🇺🇸United States

Rework and Re‑submission of Incurred Cost and Supporting Schedules After DCAA Findings

4 verified sources

Definition

If incurred cost proposals or audit support packages are incomplete or non‑compliant, DCAA issues deficiencies and requests revised submissions. Contractors must rebuild schedules, correct allocations, and repeat sampling support, consuming substantial finance and compliance capacity.

Key Findings

  • Financial Impact: DCAA’s annual reports show high volumes of questioned and unsupported costs; contractors then expend significant additional internal labor to correct and justify those costs, often representing tens of thousands of staff hours across major defense manufacturers annually, translating into recurring multi‑hundred‑thousand‑dollar rework burdens per large enterprise.
  • Frequency: Quarterly
  • Root Cause: Weak initial preparation—such as incorrect indirect rate applications, missing support for labor or materials, and non‑compliant cost pools—leads to DCAA questioning costs and requiring revised incurred cost submissions, forward pricing proposals, and cost impact analyses.

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Defense and Space Manufacturing.

Affected Stakeholders

Controller, Cost Accounting Manager, Indirect Rate Manager, Program Finance, Government Compliance Manager

Deep Analysis (Premium)

Financial Impact

$1,000,000 - $2,500,000 annually across multiple concurrent contracts; questioned subcontractor costs often represent 30-40% of audit deficiencies; payment hold-backs during audit (average 60-90 days); potential rate adjustments affecting future contract profitability • $100,000 - $500,000 annually in CM and finance rework to correlate configuration changes to cost allocations • $100,000 - $500,000 annually in CM and international coordination labor

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Current Workarounds

Ad-hoc spreadsheet creation, manual cost pool recalculation, email-based document exchange, paper audit workpapers marked up and re-scanned, timeline tracking via shared calendar • Configuration Managers use ad-hoc Excel workbooks to track cost allocations across program configurations; manual email coordination with Government Property Administrators and accounting staff; WhatsApp/Slack for urgent corrections; paper-based audit trail documents stored in shared network folders with versioning issues • Cost accounting manuals maintained as static Word documents; DCAA comments tracked in shared Excel files; manual cross-reference of questioned costs to prior-year submissions using email search

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Withheld and Disallowed Costs from Inadequate DCAA Audit Support

Common DCAA practice is to recommend withholds of 5–15% of billings or disallow questioned costs; in a 2023 DCAA report to Congress, auditors questioned $3.7 billion in costs across all audits, a significant share attributable to inadequate supporting documentation and non‑compliant systems, implying recurring multi‑million‑dollar leakage for larger defense/aerospace manufacturers each year.

Excessive Internal Labor and Consultant Spend on DCAA Audit Fire‑Drills

Industry practitioners report that medium to large defense manufacturers routinely incur hundreds to thousands of internal hours per major DCAA audit, plus six‑figure consulting engagements; for a portfolio with multiple concurrent audits, this can easily exceed $500,000–$2,000,000 per year in avoidable recurring preparation and remediation costs.

Payment Delays from DCAA‑Driven Voucher Holds and Questioned Costs

Contractors can face 60–90+ day delays on significant invoices when DCAA or the contracting officer suspends or withholds payment; for large programs with monthly billings in the tens of millions, this represents recurring working‑capital exposure easily in the $10M–$100M range and associated interest costs annually.

Finance and Program Management Capacity Consumed by DCAA Audit Cycles

For large defense/aerospace manufacturers with dozens of active contracts, recurring audit‑related capacity loss can total thousands of high‑value hours per year; at blended fully burdened rates of $100–$200/hour, this equates to hundreds of thousands to low millions of dollars in lost productive capacity annually.

Penalties, Interest, and Adverse Rate Adjustments from DCAA Non‑Compliance

DCAA’s annual reports detail billions of dollars in questioned and disallowed costs government‑wide each year; where issues are sustained, contractors not only forgo recovery but may also owe refunds and interest. High‑profile DoD IG and DOJ cases tied to defective pricing and non‑compliant accounting have resulted in multi‑million to multi‑hundred‑million‑dollar settlements in the aerospace and defense sector.

Labor Mischarging and Cost Misallocation Uncovered by DCAA Floor Checks

DoD IG and DOJ enforcement actions in the aerospace/defense sector regularly involve multi‑million‑dollar settlements for labor mischarging and misallocation; beyond legal settlements, affected contractors lose recovery of the mischarged costs, incur investigation and remediation expenses, and may suffer suspension or debarment risk on future awards.

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