On May 4, 2018, the Department of Defense (“DoD”) issued a final rule amending the Defense Federal Acquisition Regulation Supplement (“DFARS”) to state that, in the interest of promoting voluntary disclosures of defective pricing identified by contractors after contract award, DoD contracting officers have more discretion to determine the scope of the involvement of the Defense Contract Audit Agency (“DCAA”) in assessing such a disclosure. 83 Fed. Reg. 19645. This is a change from DoD’s November 2015 proposed rule, which required contracting officers to request at least a limited-scope audit when a contractor voluntarily discloses defective pricing. While arguably a step in the right direction, the permissive language of the final rule continues to provide only limited information to defense contractors about what to expect following a voluntary defective pricing disclosure. Nonetheless, by listing the types of information that the contracting officer must consider when deciding whether to request an audit, the rule arms contractors with potentially impactful information.

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Section 820 of the National Defense Authorization Act for Fiscal Year 2017, Pub. L. No. 114-238, 130 Stat. 2000 (NDAA), makes three significant changes to the federal government’s future method of conducting audits and implementation of Cost Accounting Standards (CAS).  First, it empowers contractors to avoid Defense Contract Audit Agency (DCAA) audits by employing private auditors to audit their indirect rates.  Second, it provides new requirements intended to reinvigorate the federal government’s existing CAS Board.  Finally, it creates a new and independent Defense Cost Accounting Standards (DCAS) Board to implement the Cost Accounting Standards across the Department of Defense (DoD).  All of these provisions are due to take effect on October 1, 2018.

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