Ransford S. McCourt, PE, PTOE Principal, West Coast Region Manager.

Ransford S. McCourt, PE, PTOERansford S. McCourt, PE, PTOE

Principal, West Coast Region Principal, West Coast Region ManagerManager

FAR & Your FAR & Your BusinessBusiness Why are we required to follow Federal rules?Why are we required to follow Federal rules?

What aspects of Federal Rules are important What aspects of Federal Rules are important to my business?to my business?

How does this relate to the conduct of How does this relate to the conduct of project work with ODOT?project work with ODOT?

Which rules are most relevant to my Which rules are most relevant to my business?business?

23 CFR 17223 CFR 172Administration of A&E Administration of A&E ContractsContracts

Establishes the basis for A&E contracts to Establishes the basis for A&E contracts to follow federal procurement for Federal follow federal procurement for Federal Aid projectsAid projects

Keys:Keys:Methods of ProcurementMethods of ProcurementCompensation MethodsCompensation MethodsAudit requirementsAudit requirementsQualification Based Selection (Brooks Act)Qualification Based Selection (Brooks Act)Small Purchase Procedure s100KSmall Purchase Procedure s100KCognizant AuditsCognizant AuditsAbility to be flexible in audit approach (small Ability to be flexible in audit approach (small

business)business)

Best Web Site Best Web Site ReferencesReferences

http://www.fhwa.dot.gov/programahttp://www.fhwa.dot.gov/programadmin/172qa.cfm#r17dmin/172qa.cfm#r17

http://www.fhwa.dot.gov/http://www.fhwa.dot.gov/programadmin/mega/programadmin/mega/

USC Title 48 Part 36USC Title 48 Part 36Contracting Contracting ProceduresProcedures

FHWA uses this to guide the procedures FHWA uses this to guide the procedures in contracting for servicesin contracting for services

Keys:Keys:Contracting ProceduresContracting ProceduresSelection ProcessSelection ProcessEvaluation ProcessEvaluation ProcessSelection AuthoritySelection AuthorityNegotiation ProcessNegotiation ProcessDebriefing ProcessDebriefing ProcessPerformance Evaluation ProcessPerformance Evaluation Process

Other USC Other USC SectionsSections

Basis for AuditsBasis for Audits23 USC Sec.112 b)(2)(C) – The code 23 USC Sec.112 b)(2)(C) – The code

under which DOT operates calls for under which DOT operates calls for audits and relates them to FAR = 48 audits and relates them to FAR = 48 CFR Part 31CFR Part 31

For firms conducting Federal Aid For firms conducting Federal Aid projectsprojects

Best Web Site Best Web Site ReferenceReference

http://www.fhwa.dot.gov/programahttp://www.fhwa.dot.gov/programadmin/121205_48cfr.cfmdmin/121205_48cfr.cfm

48 CFR48 CFRThe FARThe FAR

Contract Cost Principles and Contract Cost Principles and ProceduresProceduresOverhead PrinciplesOverhead PrinciplesReasonable Compensation Guides Reasonable Compensation Guides

48CFR31.205-6 (5) (b) 48CFR31.205-6 (5) (b) Unallowable CostsUnallowable Costs

Marketing CostMarketing CostContributionsContributionsBad DebtBad DebtTravel Cost in excess of GSA per diem (31.206-Travel Cost in excess of GSA per diem (31.206-

46)46)

Reasonable Reasonable CompensationCompensation

OFPP Act Section 39 – 2008 maximum OFPP Act Section 39 – 2008 maximum benchmark compensation $612,196benchmark compensation $612,196

Reasonable Basis:Reasonable Basis:Compare to other firms of same sizeCompare to other firms of same sizeCompensation practice of industryCompensation practice of industryCompensation in geographic areasCompensation in geographic areasGovernmental work vs non-governmental workGovernmental work vs non-governmental workOutside sources of informationOutside sources of information

Balance between well managed firms and Balance between well managed firms and those that are not in determining those that are not in determining reasonableness – reasonableness –

Salary vs performance incentive for Salary vs performance incentive for compensation style of management compensation style of management

FAR contract clausesFAR contract clausesTitle 48 Section Title 48 Section 36.60936.609

Responsibility of DesignerResponsibility of DesignerDesign within funding limitDesign within funding limitKeys:Keys:

The value of construction must be stated up The value of construction must be stated up front in procurement processfront in procurement process

Part of negotiation processPart of negotiation processNot used where performance is overriding Not used where performance is overriding

consideration, where little design work is consideration, where little design work is neededneeded

Not responsible for changes outside controlNot responsible for changes outside controlShould define limits in contract – indexes, Should define limits in contract – indexes,

rangerange

FAR contract clausesFAR contract clausesTitle 48 Section Title 48 Section 36.60936.609

Design errors and deficienciesDesign errors and deficienciesResponsible for Responsible for necessarynecessary

corrections at no cost to agencycorrections at no cost to agencyNegotiableNegotiableAgency does not have to require Agency does not have to require

redesignredesignAvoid vague terms – “inadequacies”Avoid vague terms – “inadequacies”

Most Relevant Business Most Relevant Business Concerns Working for Concerns Working for

ODOTODOT

Selection ProcessSelection ProcessCost AccountingCost AccountingAuditingAuditingCompensationCompensationPerformance ReviewPerformance ReviewResponsibility of DesignerResponsibility of Designer

Oregon Department Oregon Department of Transportationof Transportation

External AuditsExternal Audits

Margaret Cole, External Audit ManagerMargaret Cole, External Audit Manager

External External AuditsAudits Who we are, What we do, Why we do itWho we are, What we do, Why we do it

Schedule of Indirect Cost Rate/Overhead RateSchedule of Indirect Cost Rate/Overhead Rate

The Process, What we look forThe Process, What we look for

CognizanceCognizance

IntroductionIntroduction

Oregon Department of Transportation’s External Audit Oregon Department of Transportation’s External Audit section is comprised of Margaret Cole, Audit Manager, section is comprised of Margaret Cole, Audit Manager, Ruth Wu, CPA and Inna Cutting, Senior Auditors. Our Ruth Wu, CPA and Inna Cutting, Senior Auditors. Our work is performed in accordance with Generally Accepted work is performed in accordance with Generally Accepted Government Auditing Standards (GAGAS) as issued by Government Auditing Standards (GAGAS) as issued by the U.S. Government Accountability Office (GAO). the U.S. Government Accountability Office (GAO).

Federal law 23 USC Sec.112 (b) (2) (C) requires audits to Federal law 23 USC Sec.112 (b) (2) (C) requires audits to be in compliance with the cost principles in Federal be in compliance with the cost principles in Federal Acquisition Regulations (FARs) part 31. Acquisition Regulations (FARs) part 31.

Overhead RatesOverhead Rates

A Schedule of Indirect Costs is often referred to as an Overhead Rate. A Schedule of Indirect Costs is often referred to as an Overhead Rate.

The ProcessThe ProcessThe ProcessThe Process

Audit Services:Audit Services:• Desk ReviewDesk Review• Independent CPA Working Paper ReviewIndependent CPA Working Paper Review

What do we look forWhat do we look for?? • We look at whether or not costs are We look at whether or not costs are allocable,allocable, allowable, and allowable, and

reasonablereasonable by using the Federal Acquisition Regulations by using the Federal Acquisition Regulations System 48 Chapter 1 Part 31 (FARS), Cost Accounting System 48 Chapter 1 Part 31 (FARS), Cost Accounting Standards (CAS), AASHTO Audit and Accounting Guide, Standards (CAS), AASHTO Audit and Accounting Guide, DCAA Contract Audit Manual, Independent Survey data etc. DCAA Contract Audit Manual, Independent Survey data etc.

CognizanceCognizance

Cognizance is a term created by the National Highway Cognizance is a term created by the National Highway System (NHS) Act – Section 307. System (NHS) Act – Section 307.

The purpose of the act was to remove caps on overhead The purpose of the act was to remove caps on overhead rates and to avoid duplication of audit work.rates and to avoid duplication of audit work.

A cognizant audit is an audit by a federal or state agency A cognizant audit is an audit by a federal or state agency of the indirect cost rate conducted in accordance with FAR of the indirect cost rate conducted in accordance with FAR part 31. The cognizant agency will issue either an audit part 31. The cognizant agency will issue either an audit report or a letter of concurrence. report or a letter of concurrence.

WebsitesWebsites ODOT’s Billing Rate Policy:ODOT’s Billing Rate Policy:

http://www.oregon.gov/ODOT/CS/OPO/docs/aepage/AGR0601.pdf#bhttp://www.oregon.gov/ODOT/CS/OPO/docs/aepage/AGR0601.pdf#brpolicyrpolicy

AASHTO Audit and Accounting Guide: AASHTO Audit and Accounting Guide: http://www.transportation.org/?siteid=43http://www.transportation.org/?siteid=43

FAR part 31: FAR part 31: http://www.access.gpo.gov/nara/cfr/waisidx_04/48cfr31_04.htmlhttp://www.access.gpo.gov/nara/cfr/waisidx_04/48cfr31_04.html

DCAA Contract Audit Manual: DCAA Contract Audit Manual: httphttp://www.dcaa.mil/://www.dcaa.mil/

23 CFR 172--Administration of Engineering and Design Related 23 CFR 172--Administration of Engineering and Design Related Service Contracts Q & A: Service Contracts Q & A: http://www.fhwa.dot.gov/programadmin/172qa.cfmhttp://www.fhwa.dot.gov/programadmin/172qa.cfm

Where to go for QuestionsWhere to go for Questions

Give Us a Call or Check our Website:Give Us a Call or Check our Website:

http://www.oregon.gov/ODOT/CS/EXTERNALAUDITS/http://www.oregon.gov/ODOT/CS/EXTERNALAUDITS/

Margaret Cole Margaret Cole External Audit Manager External Audit Manager (503) 986-3213(503) 986-3213

Marlene HartingerMarlene Hartinger Chief of Audit ServicesChief of Audit Services (503) 986-4177(503) 986-4177

Oregon Oregon Department of Department of TransportationTransportation

ODOT Procurement OfficeODOT Procurement Office Donnell Fowler, CPPB – Procurement Donnell Fowler, CPPB – Procurement

Operations LiaisonOperations Liaison Michelle Remmy – Chief Procurement Michelle Remmy – Chief Procurement

OfficerOfficer

Billing Rate UpdateBilling Rate Update

What is the issue with Billing Rates?What is the issue with Billing Rates?

4.5% Escalation Fee – What does 4.5% Escalation Fee – What does this mean?this mean?

What do I need to submit for rate What do I need to submit for rate increase/decrease?increase/decrease?

Profit Fee WorksheetProfit Fee Worksheet

Profit Worksheet is a TOOLProfit Worksheet is a TOOL

Independently fill out the formIndependently fill out the form

Both parties bring to the table for Both parties bring to the table for discussiondiscussion

Analysis and InstructionsAnalysis and Instructions