Contractor Business Systems - Advisory Panels

DCMA (Defense Contract Management Agency) and DCAA (Defense Contract Audit Agency) have co-responsibility for assessing the adequacy of six business systems; accounting, estimating, material management, purchasing, property management, and EVMS. DCAA is responsible for the first three and DCMA is responsible for the last three. There are changes making their way through the regulatory process that would require contractors to hire outside CPA firms to take over the systems that DCAA currently audits (i.e. accounting, estimating, and material management). You can read more about the proposed regulations here).

So now, we have DCAA auditors and DCMA "functional specialists" running around performing reviews of Contract Business Systems (or CBSs to use the Government parlance). Sometimes these reviews result in no deficiencies and the contracting officer can recommend approval of a system. Other times however, deficiencies are disclosed and the contracting officer makes a recommendation to disapprove a system.

There are varying degrees of deficiencies but only "significant" deficiencies rise to the level where a contracting officer can disapprove a system or potentially withhold funds. A significant deficiency is a shortcoming that materially affects the ability of Government officials and the contractor to rely upon information produced by the system.

Before a contracting officer can disapprove a system however, he/she must take the matter before a special panel within DCMA Headquarters. This special panel, called the CBS Advisory Panel, reviews the contracting officer's recommendation. The recommendation must be accompanied by

• a concise chronology of events, a copy of the Business System Analysis Summary
• a copy of the functional specialist's report or DCAA audit repot
• a copy of the initial determination issued to the contractor
• the contractor's response to the initial determination 
• the proposed  final determination.but other times, deficiencies are identified. 

To provide a perspective on how often auditors and functional specialists are convincing contracting officers to make inadequacy determinations, since its inception, the CBS Advisory Panel has convened 121 times, 65 times for cases originated by DCAA and 54 times for cases originating from DCMA functional specialists. Of the 121 panels, 48 or almost 40 percent related to accounting system deficiencies. Surprisingly (to us) the next highest frequency related to contractor systems used to track Government property. Of the 121 CBS Advisory Panels convened, 109 resulted in concurrence with the contracting officer's proposed system disapproval. 73 of those are currently in a disapproved state while 36 have moved to an approved status following remediation actions to achieve compliance. Statistics concerning the number of cases where funds were withheld from contractors are not available although we do know of several cases where that occurred. See, for example, here.