PGI 15.406-1 Prenegotiation Objectives.

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Procedures for Resolving Audit Disagreements

1.  Applicability: Contract Proposals valued at $10 million or more.

2.  Definition: Significant Disagreement - The situation that occurs when the contracting officer's prenegotiation objective plans to sustain less than 75 percent of the total recommended questioned costs in the DCAA audit report. This does not include costs classified as "unsupported" in the audit report.

3.  Contracting officers are charged with making informed decisions utilizing the advice of specialists in audit, law, engineering, etc., to ensure we fulfill the requirements of our warfighters while obtaining the best business deal for the taxpayers. While the contracting officer and the auditor may not necessarily agree on every issue, it is expected that they will work together recognizing that it is the contracting officer's ultimate responsibility to determine fair and reasonable contract value. This PGI establishes the DLA procedures for attempting to resolve significant disagreements in accordance with DoD policy.

4.  Resolution of Contract Audit Disagreements

Prior to establishing the prenegotiation objectives, the contracting officer shall discuss the results of the audit report with the auditor to attempt to resolve disagreements.

The contracting officer shall document the results of the discussion with the auditor and the reasons for disagreement with specific elements of costs questioned by DCAA.

Approval of the prenegotiation objectives memorandum in accordance with local procedures confirms that the discussion with DCAA and the contracting officer's basis for deviating from the audit recommendations has been adequately documented and supported.

If the approved prenegotiation objectives memorandum does not plan to sustain at least 75 percent of the total audit recommended questioned costs, the contracting officer shall notify the auditor in writing (email notification is acceptable). The notification will require DCAA to advise within 3 days if a higher level management review is requested. If DCAA confirms (in writing) to the contracting officer that a higher level review is requested, the contracting officer will provide the contact information of the higher level review authority (the HCA) and begin planning for discussions. Concurrent with providing the higher level review information to the auditor, the contracting officer shall notify their HCA through their chain of command that a higher level review has been requested by DCAA (activities for which J-7 is the HCA shall notify the J-73 Division Chief who notify the J-7 Director). After all parties have been notified of the request for a higher level review, it is within the discretion of the contracting officer and his/her chain of command to decide whether negotiations should proceed or be suspended pending final resolution of the disagreement.

Concurrent with notification to their HCA, DESC, DSCC, DSCP and DSCR contracting officers shall also notify the J-73 Division Chief of the request for higher level review. J-73 will track the frequency and disposition of audit resolution issues.

At the HCA level, a review will attempt to determine if the auditor's and the contracting officer's positions can be reconciled. The contracting officer shall document the disposition of the higher level review of the disagreement(s) in a memorandum for the contract file.

If the HCA is other than J-7 and is unable to resolve the differences with DCAA, the approving authority shall notify J-73 with copies of the contracting officer's documentation of the issue. In turn, J-73 shall inform the Director of Acquisition Management, J-7, of the unresolved audit and the possibility of discussions with the DCAA Director prior to any DCAA referral to the Director, Defense Procurement and Acquisition Policy.