Processes to Consider Regarding Waste and Inefficiencies When Implementing the New Standards

When a cost incurred does not contribute to progress in satisfying the performance obligation, the cost needs to be accounted for separately.  Examples include:

  • Costs incurred related to rework or wasted materials would be excluded from input measurement, as these costs do not represent the transfer of goods or services to the customer.
  • Significant inefficiencies in the contractor’s performance that were not reflected in the contract price.

What processes need to be considered with regard to waste and inefficiencies?

Ask yourself the following questions to see if you are prepared:

  • Who within your organization is responsible to identify waste and inefficiencies?
  • How will you define waste and inefficiencies?
  • Who is determining the dollar value to assign to the waste and inefficiencies?
  • What education do you need to provide to these individuals to assist in their assessment of waste and inefficiencies?
  • How are you getting the appropriate information out of your system to correctly report this information?
  • Do you need to make changes to your system to assist in the above assessments?
  • Do any changes need to be made in internal controls to properly account for waste and inefficiencies?

KatzAbosch has individuals experienced in contractor issues and trained in process improvement using lean six sigma principles that can help you through this transition to identify waste and inefficiencies.  If you have any questions about this information please contact your KatzAbosch representative; or contact us by clicking here.

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