DCAA Still Pushing for More Access to Employees

Yesterday we discussed an item appearing in DCAA's fiscal year 2014 Report to Congress - the Agency's desire to expand its subpoena authority to include commercial pricing or pricing based on "other than certified cost or pricing data". Today we want to look at another wish list item appearing in that report - more access to contractor employees.

DCAA strongly believes that having access to contractor employees to conduct interviews and observations is critical to ensure the high level of assurance required by GAGAS (Generally Accepted Government Auditing Standards). Although access to employees for such purposes is not generally considered a significant problem, DCAA continues to find contractors arguing that the Agency's access to records does not include access to employees.

FAR 52.215-2(d) specifically gives the GAO (Government Accountability Office) rights to interview any officer or employee; however, FAR does not specifically give DCAA this right. DCAA has submitted legislative proposals to support its right of access to contractor employees and to avoid any future confusion on DCAA's ability to interview those employees. This legislative change would ensure DCAA has access to employees, which allows DCAA to conduct audits in accordance with GAGAS.

The legislative proposal was not incorporated into the FY15 NDAA (National Defense Authorization Act) because, as the House Armed Services Committee explained, the Agency already has authority to interview contractor employees during the course of an audit if such an interview is required to complete the audit. While DCAA agrees with that assessment, some contractors still argue that the US Code and FAR specifically gives the Comptroller General (i.e. GAO) the right to interview employees and because there is no corresponding reference to DCAA, that DCAA does not have such rights.

Therefore, DCAA still believes a change to the statute is still necessary to clarify its right to interview contractor employees. DCAA is now monitoring denials of access to employees in order to fortify its position on the next NDAA go round.

DCAA May Get Statutory Authority to Interview Contractor Employees

Back on May 30th, we reported that Senator McCaskill had introduced an amendment to the Senate version of the fiscal year 2015 NDAA (National Defense Authorization Act) that would grant specific authority to DCAA (Defense Contract Audit Agency) to interview contractor employees. The amendment made it through the Senate Committee on Armed Services and is now ready for full Senate consideration.

We've  now had a chance to review the specific wording of the amendment. It provides as follows:

Sec. 825. Authority for Defense Contract Audit Agency to Interview Contractor Employees in Connection With Examination of Records.
     (a) Authority. - Section 2313(a)(1) of title 10, United States Code, is amended by inserting ", interview employees," after "is authorized to inspect the plant".
     (b) Applicability. - The amendment made by subsection (a) shall apply with respect to contracts entered into after the date of the enactment of this Act.
     (c) Regulations. - Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall revise the Department of Defense Supplement to the Federal Acquisition Regulation to implement the amendment made by sub section (a).

If passed, Section 2313(a)(1) would read: "The head of an agency, acting through an authorized representative, is authorized to inspect the plant, interview employees, and audit the records of - "

Although Sec 825 of the 2015 NDAA specifically mentions DCAA, the Code Section it modifies applies to any contract auditor, regardless of agency.

This amendment will give similar access to DCAA that the comptroller general (GAO) already enjoys under subsection (c)(1) of the same section.

As we mentioned before, the contractor employee interview battles have been fought and settled. There are very few cases where contractors try to prevent auditors from such employee interviews. Of course, buoyed with statutory authority, contract auditors might turn more aggressive in their interview techniques. Hopefully, they do not turn into interrogations.

Employee Interviews - By What Authority?

What gives the Government the right to go in to a contractor's facility and start interviewing employees; whether concerning their timecards or anything else? That's a good question, an age-old question (at least during the age of Government contracting), and one that almost every contractor asks the first time it happens.

There is no explicit authority, either regulatory, statutory, or contractual. The best that the Government can come up with is found in FAR 52.215-2(b).

... the Contractor shall maintain and the Contracting Officer, or an authorized representative of the Contracting Officer, shall have the right to examine and audit all records and other evidence sufficient to reflect properly all costs claimed to have been incurred or anticipated to be incurred directly or indirectly in performance of this contract. This right of examination shall include inspection at all reasonable times of the Contractor's plants, or parts of them, engaged in performing the contract.

The key words in the foregoing are "other evidence sufficient to reflect properly all costs..." and "...inspection ... of the Contractor's plants." The logic falls along the following: to ensue the propriety of labor charges, review timecards. To ensure the propriety of timecards, interview employees.

The practice of interviewing employees at their work stations is so entrenched in Government contracting practices that its rarely questioned. Even the big boys (Lockheed-Martin, General Dynamics, Pratt Whitney, Boeing) with pockets so deep that they can afford plenty of legal counsel, don't challenge the Government's right to interview their employees.

However, the issue does crop up from time to time - usually from companies new to the Government contracting environment. There have been cases where auditors showing up to perform unannounced floorchecks have been rebuffed, at least temporarily. By then, the element of surprise has been voided and the interview results are suspect.

Although not widespread, the situation has caught the attention of at least one senator, Senator McCaskill. She has introduced an amendment that has been added to the Senate version of the Fiscal Year 2014 NDAA (National Defense Authorization Act) that will give auditors from the Defense Contract Audit Agency specific authority to interview contractor employees as part of an audit. We don't know yet whether the provision will make the cut when the House and Senate versions of the NDAA are consolidated. We guess that it will survive the conference committee because it doesn't seem controversial and it doesn't change any current practices.