E. Data Requirements

The final rule includes amendments to FAR 52.216-7(d)(2)(iv) in response to the comments in this category. Many respondents submitted comments regarding data requirements.

Comments: Three respondents submitted comments objecting to the volume of data required for determination of an adequate indirect cost rate proposal.

Response: The revisions to FAR 42.705-1 and FAR 52.216-7 are necessary to clarify the submission of an adequate indirect cost rate proposal. While the information required may be considered lengthy, it is not new, and it is essential information necessary for an adequate claim for cost.

Comments: Four respondents believe the proposed rule is overly prescriptive. One respondent specifically suggests the rule is a regulation to legitimize DCAA's longstanding insistence that an adequate final indirect cost rate proposal be inclusive of several mandatory schedules and supplemental information as represented by DCAA within its Model Incurred Cost Proposal rate as stipulated in DCAA Pamphlet No. 7641.90. This respondent further takes the position that use of the DCAA model schedule information eliminates any opportunity for further variation in proposal content.

Response: The information required from the contractor for an adequate indirect cost rate proposal is not new. No specific format is prescribed for the submission. This information is readily available in the contractor's books, records, and systems. DCAA has been the primary provider of information necessary for contracting officers to adequately perform their functions as stewards of public trust. Furthermore, the revised language "shall include the following data, unless otherwise specified by the cognizant Federal agency official" allows flexibility, depending on the circumstances of the contract (e.g., size, complexity).

Comments: Four respondents submitted four comments objecting to the inclusion of one or more schedule items and stated that some of the information proposed to be required for an adequate submission is not necessary for an adequate contractor rate submission.

Response: The information required in the schedules is the minimum standard for an adequate indirect cost rate proposal. For example, the information in FAR 52.216-7(d)(2)(iii) item G, reconciliation of books of account and claimed direct costs, is necessary for an adequate submission and different from the information requested for item H, which is a schedule of direct costs by contract/subcontract and indirect expenses applied. The rule language does not require the reconciliation to be presented in a single schedule. An updated schedule (as specified in FAR 52.216-7(d)(2)(v)) is necessary to ensure timely adjustments to amounts claimed and billed by a contractor for the period covered by the final indirect cost rate determination.

Comment: One respondent states that "a requirement for the adequacy of an indirect cost rate submission that final direct costs must be submitted for audit is out of the scope of this clause" at FAR 52.216-7(g).

Response: This rule does not amend paragraph (g) of the clause at FAR 52.216-7, which has no bearing on the adequacy of an indirect cost rate submission as required by FAR 52.216-7(d)(2)(iii). The Government has the right to audit any invoice or voucher and statements of cost prior to final payment pursuant to FAR 52.216-7.

Comments: Two respondents submitted comments in regard to formatting. One respondent states that DCAA's insistence that data be converted into other formats (such as spreadsheets using DCAA's ICE Model) is in direct contradiction of FAR 52.215-2(d)(2) that access to records "may not be construed to require the contractor or subcontractor to create or maintain any record that the contractor or subcontractor does not maintain in the ordinary course of business or pursuant to a provision of law." The other respondent suggests that the proposed revision at FAR 42.705-1(b)(1) eliminates the suggestion in the current rule that contractors can use the DCAA model incurred cost rate proposal and supporting data for guidance on what constitutes an adequate final indirect cost rate proposal. According to the respondent, this proposed revision also refers the definition of adequacy to the revised clause at FAR 52.216-7(d)(2), which makes mandatory specific schedules and data requirements taken almost verbatim from the DCAA ICE Model.

Comment: One respondent states that the list of requirements proposed at FAR 52.216-7(d)(2) is contradictory to the definition of supporting documentation for final indirect cost rate proposals in the current FAR. According to FAR 31.201-2(d), supporting documentation means records necessary to demonstrate the costs claimed in the proposal have been incurred, are allocable to the contract, and comply with applicable cost principles. This makes clear the meaning of the current FAR 52.216-7(d), "The contractor shall support its proposal with adequate supporting documentation."

Response: The cost principles are not intended to set forth the submission requirements of an adequate indirect cost rate proposal.

Comment: One respondent states he does not believe that the proposed rule is in line with the FAR objective of achieving a timely settlement of final indirect rates. The rule delineates extensive requirements and supplemental data related to the description of an adequate final indirect cost rate proposal that are unnecessarily burdensome and largely irrelevant to indirect cost rate proposals. Levying requirements for the creation of new books and records as supporting documentation for costs is contradictory to existing provisions of FAR 52.215-2. The respondent is concerned that many of the proposed data requirements under the proposed rule have no connection to the indirect cost rates and may result in the unnecessary disclosure of proprietary information, e.g., schedules O and L.

Response: The revisions to FAR 42.705-1 and FAR 52.216-7 are necessary to clarify the submission of an adequate indirect cost rate proposal. The information required is necessary for an adequate claim for cost. The supplemental information, if applicable, is what auditors expect to review in support of an adequate claim for cost. The proposed language "shall include the following data, unless otherwise specified by the cognizant Federal agency official" allows flexibility depending on the circumstances of the contract (e.g. size, complexity). The information being requested should be readily available from the contractor's accounting system.

The information is not new and the format of the information has not been designated for the contractor. The Government treats all audit information from contractors as confidential and protects it against all unauthorized disclosure.

Comment: One respondent states that the list of data required by FAR 52.216-7 (regardless of type of business, sector, or accounting system) is inconsistent and contradictory to FAR 42.705-1(b)(1)(i), which states that the "required content of the proposal and supporting data will vary depending on such factors as business type, size, and accounting system capabilities." The final rule should afford contractors the flexibility to provide only that information necessary to support an indirect cost rate proposal.

Comment: One respondent takes exception to the statement in FAR 52.216-7(d)(2)(iv) that "The following supplemental information which will be required during the audit process * * *" and suggests it should be restated "the following supplemental information may be required * * *."

Response: The language has been revised to read "the following supplemental information is not required to determine if a proposal is adequate, but may be required during the audit process."