March 7, 2000

MEMORANDUM FOR JAMES A. WILLIAMS

DIRECTOR OF PROCUREMENT

INTERNAL REVENUE SERVICE

FROM: Pamela J. Gardiner /s/ Pamela J. Gardiner

Deputy Inspector General for Audit

SUBJECT: Agreed Upon Procedures for ****3a**** (TIRNO-99-R-00009)

In response to your request, the Defense Contract Audit Agency (DCAA) evaluated direct and indirect labor rates. The report pertains only to the performance of agreed upon procedures and does not reflect the results of an audit. Accordingly, DCAA does not express an opinion on the adequacy and compliance of the submitted cost or pricing data.

In summary, DCAA took exception to the proposed escalation and general and administration rates. In addition, DCAA did not perform a formal review of the contractor's purchasing, estimating, and accounting systems.

The information in this report should not be used for purposes other than that intended without prior consultation with the Treasury Inspector General for Tax Administration regarding its applicability.

If you have any questions, please contact me at (202) 622-6510, or your staff may call Maurice S. Moody, Associate Inspector General for Audit (Headquarters Operations & Exempt Organizations Programs), at (202) 622-8500.

The Office of Inspector General for Tax Administration has no objection to the release of this report, at the discretion of the contracting officer, to duly authorized representatives of the contractor.

The contractor information contained in this report is proprietary information. The restrictions of 18 USC 1905 must be followed in releasing any information to the public.

This report may not be released without the approval of this office, except to an agency requesting the report for use in negotiating or administering a contract with the contractor.

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