Estimating System Deficiencies
In its recent report (DODIG 2015-139), the DOD-IG (Inspector General) found that DCMA Contracting Officers failed to comply with DFARS timing requirements related to contractor business systems (DFARS 215,407-5-70 and DFARS 252.242-7005. In this case, the IG evaluated actions (or more accurately inactions) on 18 DCAA audit reports related to contractor estimating systems which are subject to the criteria in DFARS 252.215-7002. The DFARS Business Systems rule includes no time frames concerning government audits of contractor systems; however, once a government audit report is (finally) issued, DFARS has the following time-requirements (“requirements” used loosely because due dates applicable to the government are routinely ignored as evidenced in the IG report):
- Initial determination within 10 days of the DCAA report
- Obtain contractor’s written response within 30 days of the initial determination
- Evaluate the contractor’s response (rebuttal and/or corrective action plan) and issue a final determination within 30 days
- Withhold payments (immediately) if the system is determined to have one or more significant deficiencies.
In a table within the IG report, the noncompliance rates ranged from 28% (withholds) to 77% (final determination within 30 days of receiving the contractor rebuttal). In its discussion of its findings, the results suggest that the contracting officers not only missed the (timing) mark, but in many cases, the contracting officers never accomplished the “required” action. For example, initial determinations were never made for 6 of 18 reports and for the remaining 12, the average time was 98 days (for an initial determination). The results were similar for final determinations in which case the contracting officer failed to issue any final determination and for those (8) with final determinations, these were on average 236 days after receiving the contractor’s written response. If one adds it all up, the DFARS requirements implicate a final determination within 70 days of the audit report (10 for the initial determination, 30 for the contractor response and 30 for the final determination); in contrast, for those with a final determination, the average number of days was slightly off the mark at 399 days.
Although the IG report reflects negatively on DCMA contracting officers, of far more importance to government contractors are the DCMA responses to:
- Take all appropriate actions in response to estimating system deficiencies including issuing final determinations and disapproving systems that have significant deficiencies (noting that the complexities of the issues may require additional time beyond the DFARS time-lines)
- Implement payment withholds on disapproved systems
- Improve internal controls and training (which will include a contractor business system tracking tool)