If your position has merit and the issue is one DCAA is likely to be flexible about then you have an option before formally responding to the audit position or negotiating with the CO. There is an informal "window of opportunity" to challenge the auditor’s position between the time an audit issue surfaces and negotiations with the CO commence. (The incentive to reach a settlement with DCAA is particular strong when the negotiators often say "don’t convince me, convince the auditors".) There is no formal appeals process within DCAA but the opportunities for informal agreements are significant. It is an often repeated truism that, especially at the branch level, supervisors will simply rubberstamp the auditor’s position. In our experience, this sometimes occurrence is overstated. We are constantly surprised at how often the original audit position is either reversed or some other mutually-agreed to position is found following discussions with a supervisor or branch manager.

Of course, it cannot be stressed too much to prepare your position before you approach the audit supervisor or go higher. Address the audit position completely, be able to present your counter position clearly and succinctly and make sure your authorities are clearly identified (e.g. board and court decisions, cost principles, authoritative interpretations, cost accounting standards and preambles whether you are CAS covered or not, DCAA guidance, etc.).

Within the branch office there are usually two distinct avenues of informal appeal. The first is the audit supervisor. Though the supervisor often develops the audit position with the auditor it is far from always so. The supervisor may have had other administrative duties, training, sickness or is "hands-off" and if properly approached with a request for an open mind, will give a fair hearing to your position. Even if involved in the original position, they may have relied more on the auditor’s judgment and the presentation of a strong counter argument may be sufficient to change their mind. There may be other motives to change the finding such as hesitancy to fight a weak position, other priorities, etc.

Opportunities to receive an open-minded reevaluation of the original audit position is even greater with the branch manager. Unless the issue impacts large dollars from a large contractor, the branch manager is unlikely to have been deeply involved in the original position. Recent cutbacks and greater span-of-control between supervisors and auditors result in more time spent in administration and less participation in audit issues. However, their promotion to branch manager is usually based on their technical competency over contract costing issues and their interpersonal skills at resolving problems. In our experience, most branch managers are quite intelligent and predisposed to resolving issues to everyone’s satisfaction. They are often a fair "appeals board" and if the contractor’s position is strong and the audit position relatively weak they will sometimes reverse the original position or seek a reasonable compromise (e.g. give in on this issue if another issue is not challenged, find ways of lessening the financial impact).

The third window of opportunity within DCAA is at the regional level with the Regional Audit Manager (they usually have 4-6 branch offices they supervise). The RAM is unlikely to be involved in formulating the original audit position so they have even less of a stake in supporting the original position. Since an audit report is issued under the branch manager's signature, your chance of resolving the issue to your satisfaction is best at the RAM level if you do not succeed at the branch office. RAMs are usually quite experienced in handling a variety of issues, are technically competent and often quite personable (we have a couple of former RAMs on our staff).

The next window of opportunity is at the regional office where either the Deputy Regional Director or Regional Director can hear your case. Though we have seen considerable success going to the audit supervisor, branch manager and RAM you will need a very strong position and be very clear that an important point was not adequately considered by the other three if you expect to prevail at either the Regional Office or Headquarter level. It is quite common for the branch manager and RAM to have obtained expert legal and accounting advice within the agency before rendering their opinion so it is unlikely that you will change any minds higher up.

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