The Defense Contract Management Agency (DCMA) provides contract administration services for DOD buying activities. Its contract management offices (CMO) work with defense contractors to help ensure that goods and services are delivered on time, at projected cost, and that they meet performance requirements. DCMA also supports combatant commanders during contingency operations. As DCMA recovers from years of significant downsizing, GAO was asked to (1) assess how the agency is positioning itself to meet its missions, (2) determine the extent to which contingency missions affect its oversight domestically, and (3) identify other factors that may affect its domestic missions going forward. GAO reviewed regulations, policies, and guidance, analyzed the status of contractor business systems for 17 defense contractors, and interviewed a wide range of DCMA officials.

After undergoing significant shifts in its workforce, structure, and policies and procedures over the past 10 years, DCMA has taken steps to rebuild its capacity. As the workforce declined, the agency experienced significant erosion of expertise in some areas, such as the cost and pricing function, such that it could not fulfill all of its oversight functions. A shift to a substantially decentralized, customer-oriented approach in the mid-2000s, intended to mitigate the impact of this workforce imbalance, resulted in unintended consequences such as inefficiencies in how work was done at the CMOs. DCMA has since begun to rebuild workforce expertise and has instituted new, centralized policies and procedures. The agency expects to reach about 13,400 total civilian staff by 2015--a 43 percent increase from about 9,300 staff in 2008. DCMA's military workforce has generally ranged between 500 and 600 in recent years. A growing number of DCMA's new employees have been hired using the Defense Acquisition Workforce Development Fund. To help gauge progress in meeting its missions, the agency uses performance indicators for contractor supplier base issues and DCMA processes, workload, and resources. Agency staff deployed on contingency missions are small in number--272-- when compared with the number of total DCMA employees, but several DCMA officials told GAO that deployments have a constraining impact on the agency's domestic mission. CMO officials identified examples of how their operations have been affected by deployments, such as delays in conducting timely quality assurance, audits of contractor processes, and contract close-out activities. The impact of deployments depends on the type of deployment or on certain features of the CMO; the timing of military leaders' deployments; and multiple or extended deployments of civilian volunteers. DCMA has noted support for the warfighter is a high priority for the agency, but has taken steps to mitigate the impact of deployments, such as lengthening deployment time frames to reduce their frequency. To minimize the impact of civilian deployments, DCMA established a position for a corps of personnel to support the contingency mission. Several factors may affect DCMA's ability to meet its missions going forward. One significant source of external risk stems from DCMA's reliance on the Defense Contract Audit Agency (DCAA) to conduct audits of certain contractor business systems. Business systems--such as accounting and estimating systems--are the government's first line of defense against fraud, waste, and abuse. Because of its own workforce struggles, DCAA has lagged in completing a number of such audits and is currently focusing on other high priority areas. GAO found, however, that DCMA contracting officers maintained their determination of many contractor business systems as adequate despite the fact that the systems had not been audited in a number of years--in many cases well beyond the time frames outlined in DCAA guidance. GAO recommends that DOD work with DCMA and DCAA to identify and execute options to assist in audits of contractor business systems. GAO also recommends that DCMA clarify for CMOs the agency's plans to continue funding existing workforce positions and that it identify ways to accurately reflect the status of contractor business systems, such as changing the status to unassessed when audits are delayed. DOD concurred with the first two recommendations. DOD partially concurred with the remaining recommendation but discussed several planned actions which, if implemented, should improve the transparency of system assessments.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Recommendations for Executive Action

Recommendation: The Secretary of Defense should work with DCMA and DCAA to identify and execute options, such as hiring external auditors, to assist in conducting audits of contractor business systems as an interim step until DCAA can build its workforce enough to fulfill this responsibility.

Agency Affected: Department of Defense

Status: Open

Comments: DOD reports that it is currently in the process of considering alternative approaches to audit contractor business systems. We will continue to follow up with DOD on this issue.

Recommendation: The Director of the DCMA should identify ways to accurately and transparently reflect the current status of business systems, such as changing the status of a system to "unassessed" when a system has not been audited within DCAA's time frames.

Agency Affected: Department of Defense: Defense Contract Management Agency

Status: Open

Comments: DOD reports that DCMA is in the process of developing a policy that will provide a list of the required timeframes for review of each business system as well as require its contracting officers to update the status of a contractor's business system in a business system template. This template will include the date of the last system determination as well as the status of each of the business systems (e.g., approved, disapproved, not assessed, or not applicable). The business system template will be uploaded to a database that DCMA has been developing known as the Contractor Business Analysis Repository (CBAR). CBAR is intended to provide more timely and accessible information on the status of contractor business systems to DOD buying commands and DCMA personnel. Further, DOD reported that DCMA plans to add data fields to CBAR that will supplement the information in the business system template. DCMA also plans to build query capabilities so that DCMA agency management and contracting officers can evaluate the timeliness of business system reviews. We will continue to assess the progress of these actions.

Recommendation: The Director of the DCMA should clarify for the CMOs the specific plans for how operations and maintenance (O&M) funding is to be provided to enable CMOs to continue supporting new hires brought in under the Defense Acquisition Workforce Development Fund and how Emergency Essential (EE) personnel are funded when working at domestic CMOs, given the confusion regarding this issue.

Agency Affected: Department of Defense: Defense Contract Management Agency

Status: Open

Comments: DCMA has taken some steps to address this recommendation, but additional steps are needed to fully address the recommendation. DOD reported that DCMA personnel hired under DAWDF through 2015 will be converted to O&M funding upon their graduation from the program, and DCMA is pursuing O&M funds for DAWDF conversions for fiscal years 2016, 2017, and 2018. DOD also reported that emergency essential personnel under the current 3-year program are funded by Overseas Contingency Operations funds throughout their 3-year commitment, wherever they are working. While this information provides clarification about the funding for new hires brought in under the DAWDF as well as for emergency essentials, DCMA has not provided evidence as to how or whether this information has been communicated to its contract management offices, given the confusion GAO identified on these issues.