Documentation of Proprietary Data as Evidential Matter During Government Audits

This article appeared in the OGC Adviser, Vol. 2, No. 4, July 1978. During an audit by the Defense Contract Audit Agency (DCAA), a contractor for the Army told auditors that they must not use information about its sources of supply or take copies of proprietary data from the premises. DCAA refused to conduct an audit under these rules. During a hearing on the matter, the Government contended that the contractor's rules would impair the auditor's independence in gathering information he considered necessary to substantiate his report; impair the auditor's ability to gather sufficient competent evidence by excluding such necessary data as vendors' names; and impair the auditor's ability to review the audit matters with a supervisor. In its decision, the Armed Services Board of Contract Appeals ruled that the contractor's audit limitations were not justified, since the contractor had not shown unauthorized use or disclosure by the Government of proprietary data, and neither of these results must necessarily follow if the auditors are allowed to record and remove confidential information. The contractor cannot refuse to allow auditors to document their workpaper files with its vendor names, even though the names represent sources of supply developed over 20 years. Nor can the contractor prohibit the removal from its plant of those documented workpapers during and after completion of the audit.