2016 Halloween Costumes for Government Agencies

As we again approach Halloween and the night of tricks or treats, we’ve once again done some exhaustive research (more accurately searching blogs and other reliable sources) as to the trending costumes (favored by DCAA, DCMA or the Current Administration).

The Big Bad Wolf (dressed as “grandma”)

This costume applies to the current Administration, based upon its fusillade of Executive Orders (EO), which solely target government contractors, directly impacting and altering said contractors’ management and human relations policies. The EO’s range, from the Fair Pay and Safe Workplace (13373) compelling contractors to disclose various compliance failures (a long list of failures and well before final adjudication), to EO 13076 which requires paid sick leave (56 hours per year with significant constraints in terms of contractors having any authority to manage potential misuse of sick leave).  

The logic for the big bad wolf (& little red riding hood) comparison, POTUS has continued to unveil policies which are overtly unfavorable and highly intrusive on government contractors, all while simultaneously trying to coax “Silicon Valley (commercial companies) to join the fun of being a Government contractor. Proceed with caution, “grandma” may be the big bad wolf offering more than just milk and cookies.

Magician

DCAA has certainly earned the rights to wear a magician costume based upon its ability to magically make its incurred cost backlog disappear (reference to contractor indirect cost rate proposals or ICPs required by FAR 52.216-7(d)).   Based upon DCAA MRD 16-PPD-008, September 30, 2016, DCAA has achieved currency (defined as a backlog equivalent to 18 months’ submissions) in part by auditing these submissions, but in larger part by declaring significantly more of them as “low risk” (summarily accepting the contractor rates as submitted).  

Other agencies have expressed concerns over DCAA’s “write-offs” and in fact DCAA had to tweak its low risk criteria (to get more ICPs into the low risk group). However, DCAA has convinced DOD that not-auditing several hundred million of contractor incurred costs is the right thing to do. Even more illusory, DCAA has defined 18 months’ inventory using simple count; each ICP equals 1 regardless of the incurred cost dollars. DCAA would likely not be current if it used the weighted average dollar value of ICPs. Stated differently, DCAA achieved currency by disproportionately disposing of the lower dollar value ICPs, leaving more complex ICPs to be audited (requiring disproportionately more audit resources per ICP). Regardless, many contractors whose ICPs and rates were accepted without audit are silently applauding DCAA’s magic act.  

Contractors actually audited by DCAA are less than appreciative, faced with audit exceptions based upon magical re-interpretations of the FAR (Federal Acquisition Regulations).   There are still a few government contractors hoping for the ultimate magic act: DCAA’s disappearance.   DCAA will never disappear, but if it really did disappear, the replacement contract auditors could be highly subjective, freely interpreting the FAR and equally illusive in terms of (contractors) knowing what to expect. DCAA by another name…or worse.

Two Blind Mice

These costumes are earned by the respective directors and executives of DCAA and DCMA, based upon their continuing public declarations that the two agencies are working together better than ever. Apparently top management is oblivious to record low sustention rates (DCMA sustaining only 26% of DCAA audit assertions) as evidenced by the March 31, 2016 semi-annual report issued by the DoD-IG (Appendix F).   Equally disconcerting is the fact that individual contracting officers state (offline) that they can’t trust their DCAA auditor(s).   Why? Because too many DCAA audit assertions are based upon selective use of selective facts, as well as re-stating a regulation to better support an audit assertion.   We suspect that this lack of real teaming (in the trenches) will be clearly evidenced in a to-be-issued DOD-IG report concerning DCMA (Contracting Officer) actions in dispositioning DCAA incurred cost audit reports (announced approximately 12 months ago, but not yet issued).

Paranoid Parrot

This is not as well known as some costumes, but one, which has been embraced by DCAA (agency and its auditors) as evidenced by elapsed days for issuing various types of audits. Although DCAA prides itself on its current audit “timeliness”, it now takes 85 days to complete an audit of a contractor bid proposal, and approximately 65 days to perform a pre-award accounting system audit. DCAA notes that these are significantly improved (compared to some really bad years; suggesting that if one sets the bar low, one can always improve).   Noting that 85 elapsed days are measured from receipt of an adequate bid proposal (structured and formatted as prescribed by DFARS to make it easier to audit), one might ask why it now takes 85 days when the average was 28 days (for years prior to 2008 when there were no regulatory requirement for prescribed proposal formats). The answers are a seemingly endless group (DCAA) exercise to document risk (before beginning audit field work) and ultimately, multiple post-audit reviews to ensure compliance with Government Auditing Standards. Neither of these predictably provides value to the customer (government procurement agency), but it devotes resources and adds time/elapsed days to protect DCAA from third-party criticism, a relatively clear symptom of organizational paranoia.  

Before leaving this costume and this blog, the real elapsed day mystery is with respect to pre-award audits (65 days). These are audits which are limited to an evaluation of the accounting system design (not the accounting system in operation) and the audit only commences once the contractor (auditee) completes a SF1408 self-assessment of sorts (coupled with completing a lengthy DCAA internal control questionnaire).   When this responsibility falls on prime contractors vis-à-vis a subcontractor, prime contractors rarely take more than a day or two to document the subcontractor accounting system and a week or two to document/report their adequacy conclusion. In contrasting analogies, DCAA is/are the paranoid parrot whereas prime contractors are Larry the Cable Guy (“git er done”).