Defense contract audit manual 3-104.13

This letter shall identify the beneficiary specific claims included in the recoupment action. The contractor has discretion in developing its own demand letters as long as it includes the information required by paragraph If at any time all or part of an overpayment is offset, the contractor shall prepare an Explanation Of Benefits EOB for each claim against which offset was made and shall send a notice to the overpaid party explaining the overpayment and the offset.

If the offset is against the provider, the contractor shall advise the provider that reimbursement for the claim against which the offset was made shall not be sought from the patient on whose behalf the services were provided. Any requests for offset from other Government agencies and orders for garnishment issued by the courts shall be handled under the laws of the state s. Enter the rate which would be collected under the Federal Claims Collection Act or the rate allowed by applicable state law, whichever is lower.

Interest shall begin to accrue from the date of this letter. The contractor shall keep DHA informed regarding procedures, policies and changes to those procedures and policies. The contractor shall obtain DHA approval of these procedures and policies.

The contractor shall respond within normal correspondence timeliness standards, but in no case shall delay in excess of 30 days from receipt of any communication from the debtor.

The contractor shall primarily consider the size of the overpayment and the financial status of the beneficiary. If installment payments are approved, the contractor shall enter into a repayment agreement with the debtor. The contractor may include interest in the repayment agreement.

If the debtor fails to sign and return a written agreement, the contractor may still collect installment payments. However, if the debtor fails to remit the agreed-upon monthly installments, the contractor shall treat the case in accordance with the instructions for handling delinquent installments see paragraph The contractor shall acknowledge each payment received in writing.

The contractor shall indicate the amount of the payment received, the amounts applied to interest, if applicable, and principal and the current balance due in the acknowledgment.

The contractor shall maintain an accounting record of such payments which shall be subject to audit at all times. If it is alleged by the beneficiary that monthly installments cannot be made to complete the refund within 24 months, the contractor shall carefully review the case. The contractor shall assist the beneficiary to the fullest reasonable extent by allowing reasonable terms.

The contractor shall treat a ny offsets so collected as an installment payment. The contractor shall process and pay s uspended claims normally. Policies related to such collections shall be subject to DHA approval and shall comply with all applicable state and local laws governing collections and promissory notes. If the contractor elects to charge interest on overpayments, the contractor shall not begin to accrue interest earlier than 30 days following notice of the overpayment, if payment is made within the 30 days following notice.

The contractor shall not charge i nterest rates that exceed the rate which would be collected under the FCCA or the rate allowed by applicable state law, whichever is the lower. The contractor shall send a written delinquency notice 35 days after the established due date if an installment payment, or any portion thereof, remains outstanding.

If debtor does not remit the delinquent amount within 30 days of the initial delinquency notice, the contractor shall take appropriate action under the laws of the appropriate state. Should the debtor fail to bring the account to a current status, but, instead, remit the missed installment or a portion thereof, the contractor shall contact the debtor and attempt to resolve the delinquency problem.

The contractor shall not refer a delinquent case to collection agencies, or take other similar action until at least two full installment payments are past due. However, the contractor may set and maintain a n offset flag on all delinquent installment cases. If a service or supply which is not a TRICARE benefit was paid in error, the reversal of the payment decision constitutes an initial adverse determination. The overpaid party may appeal if an appealable issue exists. Such appeals are subject to the requirements and time limits outlined in Chapter The contractor shall identify and properly account for a ny funds recouped by offset after a reconsideration has been requested.

The appealing party that the recoupment of the overpayment shall continue by offset. The contractor shall not terminate offset action because of an appeal. When a requirement to recoup TRICARE funds is identified in a Formal Review Decision or a Final Decision resulting from a hearing, the case will be forwarded to the contractor for possible recoupment action in accordance with this section.

The contractor shall carefully review a ll requests from debtors for relief from all or a portion of their indebtedness, including requests for relief from the assessment of interest, penalties, and administrative charges.

This does not apply to automatic waiver of interest on accounts paid within the first 30 days. After a case is established, the contractor shall take appropriate corrective action to stop or amend a recoupment when a contractor error is discovered. The contractor review shall be conducted by someone in a position of higher authority within the contractor organization than the individual who originated the recoupment action.

Following the review, the contractor shall respond to the debtor. The response shall explain that further administrative appeal is not available. If the review results in a decision to recoup the overpayment, the contractor shall advise the debtor that full payment or other satisfactory arrangements for repayment must be made within 30 days. However, the contractor shall retain any amount voluntarily refunded pending resolution of the fraud issue.

The contractor shall send only c opies of documentation of the refund and all other evidence relating to the case to the DHA Program Integrity Office PI. Any recoupment action shall be taken in accordance with Chapter If the debtor is on offset, the contractor shall terminate the offset immediately.

Until the bankruptcy is resolved, the contractor shall take no further recoupment action and the contractor shall be bound by the laws of the state and the court ruling. Bankruptcy cases for debts which were paid with financially underwritten funds are retained by the contractor for appropriate action.

The contractor shall forward a ll bankruptcy notices to DHA. Contracting officer determination shall be used for the following, with the indicated cognizant contracting officer or cognizant Federal agency official responsible for establishing the final indirect cost rates:.

The contractor, contracting officer, and auditor must work together to make the proposal, audit, and negotiation process as efficient as possible. The contracting officer may grant, in writing, reasonable extensions, for exceptional circumstances only, when requested in writing by the contractor. See the clause at Contracting offices having significant dollar interest shall be invited to participate in the negotiation and in the preliminary discussion of critical issues. Individuals or offices that have provided a significant input to the Government position should be invited to attend.

Pursuant to 10 U. A Adequate documentation on the costs; and. A The disposition of significant matters in the advisory audit report;. B Reconciliation of all costs questioned, with identification of items and amounts allowed or disallowed in the final settlement as well as the disposition of period costing or allocability issues;.

C Reasons why any recommendations of the auditor or other Government advisors were not followed; and. D Identification of certified cost or pricing data submitted during the negotiations and relied upon in reaching a settlement; and. The agreement shall be signed by the contractor and the auditor;.

Cognizant Government agencies and educational institutions are listed in the Directory of Federal Contract Audit Offices see The agency shall follow the procedures outlined in If this is not possible, an earlier audit may be used, but appropriate steps should be taken to identify and evaluate significant variations in costs incurred or in bases used that may have a bearing on the reasonableness of the proposed rates.

However, in the case of smaller contracts i. B It is reasonably apparent that another audit would have little effect on the rates finally agreed upon and the potential for overpayment of indirect cost is relatively insignificant.

The indirect cost rates negotiated and approved by the cognizant agency for indirect costs will be used by all Federal agencies that also award contracts to these same State and local governments. In such cases, a negotiated indirect cost rate ceiling may be incorporated into the contract for prospective application. For cost sharing under research and development contracts, see Examples of such circumstances are when the proposed contractor-.

Cost amounts will be considered relatively insignificant when the total unsettled direct costs and indirect costs to be allocated to any one contract, task order, or delivery order does not exceed the lesser of-.

The risk assessment shall include-. It covers the assessment of penalties against contractors which include unallowable indirect costs in-. Unless a waiver is granted pursuant to Prior determinations of unallowability may be evidenced by-. The letter shall state that the determination is a final decision under the Disputes clause of the contract. Demanding payment of the penalty is separate from demanding repayment of any paid portion of the disallowed cost.

For Use an alternate equitable method if the cost was not paid evenly over the fiscal year. The cognizant contracting officer shall waive the penalties at Use the clause at Generally, covered contracts are those which contain one of the clauses at This subpart prescribes policies and procedures for-. However, before issuing the notice, the contracting officer responsible for administering the contract shall make every reasonable effort to reach a satisfactory settlement through discussions with the contractor.

The purpose of the notice is to notify the contractor as early as practicable during contract performance that the cost is considered unallowable under the contract terms and to provide for timely resolution of any resulting disagreement. In the event of disagreement, the contractor may submit to the contracting officer a written response. Any such response shall be answered by withdrawal of the notice or by making a written decision within 60 days.

The contracting officer shall insert the clause at Cost-reimbursement contracts, the cost-reimbursement portion of fixed-price contracts, letter contracts that provide for reimbursement of costs, and time-and-material and labor-hour contracts provide for disallowing costs during the course of performance after the costs have been incurred.

The following procedures shall apply:. When contracting officers receive vouchers directly from the contractor and, with or without auditor assistance, approve or disapprove them, the process shall be conducted in accordance with the normal procedures of the individual agency.

This subpart prescribes policies and procedures regarding actions to be taken when a contractor enters into proceedings relating to bankruptcy. It establishes a requirement for the contractor to notify the contracting officer upon filing a petition for bankruptcy.

It further establishes minimum requirements for agencies to follow in the event of a contractor bankruptcy. The contract administration office shall take prompt action to determine the potential impact of a contractor bankruptcy on the Government in order to protect the interests of the Government. Production surveillance is a function of contract administration used to determine contractor progress and to identify any factors that may delay performance.

Production surveillance involves Government review and analysis of-. This subpart applies to all contracts for supplies or services other than construction contracts, and Federal Supply Schedule contracts.

See part 37 , especially subpart The contractor is responsible for timely contract performance. The Government will maintain surveillance of contractor performance as necessary to protect its interests. When the contracting office retains a contract for administration, the contracting officer administering the contract shall determine the extent of surveillance. Contracting officers shall assign a criticality designator to each contract in the space for designating the contract administration office, as follows:.

Reporting requirements shall be limited to that information essential to Government needs and shall take maximum advantage of data output generated by contractor management systems. This advice shall-.

The contracting officer responsible for processing and executing novation and change-of-name agreements shall be determined as follows:. If the contractor received its contract under subpart 8. This information should include the items identified in Any submission should be accompanied by supporting documentation.

See Examples of such transactions include, but are not limited to-. However, whether there is a purchase of assets or a stock purchase, there may be issues related to the change in ownership that appropriately should be addressed in a formal agreement between the contractor and the Government see If the responsible contracting officer determines that a conflict of interest cannot be resolved, but that it is in the best interest of the Government to approve the novation request, a request for a waiver may be submitted in accordance with the procedures at 9.

It shall ordinarily provide in part that-. This format may be adapted to fit specific cases and may be used as a guide in preparing similar agreements for other situations. The term "the contracts," as used in this Agreement, means the above contracts and purchase orders and all other contracts and purchase orders, including all modifications, made between the Government and the Transferor before the effective date of this Agreement whether or not performance and payment have been completed and releases executed if the Government or the Transferor has any remaining rights, duties, or obligations under these contracts and purchase orders.

Included in the term "the contracts" are also all modifications made under the terms and conditions of these contracts and purchase orders between the Government and the Transferee, on or after the effective date of this Agreement. The Transferee also assumes all obligations and liabilities of, and all claims against, the Transferor under the contracts as if the Transferee were the original party to the contracts.

The Transferee by this Agreement becomes entitled to all rights, titles, and interests of the Transferor in and to the contracts as if the Transferee were the original party to the contracts. Following the effective date of this Agreement, the term "Contractor," as used in the contracts, shall refer to the Transferee. The Transferor waives notice of, and consents to, any such future modifications. Each party has executed this Agreement as of the day and year first above written.

The contractor shall forward to the responsible contracting officer three signed copies of the Change-of-Name Agreement, and one copy each of the following:. The contracting officer may request the total dollar value as amended and the remaining unpaid balance for each contract. The term "the contracts," as used in this Agreement, means the above contracts and purchase orders and all other contracts and purchase orders, including all modifications, made by the Government and the Contractor before the effective date of this Agreement whether or not performance and payment have been completed and releases executed if the Government or the Contractor has any remaining rights, duties, or obligations under these contracts and purchase orders.

Situations may occur during contract performance that cause the Government to order a suspension of work, or a work stoppage. This subpart provides clauses to meet these situations and a clause for settling contractor claims for unordered Government caused delays that are not otherwise covered in the contract.

A suspension of work under a construction or architect-engineer contract may be ordered by the contracting officer for a reasonable period of time. If the suspension is unreasonable, the contractor may submit a written claim for increases in the cost of performance, excluding profit. Issuance of a stop-work order shall be approved at a level higher than the contracting officer. Stop-work orders shall not be used in place of a termination notice after a decision to terminate has been made.

This clause is not applicable if the contract otherwise specifically provides for an equitable adjustment because of the delay or interruption; e. The clause use is optional when a fixed-price contract is contemplated for services, or for supplies that are commercial or modified-commercial products. This subpart provides policies and establishes responsibilities for recording and maintaining contractor performance information.

This subpart does not apply to procedures used by agencies in determining fees under award or incentive fee contracts. See subpart CPARS is the official source for past performance information. Past performance evaluations shall be prepared at least annually and at the time the work under a contract or order is completed.

Past performance evaluations are required for contracts and orders as specified in paragraphs b through f of this section, including contracts and orders performed outside the United States. These evaluations are generally for the entity, division, or unit that performed the contract or order. Past performance information shall be entered into CPARS, the Governmentwide evaluation reporting tool for all past performance reports on contracts and orders.

Except as provided in paragraphs e , f , and h of this section, agencies shall prepare evaluations of contractor performance for each contract as defined in FAR part 2 that exceeds the simplified acquisition threshold and for each order that exceeds the simplified acquisition threshold. Agencies are required to prepare an evaluation if a modification to the contract causes the dollar amount to exceed the simplified acquisition threshold.

Agencies shall prepare an evaluation of contractor performance for each order that exceeds the simplified acquisition threshold that is placed under a Federal Supply Schedule contract or placed under a task-order contract or a delivery-order contract awarded by another agency i.

Agencies placing orders under their own multiple-agency contract shall also prepare evaluations for their own orders. This evaluation shall not consider the requirements under paragraph g of this section.

Agencies are required to prepare an evaluation if a modification to the order causes the dollar amount to exceed the simplified acquisition threshold. For single-agency task-order and delivery-order contracts, the contracting officer may require performance evaluations for each order in excess of the simplified acquisition threshold when such evaluations would produce more useful past performance information for source selection officials than that contained in the overall contract evaluation e.

This evaluation need not consider the requirements under paragraph g of this section unless the contracting officer deems it appropriate.

The contracting officer shall-. The following payment or nonpayment situations are not considered to be unjustified:. A There is a contract dispute on performance.

B A partial payment is made for amounts not in dispute. C A payment is reduced due to past overpayments. D There is an administrative mistake. E Late performance by the subcontractor leads to later payment by the prime contractor.

Agency procedures for the past performance evaluation system shall-. Those individuals identified may obtain information for the evaluation of performance from the program office, administrative contracting office, audit office, end users of the product or service, and any other technical or business advisor, as appropriate; and.

The evaluation should reflect how the contractor performed. The evaluations should be tailored to the contract type, size, content, and complexity of the contractual requirements. Each evaluation factor, as listed in paragraph b 2 of this section, shall be rated in accordance with a five scale rating system i.

The ratings and narratives must reflect the definitions in the tables Table or Table of this section. The contractor will receive a CPARS-system generated notification when an evaluation is ready for comment.

Contractors shall be afforded up to 14 calendar days from the date of notification of availability of the past performance evaluation to submit comments, rebutting statements, or additional information.

Agencies shall provide for review at a level above the contracting officer to consider disagreements between the parties regarding the evaluation. The ultimate conclusion on the performance evaluation is a decision of the contracting agency.

Copies of the evaluation, contractor response, and review comments, if any, shall be retained as part of the evaluation. These evaluations may be used to support future award decisions, and should therefore be marked "Source Selection Information".

The completed evaluation shall not be released to other than Government personnel and the contractor whose performance is being evaluated during the period the information may be used to provide source selection information. Disclosure of such information could cause harm both to the commercial interest of the Government and to the competitive position of the contractor being evaluated as well as impede the efficiency of Government operations.

Evaluations used in determining award or incentive fee payments may also be used to satisfy the requirements of this subpart.

A copy of the annual or final past performance evaluation shall be provided to the contractor as soon as it is finalized. These evaluations, including any contractor-submitted information with indication whether agency review is pending , become available for source selection officials not later than 14 days after the date on which the contractor is notified of the evaluation's availability for comment. The Government shall update CPARS with any contractor comments provided after 14 days, as well as any subsequent agency review of comments received.

Past performance evaluations for classified contracts and special access programs shall not be reported in CPARS, but will be reported as stated in this subpart and in accordance with agency procedures. Agencies shall ensure that appropriate management and technical controls are in place to ensure that only authorized personnel have access to the data and the information safeguarded in accordance with The contractual performance of the element or sub-element being evaluated was accomplished with few minor problems for which corrective actions taken by the contractor were highly effective.

To justify an Exceptional rating, identify multiple significant events and state how they were of benefit to the Government. A singular benefit, however, could be of such magnitude that it alone constitutes an Exceptional rating.

Also, there should have been NO significant weaknesses identified. The contractual performance of the element or sub-element being evaluated was accomplished with some minor problems for which corrective actions taken by the contractor were effective. To justify a Very Good rating, identify a significant event and state how it was a benefit to the Government.

There should have been no significant weaknesses identified. Performance meets contractual requirements. The contractual performance of the element or sub-element contains some minor problems for which corrective actions taken by the contractor appear or were satisfactory.

There should have been NO significant weaknesses identified. Performance does not meet some contractual requirements. The contractual performance of the element or sub-element being evaluated reflects a serious problem for which the contractor has not yet identified corrective actions.

To justify Marginal performance, identify a significant event in each category that the contractor had trouble overcoming and state how it impacted the Government.

A Marginal rating should be supported by referencing the management tool that notified the contractor of the contractual deficiency e. Performance does not meet most contractual requirements and recovery is not likely in a timely manner.

To justify an Unsatisfactory rating, identify multiple significant events in each category that the contractor had trouble overcoming and state how it impacted the Government.

A singular problem, however, could be of such serious magnitude that it alone constitutes an unsatisfactory rating. An Unsatisfactory rating should be supported by referencing the management tools used to notify the contractor of the contractual deficiencies e.

Exceeded all statutory goals or goals as negotiated. Complied with FAR