Post contracting cost audit

Any company in the aerospace, telecommunications, electronics or engineering fields (Or any other field where provided for in the contract), which is classed as a mandatory supplier under a government contract, can be liable to a post factum cost price review (Article 54 of the 1963 finance law and secondary legislation of 20 December 2000 and 1 July 1986).

Post factum cost price reviews may be carried out in the following situations:

  Cost analysis and monitoring for a contract to which the administration decides to apply cost review in application of legal or regulatory measures or by virtue of a contractual clause;
  To determine the final price of a contract awarded on a provisional price basis.

This review is assisted by the company’s accounts department, which is required:

  to provide a description of its accounting system, and certify that the methods employed for recording expenditure and supervising accounting of the job:

• Enable the identification of production and non-production expenses and the calculation of inventory values,
• Are based on sound and stable expense allocation formulae,
• Do not lead to the allocation of atypical expenditure to the services executed on behalf of the government by comparison with those executed for other customers,
• Are correctly implemented by the manufacturer;

  to provide the authorised agents of the government with general documents providing all necessary information for the calculation of costs for common units of measure and expense rates. These documents are always to be supplied where the company holds contracts subject to cost review. They must be provided within one month following the general meeting at which they are ratified, and at the latest six months after the end of the financial year;
  to supply, within time limits detailed in the demand, specific information concerning the contract subject to cost review (job orders, stores dockets, job cost sheets, operation sheets, costed parts lists, production orders, etc.) or equivalent documents.

Companies are to provide at least one cost statement for all goods and services covered by a government order. The level of information expected by the administration is given in the accounting requirements clause in the contract. This information must be compatible with the accounting organisation referred to above.

The company is required to provide authorised agents with all technical and accounting information relating to the cost of goods and services purchased. This information must be supplied within two months of completion of an item made up of:

  Each contract and each main package as defined by the contract;
  Each contract item (unless specifically indicated in the contract);
  Each delivery tranche and/or each contract in the case of repetitive work exceeding the framework of a single contract, and which can be considered as a homogeneous series.

The company must allow and facilitate possible additional verification, on the basis of vouchers and in situ, of the accuracy of this information. Any sanctions, relating in particular to refusal to submit the requested vouchers before the deadline, are stated in the accounting requirements clause.

More about