Thursday, June 26, 2014

Contractors Should Love This Contracting Officer

Two days ago, we discussed a recently published report by the DoD Inspector General (DoD-IG) on its investigation of a hotline complaint alleging that high level management from DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency) had exerted undo influence in settling a case for $500 million less than the Government's estimate of damages. The charge was that the Government chose to settle for an amount that was agreeable to the contractor, not what was fair to the taxpayer. Click here if you missed that posting.

While we're on the subject of DoD-IG reports, the Agency issued another report last week involving DCAA and DCMA and a hotline complaint. In this case, the "large DoD contractor" was not named. Here's what happened.

The complainant alleged that the DCMA contracting officer did not take timely or appropriate action on several DCAA audit reports covering the business systems of a large DoD contractor. (any doubt that the complainant was a frustrated DCAA auditor?)

The hotline complaint was substantiated. Even though DFARS (DoD FAR Supplement) states that the contracting officer should make a final determination with 30 days, the contracting officer has so far take up to 1,373 days and still counting. As of the date of the report (June 20, 2014), the contracting officer had still not issued a final determination. Additionally, the DoD-IG investigation revealed that the contracting officer had not implemented withholdings for significant deficiencies. But DCAA also shared some blame. The DoD-IG reported that DCAA did not obtain sufficient evidence in support of a memorandum that stated the contractor "appeared" to have implemented adequate controls for the remaining estimating system deficiencies.

The DoD-IG recommended that the Director of DCMA instruct the contracting officer to make a final determination on the compensation system, ensure the contracting officer implements withholding for any disapproved business systems and develop a written corrective action plan for improving DCMA quality assurance procedures to help ensure timely final determinations and implementation of monetary withholds for significant deficiencies. DCMA agreed.

The DoD-IG recommended that the Director of DCAA rescind its "appearance" memorandum and initiate follow-up audits of the reported business system deficiencies. DCAA did not agree with most of the DoD-IG recommendations.

We've seen many cases like this. As former auditors ourselves, we were often frustrated by the contracting officer's lack of responsiveness in resolving audit issues and identified deficiencies. In most cases, that reluctance was primarily because the contracting officer remained unconvinced that the deficiencies were material or the deficiencies were backed up with adequate facts and data.

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