Explain a Contractors Estimation and Accounting System
A contractors accounting system consists of the methods and records used to identify, assemble, analyze, classify, record, and report a contractors transactions, assets, and liabilities (Defense Contract Management Agency (DCMA), 2019). Conversely, a contractors cost estimation system refers to the policies, practices, and procedures for generating cost data and other data included in cost proposals that are submitted to the government in the expectation of obtaining contract awards (DCMA, 2019). An adequate cost estimation system should maintain a consistent approach, utilize sound estimation techniques, make use of appropriate source data, and follow established procedures as per the federal acquisition regulations (FAR) (DCMA, 2019). A good accounting system needs to be well-designed to prevent mistakes and provide reliable accounting data (DCMA, 2019). The adequacy of a contractors accounting and cost estimation systems determines whether or not they receive a contract offer. This research paper seeks to determine what the literature identifies as the primary characteristics of an adequate accounting and estimation system.
Background to the Study
The requirements for effective cost estimation and accounting systems for government contractors are covered in the Federal Acquisition Regulations (FAR). FAR 15.407-5 acknowledges that acceptable contractor cost estimation systems benefit both the contractor and the government by increasing the reliability and accuracy of individual proposals. For this reason, contractors are required to subject their cost estimation systems to regular audit reviews geared at assessing their reliability. The auditor is to record results of such reviews in a report that also indicates deficiencies and corrective action. Significant deficiencies not corrected by the contractor are a consideration in subsequent proposal negotiations for government contracts. Similarly, the need for an adequate cost accounting system is emphasized in FAR 31.201-1. This provision requires the contractor to accurately capture all direct and indirect costs...
The FAR provisions point to the importance of maintaining an adequate cost estimation and accounting system, thereby providing a rationale for this study.Literature Review
Factors Influencing Accuracy of Cost Estimates
Researchers have carried out multiple studies to identify the factors influencing the adequacy of project cost estimation and accounting systems. Although studies focused specifically on government contractors are limited, a lot of literature is available on cost estimation and accounting in projects generally. In one such study, Hatamleh et al. (2017) distributed a questionnaire to 265 construction project managers to identify the factors that influence the accuracy of cost estimation systems. The study findings showed that the accuracy of cost estimation systems is influenced by several factors including: past pricing experiences, project complexity, how well the scope of the project is defined, the accuracy and reliability of cost information, the cost estimation techniques adopted, and availability of historical data (Hatamleh et al., 2017). Another study conducted by Arif et al. (2015) to analyze the factors influencing the accuracy of cost estimates in construction projects found that that obtaining timely input from subcontractors as well as material manufacturers and suppliers significantly helped to increase the accuracy of cost estimates.
Factors Influencing Quality of Accounting Systems
The accuracy of cost estimates largely depends on the effectiveness of the accounting system (DCMA, 2019). The Defense Procurement and Acquisition Policy (DPAP) identifies several qualities of a good accounting system including: alignment with generally accepted accounting principles applicable to the contractor, proper segregation of direct and indirect costs, a logical and consistent method of allocating indirect costs to cost objectives, exclusion from costs charged to government contracts of amounts not allowable under FAR Part 31, allowing for progress payments, and segregation of preproduction and production costs (DPAP, n.d.). The aspect of segregation of direct and indirect costs is further emphasized in a study by Fitrios (2016), which sought to identify the factors affecting the quality of accounting information from 42 Indonesian hospitals.
Knowledge Gaps
Evidently, a lot…
References
Arif, F., Lodi, S., & Azhar, N. (2015). Factors Influencing Accuracy of Construction Project Cost Estimates in Pakistan: Perception and Reality. International Journal of Consruction Management, 15(1), 59-70.
Defense Contract Management Agency (DCMA) (2019). Contractor Business Management. Defense Contract Management Agency (DCMA). Retrieved from https://www.dcma.mil/Portals/31/Documents/Policy/DCMA-MAN-2301-01.pdf
Defense Procurement and Acquisition Policy (DPAP) (n.d.). Reviewing the Contractor’s Pricing and Accounting Practices. Defense Procurement and Acquisition Policy (DPAP). Retrieved from https://www.acq.osd.mil/dpap/cpf/docs/contract_pricing_finance_guide/vol4_ch3.pdf
Fitrios, R. (2016). Factors that Influence Accounting Information System Implementation and Accounting Information Quality. International Journal of Scientific and Technology Research, 5(4), 192-98.
Accounting Systems There are many ways in accounting to get the job done right but two basic approaches give accountants a foundation to work upon. The purpose of this essay is to examine the differences between manual and computerized accounting systems. This essay will explain the history and development of both types of systems and will break down the advantages and disadvantages of them as well. Explanation and History of the Manual
Accounting Systems Assessing the Current and Future State of The lifeblood of any business is the revenue it generates while managing costs, ensuring profitability of the business, and its long-term survival and growth. The catalyst of managing a business effectively is the use of accounting information, financial analysis, and increasingly in the 21st century, the use of real-time financial analytics on key performance indicators (KPIs) used to manage a business
accounting systems, their tradeoffs, and discusses the differences between countries in their approaches. Each of the cost accounting systems discussed in the articles accomplishes some management goals better than other systems, but there are tradeoffs involved with each. Different nations approach their cost accounting systems differently due at least in part to differences within cultures. For instance, GPK is more suited to countries where the culture is one of uncertainty
Accounting System Implemented at Chic Paints Limited Report submitted in order to fulfil the requirements of AAT Accounting Qualification Internal Controls and Fraud Accounting System Review Weaknesses in the Existing System and Recommendations Cost and Benefit Analysis Mapping of report to outcomes and criteria The purpose of this report is to present the findings of the evaluation of existing accounting system implemented at Chic Paints Limited. Chic Paints Limited hired me as an Accounting Technician of
Professional Profile of the Defense Finance and Accounting Service (DFAS): Chaos What is the Defense Finance and Accounting Service? Ensuring that the men and women who work for the United States military receive their salaries promptly is critical. The Defense Finance and Accounting Service (DFAS) serves this vital function. The DFAS was created in 1991 by the Secretary of Defense, "to standardize, consolidate, and improve accounting and financial functions throughout the Dod. The
Therefore an indigenous accounting profession did not evolve in this period either and no accounting or audit rules were established" (2000, p. 16). In this free-for-all environment, it is difficult to discern any influence from the French accounting profession, except to the extent that its transactions involved the international community where certain documentary practices must be followed in order to conduct international commerce. For example, according to a contemporaneous
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now