DCMA May Have Reimbursed Contractors $219 Million Without Any Support for Amounts Claimed

The DoD's Office of Inspector General (DoD-OIG) released a report this week that evaluated how Government contracting officers resolve audit reports issued by the Defense Contract Audit Agency (DCAA) when the Agency "Disclaims" an audit opinion. For non-auditors reading this post, a disclaimer of opinion is issued when the audit firm or audit agency is unable to perform all procedures necessary to obtain sufficient appropriate evidence to form a conclusion on whatever is being audited. In the context of incurred cost audits, this usually means that the contractor could not or would not provide the necessary supporting documentation for amounts claimed.

This OIG report (dated November 26, 2019 but not publicly released until December 2, 2019) concluded that contracting officers (namely the Defense Contract Management Agency or DCMA) may have reimbursed $219 million to DoD contractors that were not allowable costs on Government contracts.

DCAA questioned $219 million based on the contractor's failure to provide supporting documentation for claimed costs as FAR 31.201-2, Determining Allowability, requires. The DCMA contracting officer gave the money back for the following reasons:

• The required time periods for the contractor to retain any of the records had lapsed
• The amounts questioned in the audit report were identical to those disputed before the ASBCA (Armed Services Board of Contract Appeals) which rendered the costs allowable.
• No action was required because DCAA had disclaimed an audit opinion.

The OIG reported that none of these reasons adequately justified the contracting officers' decision not to sustain DCAA questioned costs. First of all, regardless of the minimum record retention time periods specified in the FAR (Federal Acquisition Regulations), the contractor had an obligation to support its costs claimed on Government contracts. Second, contracting officers must take appropriate action in response to DCAA question costs, regardless of the type of audit opinion rendered.FAR 42.705 prohibits the contracting officer from resolving (or otherwise allowing) any questioned cost without obtaining adequate documentation on the costs.

Concerning the ASBCA precedent, the OIG stated that although the contracting officer stated the circumstances were identical, the contracting officer failed to include any evidence to demonstrate that the outcome of the ASBCA cases would apply to the amounts questioned by DCAA. Therefore, the contracting officer failed to adequately justify why he did not sustain the questioned costs.

As a result of this review, DCMA agreed to revisit the contracting officers' decisions to determine the allowablility of questioned costs and will take reasonable steps to recoup any unallowable costs identified during its review. In addition, DCMA will assess whether action should be take to hold the contracting officers accountable for non sustaining any DCAA questioned costs determined to be unallowable.

Does DCMA Effectively Resolve Audit Findings?

What is going on between the Defense Contract Management Agency (DCMA), the Defense organization that administers contracts and the Defense Contract Audit Agency (DCAA), the Defense organization that audits Defense contracts? DCAA audits the contracts but it is up to DCMA to resolve any findings that might arise as a result of the audit.

We ask this question because the Defense Department Office of Inspector General (DoD-OIG) recently announced that it would begin an evaluation of  "DoD Contracting Officer Actions Taken on Defense Contract Audit Agency Report Findings Involving Two of the Five Largest DoD Contractors." Those two contractors, as it turns out, happen to be Boeing and Lockheed Martin. Implicit in this announcement is that someone has not been at all pleased with how DCMA is resolving DCAA audit reports. Who? The OIG's announcement does not say. It could be that the OIG has been receiving hotline complaints concerning the manner in which audits are resolved. It could be that the OIG is tracking its own metrics on the percentages of audit exceptions sustained. Whatever the genesis, this is not a routine OIG evaluation.

The OIG has selected a sample of thirty audits for its evaluation. Many of the selections are audits of annual incurred cost submissions. There are several involving Cost Accounting Standards (noncompliances with disclosed cost accounting practices and cost impact when contractors fail to comply with CAS). Also on the OIG's list are audit reports on identified business system deficiencies (usually involving the accounting system) and estimating system deficiencies.

This might become interesting.

What is CBAR (Contract Business Analysis Repository)?

The Contract Business Analysis Repository (CBAR) is Defense Department database that collects business system information on its contractors. The information is not available to the public and even contractors, baring a FOIA request (Freedom of Information Act) have difficulty in finding out exactly the information that DoD is collecting on them.

The CBAR system was created prior to 2010 but significantly enhanced in 2012 to collect the following information.

• Indirect and direct cost information (e.g. forward pricing rates).
• Status of contractor business systems (e.g. accounting and estimating systems)
• Status of compliance with CAS (Cost Accounting Standards)
• Information about costs and financial condition of the parent entity of major corporations

It also includes contracting officer's negotiation experiences with contractors so that those experiences can be shared among contracting officers negotiating with the same contractor. DoD feels that sharing experiences will result in contracting officers being better prepared for realizing better deals for the Government.

We don't know the number of DoD personnel with access to CBAR. In 2013, the number was reported at 1,900 users though by now, that figure has probably grown.

There have been instances where CBAR information is not up to date. Like all databases, procedures need to be in place to ensure that data is current, complete, and accurate. So, for example, the Government might identify deficiencies in a contractor's estimating system and report those deficiencies in the CBAR system. Meanwhile, the contractors makes the required corrective actions and the Government considers those actions to be responsive but fails to update the CBAR system. Whatever procedures DoD has in place to ensure the accuracy of CBAR data does not always work in a timely manner.

Contractors should know what information is being collected about the company to ensure its accuracy. Start by asking your contracting officer to provide you such information. Many contracting officers will oblige. If that fails, try the FOIA route.

Wouldn't Contractors Love to Have This Contracting Officer Overseeing Its Government Contracts

Is DCAA (Defense Contract Audit Agency) irrelevant? DCMA (Defense Contract Management Agency) must think so. Here's a case that represents an egregious waste of taxpayer funds.

Back in 2009, the Air Force partially terminated a contract for convenience. The part that was terminated involved the purchase of titanium for F-22 aircraft fuselages from one of the contractor's subcontractors.

In 2012, the Air Force Termination Contracting Officer (TCO) requested that DCAA (Defense Contract Audit Agency) conduct an audit of the subcontractor's termination settlement proposal.

In 2014, DCAA finally issued its audit report on the subcontractor's termination settlement proposal. DCAA identified $826 thousand of the $1.9 million claimed as questionable for not complying with FAR (Federal Acquisition Regulations). $354 thousand of the questioned amount were costs incurred after the notice of termination and therefore unallowable. The remaining $472 thousand were unallowable according to other FAR provisions.

DCMA (Defense Contract Management Agency) - the Contracting Officer - was responsible for negotiating the termination settlement proposal and for addressing the $826 thousand questioned by DCAA.

In 2016, The DCMA contracting officer, without considering any of DCAA's questioned costs, authorized the full $1.9 million termination settlement proposal.

Later in 2016, a Hotline Complaint was filed with the DoD Office of Inspector General (DoD-IG) alleging that the DCMA contracting officer's settlement was improper because it did not consider the DCAA audit findings (wonder who might have filed this hotline complaint). After receiving the hotline complaint, the DoD-IG initiated an investigation.

The DoD-IG found that the DCMA contracting officer and her supervisor were negligent in negotiating proposed termination costs. For her part, the contracting officer,

• did not have any experience in negotiating DCAA-questioned costs and prior to this termination settlement proposal, she performed only contract administrative tasks, such as maintaining spreadsheets of invoices billed by the contractor
• did not have any experience with contracting actions greater than $750 thousand, which did not require negotiations involving DCAA audits and
• was not aware of the requirements for appropriately considering and documenting her actions on DCAA-questioned costs.

That should not have happened with adequate supervision, correct? Didn't happen. The DoD-IG also found that the supervisor (since retired) was negligent as well: The supervisor did not

• document why he approved the action
• document whether he advised the contracting officer to sonsult with or engage DCAA during negotiations
• document whether he advised the contracting officer to seek legal counsel given her decision not to uphold the DCAA audit
• require the contracting officer to prepare a price negotiation memorandum documenting the reasons for not upholding the DCAA questioned costs.

DCMA, as part of corrective action, rescinded the contracting officer's warrant, sent her to more training, and reviewed all of her past actions. DCMA also asked for some money back but the subcontractor refused claiming that it had a signed contract modification.

If you want to read the full investigative report, click here.

DCMA Criticized Over it Contract Administration Performance

Surely many contractors have had their issues with Government oversight from time to time. One of those oversight organizations is the Defense Contract Management Agency (DCMA). DCMA performs contract administration services for DoD and other Federal agencies and a limited number of foreign governments. Within DCMA is an IT (Information Technology) Directorate whose program managers, contracting officers representatives (CORs) contract specialists, and contracting officers are involved in awarding and administering DCMA IT service contracts. It seems that DCMA cannot effectively administer their own contracts.

The DoD Office of Inspector General (DoD-IG) recently issued an audit report on a review to determine with DCMA properly awarded and administered IT service contracts. The DoD-IG found several significant deficiencies. DCMA officials did not

1. properly define requirements that included measurable performance standards for eight of 14 contracts in the audit universe
2. develop an acquisition plan for one contract, and
3. submit offers for Small Business Administration acceptances for two contracts awarded through the 8(a) set-aside program.
4. DCMA officials used flexible ordering agreements to award 5 of the 14 contracts which violated relevant FAR (Federal Acquisition Regulation) requirements.

According to the DoD-IG report, these problems occurred because DCMA officials did not ensure that contracts were developed in accordance with FAR and DCMA guidance, use multi-functional teams to plan and manage IT service requirements, and perform pre- or post-award peer reviews of contracts.

As a result, DCMA contracting officials acquired $56 million in IT services on contracts with poorly defined or nonexistent performance work statements that may not meet the performance needs required to successfully execute the DCMA mission.

In addition to finding problems in the contract awards, the DoD-IG found additional problems in the way that DCMA contracting officials administered IT service contract. Specifically, DCMA officials did not properly monitor contractor performance, accept IT services, approve invoices or use DCAA (Defense Contract Audit Agency) to approve interim invoices.

These administrative issues occurred because DCMA officials did not

1. appoint CORs (Contracting Officer Representatives) in some cases
2. properly train the CORs in most cases,
3. develop QA surveillance plans in most cases and develop "adequate" plans in a few more cases.

As a result of these identified contract award and administration deficiencies, DCMA had no reasonable assurance that it received the $70 million in IT services it paid for.

The DoD-IG made several rather obvious recommendations that correlated to the audit findings. DCMA management concurred with the recommended corrective actions.

So the next time you feel put upon by over-aggressive contract oversight, take some solace in the fact that sometimes, the oversight agencies can't do things right themselves.

DCMA's Ombudsman

DCMA (Defense Contract Management Agency) has an ombudsman to investigate contractor complaints against maladministration. This ombudsman is not exactly a specific person but an email address that serves the same purpose.

DCMA's primary responsibility is to administer the contractual requirements of DoD contracts. DCMA works directly with its military "customers" and contractors to ensure quality products and services are delivered within cost and on schedule.

Depending upon contractual requirements, this could mean constant collaborations and interfaces between the DCMA functional organizations (contracting, quality, engineering, property, safety, transportation, earned value, etc) and contractor representatives.

DCMA believes that good working relationships with contractors is paramount for the successful performance of the contract. While it desires for DCMA/contractor collaborations and interfaces to always be perfect, the Agency fully acknowledges the realities and challenges associated with the performance of contractual requirements.

DCMA cannot guarantee its working relationships with contractors will always be perfect. However, they want to know when there are concerns with its ability to properly administer contractual requirements. Its hope is to resolve concerns at the functional level, which includes involving the Contract Management Office (CMO) chain of command.

When concerns cannot be resolved at the local level (i.e. the CMO level), they can be elevated to DCMA Headquarters in Ft. Lee, VA. Contractor instructions for elevating concerns to the HQ Ombudsman are buried rather deeply on DCMA's website. Here's a direct link to the instructions: DCMA Connect Point for Industry/Contractor Concerns.

We've known a few contractors who have bypassed this step by going directly to their Congressional representatives to seek redress. We don't know the success rate for that tactic but do know that it involves a lot more work for everyone involved. We recommend contractors give the ombudsman a try first.

Quick Closeout Procedures for Completed Contracts Gets a Boost

The David Packard Excellence in Acquisition Award recognizes organizations, groups, and teams that have demonstrated exemplary innovation using best acquisition practices that achieve acquisition excellence in the Defense Department.

Packard was co-founder and chairman of the Hewlett-Packard Company, a deputy secretary of defense in the Nixon administration and chairman of the Reagan's Blue Ribbon Commission on Defense Management. Each year since 1997, the Defense Department recognizes several groups as recipients of the award. This year, there were four recipients but the one that might be of most interest to Government contractors is the Defense Contract Management Agency's (DCMA's) Special Programs Quick Closeout Team (QCT)..

The QCT was recognized for innovation and creativity in the area of contract closeout. Previously, the rate of physically complete contracts coming due for closeout exceeded the number actually being closed, resulting an a 31.1 percent increase in overage contracts, further exacerbating the problem.

The QCT piloted new, quick closeout techniques that standardized risk factors and changed the paradigm in how contracts could be closed. This resulted in 4,805 contracts being closed using quick closeout  procedures and enabled a 32.8 percent improvement in overage contract reduction, creating a positive contract closeout rate and reducing the overage contract backlog.

In doing so, the QCT reduced the administrative burden to both industry and the government and limited the Defense Department's exposure to certain financial risks, ensuring the use of unliquidated funds from completed contracts before the funds could be canceled and returned to the Treasury Department.

The QCT continued to innovate by expanding application to subcontractors, opening up an additional 10 percent of contracts to quick closeout. The team also deployed multiple initiatives to encourage the practice to other federal agencies with potential significant improvements to the acquisition community at large.

DCMA blamed the increased backlog on DCAA's failure to complete incurred cost audits in a timely manner (see online source). By employing quick closeout procedures, DCMA could largely bypass the need for audit. The quick closeout process is not new and innovative. It has been part of the Federal Acquisition Regulations for decades. However, the procedures were not widely used until the QCT began its emphasis on employing the procedures.

Defense Contract Management Agency Gets its Own Hotline

Not to be outdone by its sibling DCAA (Defense Contract Audit Agency), DCMA (Defense  Contract Management Agency) has rolled out its own internal Hotline. Doesn't there seem to be a lot of redundancy here. The Inspector Generals (IGs) have their own hotlines. Contractors should be well aware of these since there are contractual requirements to post hotline posters in prominent locations (or on an employee website). DCAA established its own hotline a couple of years ago, encouraging auditors and outsiders to report matters relating to contract and procurement irregularities, cost/labor mischarging, defective pricing, defective parts, bid rigging, and bribery and acceptance of gratuities. Why are so many hotlines necessary?

DCMA states that their hotline is to enhance accountability practices and improve incident response times. They say that their hotline aligns with calls to improve government transparency. Really? Is DCMA going to make all of the hotline calls public? Don't think so since one of the tenants of a hotline is to ensure confidentiality. How then can DCMA's hotline improve government transparency, except perhaps in some esoteric way.

In introducing the Hotline to DCMA employees, the Agency stated:

Throughout our climate and government surveys and new channels of communication, there is a lot of talk about holding the government employees and contractors accountable for their actions. With the implementation of our DCMA  Hotline, we are providing an independent means for individuals to report allegations of fraud, waste, and abuse, or general administration issues and concerns, as well as other wrongdoings pertaining to programs, personnel and operations.

Hotlines are useful for identifying instances of fraud, waste, and abuse. According to the Association of Certified Fraud Examiners (ACFE), tips were the most common detection method by a wide margin, accounting for 39 percent of cases. Internal audits were the second-most common at 16.5 percent. For organizations that maintain internal hotlines, schemes were detected through a tip in 47 percent of the cases. Without the hotline, only 28 percent of schemes were detected through tips.

DCMA suggests that its new hotline be used for such matters as (i) waste of funds, (ii) theft and abuse of government property, (iii) abuse of authority, (iv) conflicts of interest, (v) mismanagement, and (vi) a variety of personnel-related issues.

DCMA also states that employees can still refer matters relating to suspicions of contractor fraud, waste, and abuse to its FraudNet,

Read more about the DCMA Hotline here.

Revolving Door - DCMA Commander Goes to KBR, Inc.

KBR, Inc. announced late last month the appointment of Lieutenant General Wendy Masiello, USAF (Ret) as a member of its Board of Directors, effective August 18th. That's about a month and a half after she retired as head of the Defense Contract Management Agency (DCMA) where she was responsible for the oversight of KBR's Government contracts. Ms. Massiello will serve on the Audit and the Health, Safety, Security, Environment and Social Responsibility  Committees of the Board. As a Board Member, she will earn at least $200,000 per year in cash and stock.

We wish it were not so. It looks really bad. According to the Commission on Wartime Contracting, KBR (and its subsidiary Halliburton) was paid at least $36.3 billion  over an eight year period. The Commission documented kickbacks from subcontractors, mechanics who worked as little as 43 minutes per month on average but received full pay, its inability to account for $100 million in Government-furnished property, hiring private security guards and passing the costs on to taxpayers, human trafficking, and $300 million in pay for unnecessary personnel. And this doesn't include the results of many DCAA audits and the findings that DCMA was responsible for resolving.

DCMA prides itself as being the independent eyes and ears for the Department of Defense. It seems like Ms. Masiello had eyes and ears all right, eyes and ears for her post retirement employment opportunities. Does DCMA really have an independent voice that provides timely and relevant oversight analyses to DoD like its mission statement reads? Is it possible that the "independence" might have been compromised to secure post-retirement employment?

What is Actionable Acquisition Insight?

What is "Actionable Acquisition Insight"? If you don't know, ask your local DCMA (Defense Contract Management Agency) person for a definition. Everyone at DCMA possess it, seemingly. So they must know what it means.

Every month or so, DCMA publishes a short autobiographical sketch on their website of someone in their organization. The series, entitled "My DCMA" intends to showcase DCMA's workforce and "... highlights what being part of the national defense team means to them." Yesterday's "showcase" was a contract administrator out of Indianapolis.

We know the functions assigned to contract administration under FAR 42.302 - an impossible list of 71 different responsibilities or activities but when we saw this article, we thought we could gain some insight on what DCMA's contract administrators really do once they pull their picture badge on a lanyard over their necks and get down to work. I guess we'll have to keep looking because there is no such information in this autobiography.

In his autobiographical sketch, Mr. Jamal Hoover states "I am the independent eyes and ears for DOD". Later, he claims to provide "actionable acquisition insight to DoD". Hmm, those phrases are familiar. Where have we seen them before. Oh yes, those claims come from DCMA's mission statement:

We are the independent eyes and ears of DoD and its partners, delivering actionable acquisition insight from the factory floor to the front line ... around the world.

Let's not just pick on Mr. Hoover. How about previous "My DCMA" articles. Take Mr Jon Bayus in Cleveland. His autobiographical sketch states: "I provide actionable acquisition insight to the Department of Defense ...".

Or, how about James Vandross in Whicita. "I provide actionable acquisition insight to the DoD ...".

We could give more examples but you've got the gist. It seems like these "independent eyes and ears" are not so independent when it comes to writing about what they do on a daily basis.

We had an occasion to visit DCMA not long ago. We walked into their un-signed building, punched the elevator button for the third floor, walked down a long dimly-lit hallway to a windowless door and pushed a buzzer to get help. It took awhile for someone to come to the door and let us in, probably because everyone inside was engaged in providing actionable acquisition insight to DoD.

Elevating Concerns That Are Not Satisfactorily Resolved by Your Local ACO

Did you know that DCMA (Defense Contract Management Agency) has a mechanism whereby contractors can elevate concerns that cannot be resolved at the CMO (Contract Management Office) level? One has to dig deep on DCMA's website to find it but here's a direct link.

According to that site, DCMA's primary responsibility is to administer the contractual requirements of the contracts awarded by its military customers. DCMA works directly with its military customers and with contractors to assure quality products and services are delivered within cost and on schedule. DCMA works closely with contractors in the performance of their contracts. Depending on the contractual requirements, this could mean constant collaborations and interfaces between the DCMA functionals (contracting, quality, engineering, property, safety, transportation, earned value, etc.) and contractor representatives. The DCMA working relationship with contractors is paramount for the successful performance of the contract.

While DCMA would like for collaborations and interfaces to always be perfect, it fully acknowledges the realities and challenges associated with the performance of contractual requirements.

DCMA does not guarantee working relationships with contractors will always be perfect. However, when issues cannot be resolved at the local level, DCMA Headquarters wants to hear about them. On those occasions when a concern cannot be resolved at the local level, the website provides a link for elevating the problem to HQ. HQ will, in turn acknowledge receipt of the complaint, route it to the appropriate official, and respond to, or ensure a response is provided to, the requester.

DCMA needs certain information to adequately respond to elevated issues including a contract number, contractor contact information (of course), the local DCMA official, a detailed description of the concern, and a statement as to whether the concern was elevated through the local chain of command.

We do not have any experience with this established mechanism for raising concerns or issues that cannot be satisfactorily resolved at the local level nor do we have any knowledge on how effective this mechanism is in resolving issues. But at least there is a mechanism. If you have any experiences with elevating issues to DCMA HQ, please let us know.

DCMA Reforms to Improve Their Product Offerings

DCMA (Defense Contract Management Agency) has undertaken a new initiative to improve its business capabilities. The DCMA business capability framework is "...a set of high level contract management functions that underpin the Agency's strategic plan and captures the results of the daily, multi-functional activities of  ... personnel in order to provide actionable insight to the Defense Acquisition Enterprise."

DCMA has established thirteen working groups, tasked to separate policy from procedure, with an emphasis on producing agency manuals and streamlining policies in ther respective area to make sure everyone around the Agency follows the same guidelines.

The thirteen working groups are further broken down into primary capability, integration, and enabling. The five primary capability working groups focus on administering existing or future contracts and include:

1. Product acceptance and proper payment
2. Indirect cost control (formerly a DCAA (Defense Contract Audit Agency) primary function)
3. Contractor Effectiveness
4. Negotiation intelligence
5. Contract maintenance.

The three integrating working groups will take the information gleaned from the primary groups, analyze and repackage the data to help the Agency's other stakeholders (customers) These working groups include:

1. Program support
2. corporate assessment
3. Mission assurance and industrial base vialbility assessment

The enabling working groups provide support to DCMA's workforce so that employees can do their jobs better. These five groups include:

1. Facilities management
2. Talent management
3. Skills development
4. Stewardship
5. Information technology management
6. Planning and programming

What does this mean for contractors? Well, in theory, it should improve the contract administration process. Time will tell however whether this results in any tangible improvements or is merely more fanciful fluff like so many acquisition reform initiatives in the past.

Defense Department Implements a Hiring Freeze for Civilian Workforce

The Department of Defense (DOD) has instituted a civilian hiring freeze for the Office of the Secretary of Defense, Defense Agencies and Field Activities. This freeze applies to both DCMA (Defense Contract Management Agency), DCAA (Defense Contract Audit Agency) among many other agencies in the Department.  The freeze affects all vacant full-time, part-time, temporary and permanent civilian positions.

What does this mean for contractors? It can't be good. DCMA contracting officers already have more work than they can reasonably handle. Freezing hiring will only exacerbate the situation. If you don't believe us, put in a call to your administrative contracting officer. Chances are it will go to voice-mail and any message you leave may never get returned.

DCAA is already struggling to meet its workload demands and starting this fiscal year, has had to jettison all of its work for other Federal Agencies until such time as it can become current in its audits of incurred cost. Freezing DCAA hiring will certainly not help reduce the backlog.

DoD is looking for each agency to present it a delayering plan. A lot of people, Senator John McCain being a notable example have made civilian reductions at the pentagon a high priority. Some have suggested that the reductions be commensurate with the draw down of military personnel. The military has seen a seven percent reduction while the civilian side less than half of that at 3.3 percent.

The hiring freeze provides for exemptions for mission critical requirements. DCMA has asked for an exemption but so far, even though still hopeful, has not been granted one.

DoD's 100% Return on Investment

Alan Estevez has been the Principal Deputy Under Secretary of Defense for Acquisition, Technology and Logistics since his 2013 Senate confirmation. In that role, he helps develops and implement strategies, policies, and programs that increase the Department's warfighting capabilities, management efficiency, and buying power. He also supports his boss, the Under Secretary of Defense in matters related to acquisition, logistics and material readiness, research and engineering, weapon systems, operational energy, installations and environment and the defense industrial base.

Last June, he announced the Department's goal to shave $15 billion off of the amount they spend on service contracts. The Department spends more on service contracts than it does on weapon systems. Service contracts include such things as technical engineering, health care, shipping of materiel, tactical vehicle maintenance, and of course base maintenance.

But recently, Estevez said something else that got our attention. In a recent speech to DCMA (Defense Contract Management Agency), Estevez stated:

For every dollar I give DCMA, I get two dollars back as a return on investment. DCMA provides the best equipment to the best military on this planet. You should be proud of what you do every day. You are the independent eyes and ears of DoD.

Now that's pretty impressive don't you think. If fact, why stop at DCMA's $1.375 billion budget for this year? Why not double it, triple it? If Estevez quadruple's it, he'll spend $5.5 billion but he'll get back $11 billion.

One really wonders how Estevez calculates ROI (Return on Investment). Perhaps he learned his technique from the Beardstown Ladies.

How to Find Your (DCMA) Contracting Officer

So you've been awarded a contract and you know from the contract that it has been delegated to DCMA (Defense Contract Management Agency) for contract administration (see FAR Part 42). But you don't know who the specific contracting officer is nor are you given a phone number or email contact.

DCMA has a lookup function on its website that will give you the information. Here's how it works.

First, go to DCMA's Website

Next, select Contract Management Team (CMT) from the Customers Tab

That will open a search box that looks like this:

You can search by contract number or CAGE code. Lets go to DoD contracts awards and find a contract number. These are the contracts awarded on January 15, 2015.

We scroll down and find an Army contract awarded to L-3 Communications:

We enter the contract number into the search criteria:

We click on Search and get the following results. Not shown in this screenshot is the full email address of the ACO and many other DCMA employees having some kind of involvement with the contract, but also their telephone numbers.

Now you've got the ACO name, his/her email, and phone number.

DoD Inspector General Blasts DCMA for Inadequate Contract Case Files

Beating up on DCAA (Defense Contract Audit Agency) has become somewhat passe' so the DoD-IG (Inspector General) is turning its focus on DCMA (Defense Contract Management Agency). In a recently issued report, the IG was heavily critical of DCMA's practices and procedures for reviewing contractor indirect expense rates - rates which were used to negotiate at least $70 billion in contracts.

Basically, the IG's criticism involved the lack of documentation - so much so that it was unable to ascertain whether the contracting officer responsible for negotiating indirect rate agreements knew what they were doing. It was certainly not evident from the working papers (the IG calls them Contract Case Files) that the Government's interests were protected in six of the eight DCMA offices reviewed. In fact, the IG stated that the working papers were so deficient that it could not determine whether the Government (or, they should have said "taxpayers") achieved fair and reasonable pricing.

This breakdown was foreseeable. First of all, DCMA has never emphasized the importance of working papers. One former contracting officer quipped that if he could not write the information down on his cuff, he didn't need it. DCAA, on the other hand, has always stressed the importance of adequately documenting in working papers the risks and the planning and the actual work performed. Bur, more importantly, the Government has always been at a disadvantage when it comes to figuring out the propriety of contractor indirect expense rate forecasts. The Government could never match the hoards of contractors' minions with insider knowledge involved in the preparation of rate forecasts. But when you remove the most important piece to understanding and attesting to the reliability of these rates (i.e. DCAA), the Agency with the expertise, the background, the continuity, the historical perspective, and the professional standing (e.g. CPAs), an awful void is left that is hard to fill.

It's not that DCMA isn't trying. They've done a lot over the past few years to advance their knowledge, skills, and abilities in evaluating indirect costs and indirect expense rates (including hiring away a lot of DCAA auditors) but that is not their strong suit. They are not (generally) accountants and they do not have a propensity for understanding job costing, adjusting journal entries, or accounting accruals. Sure, they can tally up a list of numbers on a spreadsheet, but to understand the meaning of those numbers often requires someone with accounting expertise. DCAA was best suited for that job.

You can read the entire IG audit report here.

EVMS Compliance - What's Going On?

Last week there was a flurry of news articles concerning the decertification of Lockheed's EVMS system. EVMS (Earned Value Management System) is a standard used by contractors to provide data on the progress of large Government contracts. In 2007, the Defense Contract Management Agency (DCMA) reviewed Lockheed's EVMS system and found it deficient in more than half of the 32 EVMS standards. In a recent followup review, DCMA found that Lockheed had not made sufficient progress on its corrective action plan, hence the decertification.

In today's news, another defense contractor has been found to have EVMS issues. DCMA is on the verge of issuing a report citing Northrop Grumman of significant deficiencies in a number of EVMS standards.

There is obviously a renewed emphasis on EVMS. DCMA (as well as DCAA) is focusing a lot of resources these days to ensure that these systems are functioning properly and provide valid, accurate, and current information on the status of major programs. This would be a good time for contractors to assess the adequacy of their own EVMS implementations - before the Government arrives.

DCMA on the Hot Seat

DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency), despite the name similarities, are two separate and distinct Agencies and report to different components within the Pentagon. DCAA reports to the Under Secretary of Defense - Comptroller while DCMA reports to the Under Secretary of Defense - Acquisition, Technology and Logistics. The Defense Contract Audit Agency (DCAA) is the audit arm of the Department of Defense (and for other Executive Agencies). The Defense Contract Management Agency (DCMA) is the Contract Administration arm of the Department of Defense. DCAA issues audit reports to DCMA. DCMA is charged for resolving whatever issues the auditors raise. Sometimes DCAA doesn't like DCMA because the auditors feel that DCMA does not do a good job of sustaining their findings. Sometimes DCMA doesn't like DCAA because they feel that audit reports are issued too late to be of any use or audit findings are not well conceived and therefore unsustainable.

DCMA is also the lead Agency for several oversight roles; EVMS (Earned Value Management Systems) and CIPR (Contractor Insurance/Pension Reviews) to name two major areas. Where DCMA is the lead organization, it typically asks DCAA to address certain financial-related aspects of the required oversight responsibilities. It is against this backdrow that DCMA now finds itself in the DoD-IG's cross-hairs.

In an Audit Report issued on July 28, 2010, the DoD-IG looked into allegations of unsatisfactory conditions regarding actions by DCMA. Specifically, during two reviews of a DoD contractor in 2008, DCMA (i) failed to allow DCAA sufficient time to perform an audit of the contractor's system, (ii) failed to adequately resolve DCAA findings and (iii) failed to demonstrate independence and objectivity in fulfilling its oversight responsibilities (because they teamed up with contractor personnel to perform joint reviews - brings to mind the fable where the fox was allowed to guard the hen house).

Although DCMA essentially disagreed with the DoD-IGs findings, it did agree to seven of the eight recommendations made in the report. You can read the entire IG report here.  Among those recommendations were a new policy to prohibit joint surveillance reviews with contractor personnel, a policy to always request DCAA participation in EVMS reviews, establish reasonable due dates from DCAA, and hold discussions with DCAA to help resolve auditor-reported deficiencies. A followup review by the IG is scheduled to see well how DCMA has implemented these recommendations.

Can't We All Just Get Along

The Defense Contract Audit Agency (DCAA) is the audit arm of the Department of Defense (and for other Executive Agencies). The Defense Contract Management Agency (DCMA) is the Contract Administration arm of the Department of Defense. DCAA issues audit reports to DCMA. DCMA is charged for resolving whatever issues the auditors raise. Sometimes DCAA doesn't like DCMA because the auditors feel that DCMA does not do a good job of sustaining their findings. Sometimes DCMA doesn't like DCAA because they feel the audit findings are not well conceived and therefore unsustainable. There have been several high-profile disagreements between the two organization during Congressional hearings.

On May 7th, 2010, the Directors of DCAA and DCMA jointly issued a memorandum to the employees of both organizations imploring them to get along. This memo has been pejoritively referred to as the Rodney King "Can't We All Just Get Along" memo by some of the staff. Some in DCAA have called the idea that everyone should cooperate at all cost, is a potential encroachment to their independence, a violation of generally accepted Government auditing standards and the kind of situation that the Agency got called out for in recent GAO and OIG audits.

You can download the joint memorandum here.

Contracting Out Contract Oversight

David Iisenberg writes about issues related to contracting for inherently Governmental services today over at the Huffington Post. Mr. Isenberg focuses on a recent report from the DoD-IG on DCMA's (Defense Contract Management Agency) activities in Afghanistan and notes that the Agency is ill-equipped to administer some $1.3 trillion in contracts. In fact, some of those contracts require contractors themselves to self-perform some of the oversight functions normally performed by the Government. Makes one wonder who is guarding the hen-house. Read the entire article here.