MANAGEMENT INFORMATION SYSTEM REQUIREMENTS in .NET framework

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372 MANAGEMENT INFORMATION SYSTEM REQUIREMENTS
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(d) PROJECT MANAGEMENT SYSTEMS The ability to monitor and project costs on government contracts is critical The government is particularly concerned about overpaying cost-based progress payments and not being forewarned about potential cost overruns The preparation of a comprehensive estimate of contract costs at completion is key to assessing progress and determining if problems exist These estimates should be prepared at least quarterly to ensure the reliability of interim nancial statements and to avoid surprises that come too late for effective corrective action Management must be informed promptly and periodically of the key facts concerning contract performance Inherent in such systems is a con guration management function that tracks changes to the technical baseline of a product The project management system needs to timely provide information needed, which includes:
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Actual cost to date Budgeted cost for work scheduled Budgeted cost for work performed Estimated cost to complete Estimated cost at completion Contract amount (including changes) Projected overrun or underrun Contract scheduled completion date Expected completion date Projected slippage
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To ensure effective monitoring of a contractor s progress on major procurements, DOD inserts the Earned Value Management System (EVMS) clause (DFARS 252234 7001) into certain large contracts requiring compliance with the criteria provided in DOD 50002-R, Mandatory Procedures for Major Defense Acquisitions Programs (MDAPs) and Major Automatic Information System (MAIS) Acquisition Programs Basically, an EVMS or other type of cost/schedule control system breaks down the contract into work packages, identi es organizations and managers responsible, develops a schedule, and budgets the costs by those work packages The Limitation of Cost clause (FAR 52232-20), inserted in fully funded cost-reimbursement contracts, and the Limitation of Funds clause (FAR 52232-22), inserted in incrementally funded cost-reimbursement contracts, obligate the contractor to notify the government when the contractor has reason to believe that within the next 60 days the cumulative cost incurred to date in performing the contract will exceed 75 percent of the estimated cost of, or funds allotted to, the contract The contractor must also notify the government anytime the total contract cost is expected to be substantially more or less than the estimated cost or allotted funds The government is not obligated to reimburse the contractor for any cost in excess of the contract estimated cost or funds allotted to the contract Nor is the contractor obligated to continue performance or incur any costs in excess of the contract estimated costs or funds allotted The limitation of cost or funds clauses are designed to give the government an opportunity to decide whether it can and will provide additional funds necessary to complete the work Because of the reporting requirements of these clauses, companies contracting with the government must have an adequate project management system to allow for timely noti cation of potential cost overruns Boards of contract appeals and the courts have ruled in numerous instances that inadequate accounting or project management systems are not valid excuses for not providing the notice required by the clauses (e) BILLING SYSTEMS (i) Cost-Reimbursement Contracts The Allowable Cost and Payment clause (FAR 52216-7) provides for reimbursement costs incurred in contract performance that are deemed allowable by the contracting of cer, in accordance with procurement regulation cost principles and contract terms The clause provides cost reimbursement of allowable, recorded incurred costs for:
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ACCOUNTING FOR GOVERNMENT CONTRACTS
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Items or services purchased directly for the contract and associated nancing payments to
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subcontractors, provided payments are made on a timely basis
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Materials issued from the contractor s stored inventory Direct labor Direct travel Other direct in-house costs Properly allocable and allowable indirect costs, except that pension plan contributions must
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be funded no less frequently that on a quarterly basis When pension plan contributions are funded less frequently than quarterly, the accrued cost must be excluded from claimed indirect expenses until actually paid The contractor s cost accounting system is used to determine properly allocable costs As discussed in Section 373(c), the allocation of costs to a government contract may be subject to some or all of the provisions of the Cost Accounting Standards Board (CASB) s rules, regulations, and standards In establishing the allowable indirect costs under a contract, indirect cost rates are applied to allowable contract base costs Since indirect cost rates can be de nitively determined only at the completion of a contractor s scal year, estimated rates are required to reimburse contractors on an interim basis These rates, referred to as billing rates, are based on the anticipated nal annual rates To prevent substantial overpayment or underpayment, the billing rates should be adjusted as needed during the year The contractor must determine the continued appropriateness of previously established billing rates given the passage of time and experience The ACO or auditor responsible for determining the nal indirect cost rates is usually responsible for establishing the billing rates to be used Final indirect cost rates, which are generally determined after the contractor s scal period ends, are used to determine indirect expenses applicable to cost reimbursement type contracts, as well as xed-price redeterminable and incentive-type contracts The contractor is required to submit an adequate nal indirect cost rate proposal to the ACO and auditor within six months after expiration of the scal year For guidance on what constitutes an adequate proposal, FAR 42705-1(b)(1) refers contractors to the Model Indirect Cost Proposal contained in 6 of the Defense Contract Audit Agency Pamphlet (DCAAP) No 764190, Information for Contractors 1 FAR 42703-2 and Certi cation of Final Indirect Costs clause (FAR 52242-4) require execution of the following certi cation when nal indirect cost rate proposals are submitted: This is to certify that I have reviewed this proposal to establish nal indirect cost rates and to the best of my knowledge and belief: 1 All costs included in this proposal (identify proposal and date) to establish nal indirect cost rates for (identify period covered by rate) are allowable in accordance with the cost principles of the FAR and its supplements applicable to the contracts to which the nal indirect cost rates will apply; and 2 This proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements The certi cation must be signed by a senior management of cial at a level no lower than vice president or chief nancial of cer The certi cation requirements should not be taken lightly Contractors should ensure that effective internal controls exist to properly screen unallowable costs from indirect expense proposals Including expressly unallowable costs in nal indirect cost rate proposals subjects the contractor to certain monetary penalties prescribed in FAR 42709-1 and the Penalties for Unallowable Costs clause (FAR 52242-3)
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Defense Contract Audit Agency Pamphlet No 764190 can be obtained by contacting Internet address wwwdticmil/dcaa/chap5html
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