Inspector General Finds a Need for Improved Contract Oversight

In a report released late December, the DoD Inspector General identified a number of deficiencies in contract oversight of the Broad Area Maritime Surveillance (BAMS) program. Specifically, the IG recommended that Navy and the Defense Contract Management Agency (DCMA) officials need to improve the management and administration of the contract. Those officials failed to review billings totaling $329 million, failed to keep track of Government-furnished property, failed to share specialized tooling and test equipment with other Government programs thereby potentially wasting $150 million. The IG concluded that these conditions occurred because contracting officials did not properly perform all of their assigned duties, comply with Federal and DoD policies, or complete necessary training requirements.

The aspect of this audit that is getting the most publicity right now is the contractor's billing of unallowable travel expense. The IG found that the contractor had included $206 thousand for such things as golf outings and other unallowable travel. Not only that, but the contractor had also earned "award fee" on these expenses. Although DCAA had reviewed some of these invoices, its review was limited to "tick marks" - tracing billings back to the accounting records, ensuring that the contractor was using the correct indirect rates,  and ensuring that the amounts billed did not exceed contract funding. DCAA had not performed any kind of review to determine the allowability, allocabilitiy, or reasonableness of claimed costs.

While the unallowable cost aspect of this gets the headlines, the other issues are perhaps more wasteful from a taxpayer perspective. The fact that tooling and test equipments were available to other programs but not used, considered, or offered, caused those other programs to expend perhaps $150 million that it didn't need to. The lack of adequate EVMS surveillance left the Government blind with respect to progress under the contract - leaving open the possibility of significant cost overruns that will be sprung upon the Government at some future date. The lack of accountability for Government property leaves taxpayers vulnerable to theft or misappropriation.

This is a significant audit and one that we will certainly be hearing more about in the near future.