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What is involved when monitoring technical compliance for noncommercial requirements?

When monitoring technical compliance for noncommercial requirements,

the COR:

Identifies potential contractor delinquencies

Isolates specific problems with the quality of contractor work

Supports contractor requests

Points out any need for government assistance with monitoring

Reveals actual or anticipated default (i.e., the contractor's failure to perform the contract as required).

Formal monitoring and inspections of supplies are likely to become increasingly less commonplace under the new rules of FASA. Reliance will instead be placed on the integrity of the contractors to deliver acceptable products, with the government retaining contractual protection in all other instances. This means the government will include clauses and terms and conditions in the contract that will allow for government rejection or termination of nonconforming supplies or services or otherwise permit the government to legally protect its contractual interests.

What techniques are used to monitor technical compliance?

The COR monitors technical compliance through techniques such as:

Site visits

Testing of items to be delivered, if applicable

Visual inspections of the work the contractor has done

Analysis of progress charts and technical reports.

What tools are best used to monitor schedule compliance?

Many types of contracts may require the contractor to submit graphic displays to compare actual progress with scheduled progress. It is relatively easy to create these graphics with computer graphic software programs. Graphic displays on which contractor progress can be charted include the following:

Bar and milestone charts. Bar and milestone charts are simple graphic displays, but they are difficult to revise when changes in the data must be documented. These charts can display only events, tasks, time, and contractor progress.

PERT and CPM charts. Program evaluation review technique (PERT) and critical path method (CPM) charts provide a more elaborate graphic display. These charts are useful when a contract involves a complex web of interdependent relationships between what has to be done, when it must be done, and the relationship among various tasks; the order in which events and decisions will take place; and the need for specific resources (materials, equipment, and labor). These charts serve as a planning, contract performance, and management tool. When the contractor makes these charts available to the government, they can be an important contract monitoring tool. In some instances, the government may also develop these charts to use for comparison in monitoring the contract.

Cost Monitoring

What is cost monitoring?

Cost monitoring involves using various procedures and techniques to:

Monitor individual costs to verify the appropriateness of costs

Monitor total costs to detect variances in planned or budgeted expenses.

Cost reimbursement contracts, as compared to fixed price contracts, require the most cost monitoring because of the potential risk to the government that a cost reimbursement contract creates.

How are individual costs monitored?

The COR examines the following factors when monitoring individual costs: Categories of costs. Under cost reimbursement contracts, payments are made to contractors for incurred expenses plus the agreed-upon fee (or profit). These payments include costs in the following categories:

Direct costs

- Labor

- Materials

Indirect costs

- Overhead expenses.

A direct cost is any cost that can be identified specifically with a final cost objective (e.g., a particular contract). Examples include:

Wages of employees working directly on the production of a product

Cost of materials incorporated in the product

Cost of subcontracts needed to accomplish the work.

FAR cost principles state a preference for charging costs directly if the direct cost:

Relates to a specific cost objective or contract, or can be identified with any work unit for which costs are separately accumulated

Benefits no other cost objective.

Indirect costs are defined as those costs that cannot be tied to any one final cost objective (a contract), but are instead common to multiple cost objectives. These costs generally include the following expenses:

Management

Rent and utilities

Accounting

Sales and similar business expenses.

Indirect costs are distributed or allocated proportionally among the contractor's various final cost objectives using accepted accounting principles.

 
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