As we will discuss in a follow-up article, the auditor will evaluate the validity of survey data the contractor used. If they determine it is not adequate, they can either use one available to them or if one does not exist, cite the contractor for system deficiencies, indicate corrective action is needed and put the burden on the contractor to demonstrate the reasonableness of its compensation by use of an adequate survey. More commonly, the auditor will use surveys DCAA has determined are appropriate. The auditor will make a comparison test with benchmarked jobs within a "pay structure job class" or "grade."

The new guidance specifies comparison tests are to be made by comparing the weighted average wage or salary of either the contractor’s job class or grade with that of the acceptable survey. Surveys can be updated to a common data point using appropriate escalation factors. More than one survey may be used. DCAA is instructed to ask the ACO whether the tests are to be made at the job class or job grade level.

Citing the new FAR 31.205-6(b)(1)(i) that now provides greater flexibility to the contractor because reasonableness can be established at either the job class or job grade with offsets allowed, the new guidance suggests less audit effort can be expended if:

1. Benchmarking effort made by the contractor should be relied on where audit effort should only supplement the contractor’s work.

2. Ask the contractor to make a preliminary assessment of any offsets it can make available since more offsets of questioned costs can show compensation costs are reasonable.

3. If a contractor has a majority of commercial or competitively awarded government fixed price work it is presumed its compensation under such contracts provide considerable pressure to be competitive and hence low. This will reduce risk that compensation is high.

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