Top-25 government contractor settles multimillion dollar CAS noncompliance charges with no cost impact

Our client’s need

A large, multimillion dollar professional services provider with over $20B in annual revenues turned to Baker Tilly to address a number of accounting and compliance related issues including alleged Cost Accounting Standard (CAS) violations, multiple open Incurred Cost Submission (ICS) years, and difficulty providing financial support related to governmental audit questions on indirect rates and contract costs. This top-25 government contractor faced significant financial consequences including billing decrements, Defense Contract Management Agency (DCMA)-issued Forward Pricing Rate Recommendations (FPRR) and Provisional Billing Rates (PBR) significantly below actual rates as recorded, and challenges winning new contracts due to CAS Disclosure Statement questions.

Baker Tilly solution

Baker Tilly deployed a multifaceted team of compliance experts, financial analysts, and experienced contracting professional, including a former 20-year veteran of DCMA. Although inter-related, the team isolated each of the individual issues the client identified and thoroughly analyzed as much information as possible to present viable solutions to key client personnel. The team performed a detailed analysis of labor data and home office costs to prove compliance with CAS standards where the government had alleged noncompliance. In addition, the team was able to complete develop a unique methodology to address multiple outstanding incurred cost years by analyzing government-provided and contractor data to have a synthesized approach to unallowable cost removals.

Results achieved

By isolating the problems and coming up with analyses to combat government arguments and coming up with options given each unique set of circumstances, the client was able to successfully navigate through two CAS noncompliances, close out multiple open ICS years and close out old contracts, and open further lines of communication with the government to modify FPRs and PBRs. Initial financial statement reserve calculations for two CAS alleged noncompliances were set in the $10s of millions of dollars range, and both were successfully settled with no cost impact to the contractor.

For more information on this topic, or to learn how Baker Tilly government contractor specialists can help, contact our team.