accounting practice 

changes referred to as a Detailed Cost Impact (DCI) 

proposal

180 days from date of contracting officer request for 

review

Contractor compliance with CAS in accordance with 

the contractor’s CAS disclosure statement

90 days from date of contracting officer request for 

review

Contractor compliance with an CAS 90 days from date of contracting officer request for 

review

Matter for DCAA review DCAA time limit

Contracting officers should possess the ability to extend time limits, but extensions should be recorded 

separately from the original required or agreed-upon time limit. Extensions should be categorized as

shown below:

§ Contracting officer timing changed

§ DCAA/DCMA requested

§ Contractor requested/caused 

No extensions should be categorized as contractor requested/caused without the contractor’s express 

knowledge. If contractors disagree that they caused the delay, their disagreement should be noted. This 

information will be important in determining certain elements of DCAA’s annual report to Congress. 

Time limits should become effective October 1, 2019. DCAA and DCMA should be encouraged to 

adopt these time limits sooner to accommodate engagement, resource staffing, and estimated funding 

levels for IPA support.

Implementation

Legislative Branch

§ In accordance with the requirements of DoD and the Section 809 Panel, set forth in Section 803

(a) of the FY 2018 NDAA, Performance of Incurred Cost Audits, amending 10 U.S.C 2313b (g), 

establish statutory time limits for audit and advisory services.

§ Revise 10 U.S.C. § 2313b(g) to correspond with statutory time limits recommended above.
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

Contract Compliance and Audit Volume 1

Executive Branch

§ No Executive Branch changes are required.

Implications for Other Agencies

§ There are no cross-agency implications for this recommendation.