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Forensic Accounting Article

Pricing Changes and Claims in Government Contracts

Changes are not the occasional blip on the contracts radar screen. Rather they are as integral to the contracting process as submitting invoices for payment. This fact is not new, since government contracts have always encouraged a "change" mentality as evidenced by the long time presence of the Changes clause.

What is new is greater competitive pressures. In times past contractor estimating techniques along with limited competition allowed considerable room for the unanticipated so that in the end there was not a perceived need to pursue changes. As competitive pressures increase, however, contractor estimating techniques will be forced to reflect prices that barely meet the solicitations's actual requirements. Contract administration will then become more sales oriented, since each change represents a sole-source revenue generating opportunity.
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Termination for Convenience of Federal Government Contracts

The primary objective for contract terminations is to compensate the contractor fairly and negotiate a settlement by agreement. Toward that end, the FAR Part 31 cost principles are simply guides and a contractor need not have extensive accounting data to prove the settlement amount. Estimates, standards, and negotiated amounts are all suitable means of arriving at the settlement amount.
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The Case Against Offsets When Pricing Changes and Delay Claims in Government Contracts


Author Fordham presents a compelling and well thought-out 10-page article that advocates there is no basis for offsetting Eichleay overhead with amounts received as markups on change orders.  In presenting his thesis, Fordham examines the issue from three perspectives.  First, he examines the percentage markup method as required in the Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS).  Second, he examines the mechanics of the Eichleay formula and the variables used for making the computation.  Finally, he examines the decisions by the General Services Board of Contract Appeals and by the Federal Circuit in Wickham Contracting where both the Board and the Court rejected the government’s decrement to the Eichleay value for overhead recovered in priced changes.

This article first appeared in The Procurement Lawyer, Spring 2004, Vol. 39, No 3, American Bar Association Section of Public Contract Law, and is available by request only.

Using Database Analysis to Detect Fraud


In general terms, everything is a database of one kind or another.  But even if the scope is narrowed to its more vernacular meaning, computerized database management systems are probably the largest single repository of electronic data.  As such, this also makes them the most  desired source of auditable data.  Furthermore, their electronic form makes them even more attractive as a source of auditable data. As a result, when the forensic accountant is confronted with the prospect of examining a database it should be considered a windfall for several reasons.

This paper was first presented in 2008 at the US Department of Defense Conference on Fraud Investigation and is available by request only.

Wickham Contracting: A Holocaust


Wickham Contacting is the case where the Federal Circuit proclaimed the Eichleay formula as the only means for computing unabsorbed overhead (delay damages) for Federal government contracts. In this 20 page article, author Fordham reviews the history of delay claim quantification in government contracts as well as the damages theory and explains how the court's decision in Wickham undermines equitable analysis.

This article first appeared in The Clause, December 1995, The Board of Contract Appeals Bar Association, and is available by request only.