Background
Recently I have been working in the Cost or Pricing data world. If you don't know what cost or pricing data are, you probably don't have contracts or subcontracts with the Federal Government. I can't say if contracting with the government is a good thing or not. What I do know, is that contracting with the government or subcontracting with prime contractors, can be complicated. I used to say that when contracting with the government, you will get paid. Boy was I surprised (I didn't know, sometimes it takes years).
Why Am I Writing This
My intent is to share some of the knowledge I have gained over the past 30+ years. Often small businesses do not have resources to hire the experts when they get into trouble. The following is a list of actions required for success.
- Read the contract;
- Read the contract clauses (even those incorporated by reference);
- Comply with the terms of the contract.
I know that some of you may be thinking that my comments regarding reading the contract may be over-kill. Everybody knows that you need to familiarize yourself with any contract, it's causes and terms, prior to signing. That works sometimes. When it doesn't work it can cost small businesses everything. Although I refer to small businesses there are many large businesses that have had to pay significant fines and penalties because they did not follow the contract.
The Story
Defective Pricing
The Story
Defective Pricing
A number of years ago I was the Auditor-In-Charge of a contract audit office for a government entity. Prior to my becoming the supervisory auditor, there was an active investigation into alleged defective pricing by a construction contractor.
The construction contractor had about 60 employees when they were awarded the contract. By the time I got involved, the contractor was almost out of business. The company's staffing was reduced from about 60 employees to two, and they were close to going out of business.
It all started when one of my future auditors (about a year before I was selected for the supervisory job) performed a post award audit (sometimes referred to as a defective pricing audit) and came to the conclusion that the data submitted by the contractor was not current, accurate, and complete. The reason that I went to the contractor's office was to satisfy myself that the audit report was accurate. The report was included in the documentation that was going to be presented as part of the evidence to the grand jury seeking indictment of the contractor for false statements, false claims and any other thing that the criminal investigators believed were illegal acts.
The primary concern of government was whether or not contractor disclosed that it owned equipment rental company from which the contractor was renting equipment. The full rental rates (not ownership costs) were included as part of the pricing of the subcontract. However, that was not disclosed according to my auditor.
The day before the grand jury was scheduled to meet, I was at the contractor's office and found that the contractor had not submitted false data. Fortunately, I was able to contact the lead investigator and provide data proving that the contractor had not submitted defective pricing.
Conclusion
Even though the contractor was cleared of submitting defective pricing, they went out of business because of the erroneous audit in the cost of the subsequent investigation.
