Contractor Estimating and Accounting Systems
Use and Application of Contractor Estimating and Accounting Systems
Introduction
Contractors throughout the world develop and use cost information to manage their contracts. Cost is treated as information from where insights are generated based on contract involved and the translated to client cost. Contractors use the estimating and accounting systems to ensure effective and efficient supply chains. Therefore, their current costing practices and cost controls must be applied to support supply chains’ effectiveness. The contractor’s building information has to be integrated with the cost information to enhance the process of decision making. That is why the use and application of contractor estimating and accounting systems become important during procurement processes.
Background
The authority of cost experiences in every aspect of human life and Cost information plays a critical role in influencing the decisions made by contractors in the procurement processes. Since the early centuries, the contractors have been constantly challenged to innovate to reduce inefficiencies in contract management processes. Therefore the digital representation and exchange of contract information through the use and application of contractor estimating and accounting systems have been advocated across the globe to help manage projects efficiently. The accuracy of the systems is integral to determining how contracts will be awarded and charged. In modern business practice, the processes of contracting projects, especially large governmental projects, have become complex. A slight mistake can lead to the failure of the projects, fraud, or wastage of resources (Gerber, 2019).
Findings
In the United States, the use and application of contractor estimating and accounting systems are heavily relied upon by the Department of Defense (DOD). The contracting officers in DOD use the information generated by the contractor systems to negotiate and manage contracts worth billions of dollars. The contractor estimating and accounting systems acts are the main tools used to provide defense against resource wastage, fraud, and mismanagement of federal projects. For example, accounting systems prevent contractors from mischarging or overcharging federal construction projects. The Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA) reviews and audits the adequacy of the systems before they are accepted as standard contractor systems.
In 2009 the GAO and commission on Wartime Contracting had identified slugs in the way DOD was performing CBS reviews. That led to the enation of Section 893 of the National Defense Authorization Act (NDAA) in 2011 (GOA 2019). The act gave DOD the responsibility to develop programs to improve contractor business systems. Section 893 of the NDAA was later amended in 2017 to redefine covered contractors as those involved in government projects subject to cost accounting principles that account for more than 1% of the company’s gross revenue. It was also amended to allow the contractors to use registered public accounting companies when reviewing their systems in place of DOD reviews. Section 890 of NDAA 2018 has the provisions required for GAO to evaluate the effectiveness and implementation of the changes in the contractor business systems (DCMA Manual 2301-01, 2019).
The report has the changes that DOD made on its contractor business systems review process. It examines the extent to which the DOD ensures that the reviews are conducted in time. It also describes DOD’s steps to implement the provisions made in Section 893 of NDAA in 2017 (GOA 2019). According to federal acquisition regulation, the contractors who transact business with the government are required to maintain contractor business systems of high standards to avoid rising taxpayers and government resources. The contractors might have a total of six contractor business systems that require review. DOD provides the acquisition regulation that has the criteria under which the systems should be implemented. The contractor business systems are required to meet the criteria for them to be considered acceptable. Dollar value and the contract type are among the factors that determine whether the provisions are included. For contactor estimating, system contracts should be awarded based on pricing data or certified costs. Additional provisions apply when the business is considered large. For contractor accounting systems, the factors considered are incentive type, cost-reimbursement, time and material, and nature of the contract.
Conclusion
Contractor estimating and accounting systems are important tools for conducting contractual obligations. If the system use and applications are not regulated, they can lead to wastage of resources, fraud, and poor contract awarding. That is why bodies such as DOD, NDAA, GAO, DCAA, and DCMA must set standards to be followed.
References
GOA. (2019). GAO-19-212, Contractor Business Systems: DOD Needs … Retrieved from https://www.gao.gov/assets/700/696801.pdf
Gerber, S. N. (2019). Renewed Focus on Contractor Business System Reviews. Retrieved August 24, 2020, from https://governmentcontractsnavigator.com/2019/03/21/renewed-focus-on-contractor-business-system-reviews/
DCMA Manual 2301-01. (2019). DCMA Manual 2301-01 Contractor Business Systems. Retrieved August 24, 2020, from https://www.dcma.mil/Portals/31/Documents/Policy/DCMA-MAN-2301-01.pdf?ver=2019-05-03-123122-347