Wednesday, May 15, 2013

Does DCAA Target Contractors?

A few days ago, the IRS disclosed that some rogue employees in Ohio had been "targeting" conservative groups. Since then, there have been more disclosures and a full-blown scandal is brewing. There have also been numerous accounts by individuals and groups suspecting they have also been targeted for one reason or another. Obviously, this story is not going away soon.

This got us discussing among ourselves whether contract auditors or administrators (e.g. DCAA, DCMA, GAO, DoD-IG, etc.) have ever been part of a orchestrated effort to target particular contractors or segments of the contractor community.

Happily, not one person in our Consulting Group had ever been a part of such an endeavor. Moreover, we have never heard of it happening nor could we imagine that it could even occur. DCAA auditors, first and foremost, are independent. Independence is required by GAGAS (Generally Accepted Government Auditing Standards) and any impediments to independence will disqualify an auditor on any given audit. Secondly, auditors are driven by risk, not by politics. Auditors spend their time in areas that seem to be of highest risk to taxpayers -  getting the most bang for the buck, so to speak.

When we were auditors, contractors sometimes asked us why we were picking on them. We weren't. We just had some audits to perform and after taking them through our risk assessments, they understood our purposes better. We were never there for nefarious reasons. There may be cases where auditors stayed a little longer and dug a little deeper than was justified by the risk assessment because he/she was ticked off at someone or something. Sometimes its difficult to suppress the human element when two sides collide. These situations however are "one-off" cases, not something orchestrated by management.

Our advice to contractors undergoing any audit is to ensure that the audit scope and the risk assessments are fully understood before the audit begins. We've given this advice several times in this blog. If the auditor seems to go astray, ask him/her what they are doing. It you don't get a satisfactory answer, talk to their supervisor or manager.


  1. I believe “profiling” has occurred within DCAA and as a result the “profiled” contractor was held to a higher standards than others. I worked for DCAA for over 30 years in Texas, Iraq, Afghanistan and Kuwait. It was my experience both in Texas and the Middle East that some contractors such as minority owned, Arab owned, and US contractors doing work in Iraq and Afghanistan were assumed to be “high risk” and the risk assessments reflected this biased assumption. In the DCAA offices in the Middle East it was common to hear sarcastic and biased remarks about the local contractors and about US companies doing work in the war zone. This attitude towards both US and Non-US contractors working in the Middle East was common in the US Media and it also flowed down to the field offices from DCAA Headquarters starting in 2003 when the first sub offices were established in Kuwait, and Iraq. Therefore based on my limited experience I belive "profiling" has occurred.

  2. You raise a very good point. Auditors perform risk assessments with every audit they perform. Hopefully, in the case of contingency operations, the increased risk is based on the fact that the contracts are huge cost-type contracts with little incentive for contractors to control costs and not because of biased assumptions.

    When we wrote this post, we were thinking about partisan politics and directions from the "top".