RCGI-2018 Halloween Costumes for Government Agencies

As we again approach Halloween and the night of tricks or treats, we’ve been able to identify and report a number of the more popular Halloween costumes (or masks) among government agencies and/or (n one case) an ex-government “CEO”.  Some of these trending costumes include:

Two-faced Mask—Former President

RCI-2018-Halloween-TwoFaceOn September 1, 2018, Senator John McCain was honored as an American hero and one who detested the divisive partisanship which is now in play across the US political spectrum and most pronounced at the Federal Level.   As a gesture towards bi-partisanship, Senator McCain asked that Barack Obama speak, and Mr. Obama honored McCain’s wishes by delivering a moving speech which briefly honored McCain but was far more focused on criticizing political partisanship which is now the norm.  However, Mr. Obama’s criticism of political partisanship was clearly focused on circumstances which have followed the 2016 elections (as if partisan politics did not exist until Mr. Trump was elected).   As he has done since he took office in January 2009, Mr. Obama was once again blaming someone else for any kind of negative trends or circumstance, but in the case of partisan politics, Mr. Obama is anything but an innocent bystander (consider Obama’s disinterest in any conciliatory discussions related to “Obama-care”).  However, Mr. Obama secured the two-faced mask when he engaged in highly partisan political campaigning within a week of the McCain funeral.  On the campaign trail for democratic candidates his messages were a case-study in partisan politics, laced with bombast and insult (two words coincidentally used by Obama at McCain’s funeral to implicitly describe Mr. Trump).   On September 1, 2018, Mr. Obama may have temporarily been the “face” of bi-partisan politics (solely to honor John McCain), but that “face” almost immediately changed (or regressed) to one of using fear tactics to attack any republican candidate with the audacity to run against a democratic opponent.

Mr. Obama has unquestionably earned the “honor” of wearing a two-faced mask along with the co-title of chief promoter of partisanship politics (perhaps shared with Mr. Trump).   John McCain is a true American Hero, who believed in bi-partisan politics and the belief that there can be solutions which are the result of “give-and-take” versus “take-it-or leave-it” mindsets.   Unfortunately, Mr. McCain is dead as are his hopes for any predictable return to bi-partisan politics.


Alfred E. Newman—DCAA (Defense Contract Audit Agency)

RCI-2018-Halloween-WorryFaceDCAA has embraced the Alfred E Newman mask as it relates to his (Mad Magazine) mantra: “What me Worry?”   In the context of DCAA, the Agency continues to reassure itself that its future existence is rock-solid, seemingly ignoring the fact that DCAA is no longer “The” contract audit agency for anyone who has any other alternative.   DCAA’s “what me worry” thinking seems to be ignoring:

  • DCAA’s reimbursable audit work has all but disappeared. Civilian (Non-DoD) agencies had historically used DCAA for audits of civilian agency contracts’ pricing and costs, in which case the civilian agency had to reimburse DCAA for those audits.   At one point, the reimbursable audits represented approximately 20% of DCAA’s funding; however, that percentage is now below 5%.   Transitioning away from DCAA hasn’t been pain-free (for civilian agencies), but apparently that has been less painful than trying to work with DCAA’s untimely and grossly inefficient audits
  • source as much as 25% of the incurred cost audits (along with giving DCAA very specific and relatively short time-frames for completing actions related to contractor incurred cost proposals). DCAA’s untimely audits (and continuing excuses) led Congress to get directly involved in DCAA processes.
  • DCAA’s sustention rate (reported in semi-annual reports issued by the DoD-IG) have been in the range of 22-30%. Hence, for every $100 questioned by DCAA, Contracting Officer only recover $22 to $30 dollars (varies with the six-month reporting cycle).  Perhaps obvious, but DCAA is wasting its (apparently) limited resources on developing and reporting non-sustainable cost questioned…while also wasting contractor and contracting officer resources.
  • DCMA (Defense Contract Management Agency) has assumed the responsibility for contract compliance for a number of areas previously assigned to DCAA (but always on DCAA’s “back-burner” because of other DCAA priorities). These have included contractor financial capability contractor business systems, contractor disclosure statements and contractor bid proposals.

In the good old days (prior to 2008), DCAA Executive Management was focused on DCAA retaining its role as “The” contract audit agency.   DCAA now embraces a “What Me Worry” mantra which seems to be ignoring a number of trends suggesting that DCAA might want to rethink its long-term prospects of survival. 

Humphrey Bogart (as Rick Blaine in “Casablanca”)—DCAA.

RCI-2018-Halloween-CasablancaAlthough it is slightly misquoted, Humphrey Bogart will forever be remembered for his line “Play it again, Sam” in Casablanca.   DCAA is Humphrey Bogart in terms of “play it again” applied to a number of DCAA’s audit exceptions based upon DCAA repeating audit interpretations which have been clearly and repeatedly rejected in published decisions (contract disputes).  The two most notable “play it again, Sam” audit themes are:

  • Unreasonable compensation (FAR 31.205-6(b)) based upon DCAA’s compensation benchmarking which was determined to be statistically invalid in two published ASBCA decisions (going back to 2012-2013 and not changed by any later decisions). DCAA’s flawed methodology repeats itself as if the published decisions never happened and rest assured, that contracting officers are less than receptive to addressing audit reports with cost questioned which are best described as “the agony of defeat”
  • Prime contractors who fail to adequately manage subcontractors, in which case DCAA questions 100% of the subcontract costs. DCAA has not addressed its problematic and non-sustainable interpretation of a FAR clause which isn’t even in any contract term or condition.   In fact, an ASBCA Judge described this as a legal theory created by an auditor.  

There are other DCAA audit interpretations which are repeated even though the same interpretation has yielded non-sustainable cost questioned (when dispositioned by a contracting officer in a prior audit report)…play it again, Sam.

Wicked Witch of the West—Corps of Engineers Contracting Officer

RCI-2018-Halloween-Wicked WitchA recent ASBCA decision earns a Contracting Officer the rights to the costume from the Wizard of Oz.   As noted in the 57-page decision, the Contracting Officer directed a small business to change from one type of dredge to a much more expensive dredge, then refused to adjust the contract price for the directed change.   The CO also ignored differing site conditions that clearly resulted in performance delays and additional costs.  In spite of the contractor’s requests for financial relief (in excess of $1 million), the Contracting Officer offered an arbitrary $375,000 with a stern “take it or leave it”   More specifically the CO threatened to terminate the contractor for default if the contractor refused the $375,000 and the $375,000 came with a demand for the small business contractor to release the government from any further claims.  The ASBCA Judge took note of the Contracting Officer’s abuse of authority (breaching the implied covenant of good faith and fair dealing) and nullified the contractor’s release (effectively reopening the contractor claim for additional compensation).   In its decision the ASBCA concluded that the contract modification (adding $375,000) and its release are unenforceable because the CO engaged in coercion.   Although not identified in this blog, the Contracting Officer is identified in the ASBCA decision (Case # 60235, 60236 and 60237). If you encounter this Contracting Officer, you might want to have a bucket of water nearby.

 Whitepaper: What Are The Prime Contractor’s Risks  Related to Subcontracts Download Now

Written by Michael Steen

Mike Steen is a Senior Advisor with Redstone Government Consulting, Inc. and a specialist in complex compliance issues to include major contractor cost accounting & business system regulations, financial compliance, resolution of DCAA audit issues, Cost Accounting Standards application, litigation support, and claims preparation. Prior to joining Redstone Government Consulting, Mike served in a number of capacities with DCAA for over thirty years, and upon his retirement, he was one of the top seven senior executives with DCAA. Mike Served as a Regional Director for two DCAA regions, and during that time was responsible for audits of approximately $25B and 800 employees. In October 2001, he was selected for the Senior Executive Service and in 2006 he received the Presidential Rank Award. During Mike’s tenure with DCAA, he was involved in conducting or managing a variety of compliance audits, to include cost proposals, billing systems, Cost Accounting Standards, claims, defective pricing, and then-evolving programs such as restructuring, financial capability and agreed-upon procedures. He directly supported the government litigation team on significant contract disputes and has prepared and presented various lectures and seminars to DCAA staff and business community leaders. Since joining Redstone Government Consulting in June 2007, Mike has developed and presented training and seminars on Government Contracts Compliance to NCMA, Federal Publications Seminars and various clients. Mike also is a prolific contributor of written articles to government contracting publications, as well as to our own Government Insights Newsletter. Mike also serves as the director of our training service offerings, with responsibilities for preparing and developing course content as well as instructing our seminars to clients and general audiences throughout the U.S. Mike also serves as a faculty instructor for the Federal Publications Seminars organization. Education Mike has a BS Degree in Business Administration from Wichita State University. He is also a graduate of the DCAA Director’s Fellowship Program in Management, and has a Masters Degree in Administration from Central Michigan University. Mr. Steen also completed a number of OPM’s management and executive development courses.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Redstone GCI