PGI 215.407-5-70 Disclosure, maintenance, and review requirements.

(e)  Review procedures. Cognizant audit and contract administration activities shall-

(1)  Establish and manage regular programs for reviewing selected contractors' estimating systems.

(2)  Conduct reviews as a team effort.

(i)  The contract auditor will be the team leader.

(ii)  The team leader will-

(A)  Coordinate with the ACO to ensure that team membership includes qualified contract administration technical specialists.

(B)  Advise the ACO and the contractor of significant findings during the conduct of the review and during the exit conference.

(C)  Prepare a team report.

(1)  The ACO or a representative should-

(i)  Coordinate the contract administration activity's review;

(ii)  Consolidate findings and recommendations; and

(iii)  When appropriate, prepare a comprehensive written report for submission to the auditor.

(2)  The contract auditor will attach the ACO's report to the team report.

(3)  Tailor reviews to take full advantage of the day-to-day work done by both organizations.

(4)  Conduct a review, every 3 years, of contractors subject to the disclosure requirements. The ACO and the auditor may lengthen or shorten the 3-year period based on their joint risk assessment of the contractor's past experience and current vulnerability.

(f)  Disposition of survey team findings.

(1)  Reporting of survey team findings. The auditor will document the findings and recommendations of the survey team in a report to the ACO. If there are significant estimating deficiencies, the auditor will recommend disapproval of all or portions of the estimating system.

(2)  Initial notification to the contractor. The ACO will provide a copy of the team report to the contractor and, unless there are no deficiencies mentioned in the report, will ask the contractor to submit a written response in 30 days, or a reasonable extension.

(i)  If the contractor agrees with the report, the contractor has 60 days from the date of initial notification to correct any identified deficiencies or submit a corrective action plan showing milestones and actions to eliminate the deficiencies.

(ii)  If the contractor disagrees, the contractor should provide rationale in its written response.

(3)  Evaluation of contractor's response. The ACO, in consultation with the auditor, will evaluate the contractor's response to determine whether-

(i)  The estimating system contains deficiencies that need correction;

(ii)  The deficiencies are significant estimating deficiencies that would result in disapproval of all or a portion of the contractor's estimating system; or

(iii)  The contractor's proposed corrective actions are adequate to eliminate the deficiency.

(4)  Notification of ACO determination. The ACO will notify the contractor and the auditor of the determination and, if appropriate, of the Government's intent to disapprove all or selected portions of the system. The notice shall-

(i)  List the cost elements covered;

(ii)  Identify any deficiencies requiring correction; and

(iii)  Require the contractor to correct the deficiencies within 45 days or submit an action plan showing milestones and actions to eliminate the deficiencies.

(5)  Notice of disapproval. If the contractor has neither submitted an acceptable corrective action plan nor corrected significant deficiencies within 45 days, the ACO shall disapprove all or selected portions of the contractor's estimating system. The notice of disapproval must-

(i)  Identify the cost elements covered;

(ii)  List the deficiencies that prompted the disapproval; and

(iii)  Be sent to the cognizant auditor, and each contracting and contract administration office having substantial business with the contractor.

(6)  Monitoring contractor's corrective action. The auditor and the ACO will monitor the contractor's progress in correcting deficiencies. If the contractor fails to make adequate progress, the ACO shall take whatever action is necessary to ensure that the contractor corrects the deficiencies. Examples of actions the ACO can take are: bringing the issue to the attention of higher level management, reducing or suspending progress payments (see FAR 32.503-6), and recommending nonaward of potential contracts.

(7)  Withdrawal of estimating system disapproval. The ACO will withdraw the disapproval when the ACO determines that the contractor has corrected the significant system deficiencies. The ACO will notify the contractor, the auditor, and affected contracting and contract administration activities of the withdrawal.