(Editor’s Note.  In the last issues of the GCA REPORT and DIGEST we reported on the government’s cessation of its “rolling forward” procedure that allowed unresolved questioned costs to be moved up to subsequent years when their allowability cannot be settled in the current period and industry’s near-unanimous rejection of the cessation.  The following is the government’s recent response to industry’s position.)

The Defense Contract Management Agency rejected a recent request by the National Defense Industrial Association (NDIA) that it withdraw a memo discouraging use of the “roll forward.”  NDIA said it would lead to the cessation of a procedure that effectively establishes final billing rates and would contradict the FAR provisions that encourage quick closeouts, pay forwards and roll forwards that allow for timely closeout of contracts.  Rebecca Davies, DCMA’s executive director for contract operations said in an undated letter to NDIA that neither the memo nor the accompanying legal opinion precludes use of roll forwards but only those uses that have no support in “recognized cost accounting concepts.”  She said that DCMA shares their desire to expeditiously establish billing rates and close out contracts and that prior DCMA memos endorsed use of roll forwards when allowability determinations depend on a future event and roll forwards comply with cost accounting standards.  She concluded that COs should consider use of quick closeout rates and “other contract closeouts solutions” such as litigation of contested costs.  

DCMA’s  legal opinion referenced by Ms. Davies states that the rationale for rolling forward disputed costs to settle billing rates in a current period, though “superficially appealing, violates CAS because it shifts a cost that is properly assigned to one period to another (and by implication the violation also applies to non-CAS covered contracts since CAS provisions on assigning costs to time periods are mirrored in the FAR).  The opinion states there is no basis to roll forward a cost where the contractor’s otherwise CAS-compliant cost accounting practices provide a “clear basis” for assigning it to any one specific period.  A shift of a cost from one period to another is justified only where “an initial determination of the period for assignment of the cost was found to be erroneous.”

{TAG_FORM_TITLE}