DCMA Updates Forward Pricing Rate Recommendation Policy

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On January 11, 2011, Ronald Youngs, Acting Executive Director, Contracts, Defense Contract Management Agency (“DCMA”), issued Information Memorandum No. 11-108 regarding Forward Pricing Rate Recommendations (“FPRR”). This memorandum implemented a mandate included in the September 14, 2010 memorandum of Ashton B. Carter, Under Secretary of Defense for Acquisition, Technology & Logistics, entitled “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending.” In an attempt to reduce the overlap between DCMA and the Defense Contract Audit Agency (“DCAA”), Mr. Carter directed that “where DCAA has completed an audit of a particular contractor’s [Forward Pricing Rate Proposal (“FPRP”)], DCMA shall adopt the DCAA recommended rates as the Department’s position regarding those rates.”

To implement this requirement, DCMA has updated its policy regarding FPRR development as follows.

- When a contractor submits a new FPRP, the Administrative Contracting Officer (“ACO”) will review the proposal and may issue a new FPRR according to the guidelines in Paragraph 6 of the FPR Instruction (discussing the development of pre-negotiation objectives). After issuing a new FPRR, the ACO will inform DCAA of any new information that may impact the rates or the FPRP audit. If the FPRP has significant changes that require a new audit, DCMA will issue a FPRR pending receipt of the audit report....

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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