Defense Contract Management Agency:

Amid Ongoing Efforts to Rebuild Capacity, Several Factors Present Challenges in Meeting Its Missions

GAO-12-83: Published: Nov 3, 2011. Publicly Released: Nov 3, 2011.

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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.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD concurred with our recommendation, and originally planned to address it through a proposed amendment to the Defense Federal Acquisition Regulation Supplement (DFARS) that would have allowed contractors to demonstrate compliance with DFARS criteria for certain business systems through audits by independent Certified Public Accountants. The proposed amendment was subsequently withdrawn. The Defense Contract Audit Agency (DCAA) has undertaken a number of initiatives to try to conduct more business system audits or gain insight into potential deficiencies, including establishing a team of auditors to conduct risk-based audits, reporting business system deficiencies identified during other audits, and investigating ways to leverage contractor internal audit work. However, DCAA reports that it would need to conduct 675 business system audits per year to achieve its goal of being able to audit one business system per year at each major contractor, and its efforts to date have resulted in an average of less than 30 audits per year. Given the time that has passed since our recommendation was made, and the lack of progress in implementation, we are closing this recommendation.

    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

  2. Status: Closed - Implemented

    Comments: DCMA has taken the actions necessary to implement this recommendation. DCMA has developed the capability to record information on the status of business systems (e.g., approved, disapproved, not evaluated, not applicable), included the date the system was last reviewed, in DCMA's database 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. DCMA has also developed the capability to query the information on the status of business systems included in CBAR. For example, DCMA can query the date that systems were last reviewed across contractors and across different types of business systems. As a result of these actions, DCMA has greater transparency into the status of its business systems as well as the capability to look across defense contractors to identify the extent of audit timeliness problems.

    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

  3. Status: Closed - Implemented

    Comments: DCMA has taken the actions necessary to implement this recommendation by clarifying for the contract management offices (CMOs) how personnel hired under the Defense Acquisition Workforce Development Fund, as well as Emergency Essential personnel, are funded. For example, when communicating the fiscal year 2014 authorized numbers of personnel to the three DCMA regional commands (commands which oversee DCMA's CMOs), DCMA headquarters specified that authorized operations and maintenance (O&M) numbers represent actual growth, and that the numbers of personnel funded via O&M funding versus the Defense Acquisition Workforce Development Fund would be adjusted accordingly. Regarding the confusion about how Emergency Essential personnel are funded, in February 2012 DCMA issued a memo to the CMOs that indicated, among other things, that Emergency Essential personnel are funded through the DCMA Operations Directorate, not through the individual CMOs. In addition, DCMA's manning documents show that the Emergency Essential personnel are not counted in the CMO's authorized personnel numbers.

    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


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