Rethinking Expressly Unallowable Costs: What the Defense Contract Audit Agency’s Guidelines Mean for Federal Contractors

The auditors for the Defense Contract Audit Agency (DCAA) received additional guidance from DCAA further defining and focusing on the identification of expressly unallowable costs and the recovery of penalties for those unallowable costs. Federal contractors should consider this guidance carefully; what the DCAA instructs its auditors regarding unallowable costs will directly impact contractors that are the subject of the DCAA auditor’s review. On December 18, 2014, DCCA issued MRD 14-PAC-021(R), Audit Alert Distributing a Listing of Cost Principles That Identify Expressly Unallowable Costs.  The guidance contains over 32 pages of cost principle excerpts and directs the DCAA auditor to question
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