Due to the many rumors and conflicting stories on this topic, a special update is necessary.

Here are some of the comments heard:

DCAA is appealing the decision. Obviously wrong, DCAA cannot appeal anything.

DCMA does not intend to appeal the decision. This would be consistent with their actions.

Two interesting reactions on the decision that labeled the DCAA approach flawed. One is that some Federal employees and even more state employees are alleging that “DCAA is appealing this decision.” First of all, DCAA does not appeal decisions—DCMA appeals decisions. Second, the word is that DCMA has no intention of appealing. DCMA wanted a Board decision so they could clear the logjam of DCAA reports dumped on them by DCAA on this very topic. This decision can serve as a basis for “overruling” DCAA. Another reaction is that apparently DCAA has not (and likely will not) inform their field auditors of this Board decision.

DOD is seeking to add about 1,600 employees to the combined DCAA and DCMA staffing at the same time that it is planning a 5 percent cut in the defense budget. [Complete article here] Noteworthy, DCAA completed only $19 billion in “incurred cost” audits in fiscal 2011—a 44 percent drop from the previous year. In the prior year $34 billion was audited...even if this were enough to stay current, DCAA is dropping behind at a rate of 5 months every year.

The DOD IG has substantiated two of three allegations in a hotline complaint which alleged that a Defense Contract Audit Agency (DCAA) audit team in the mid-Atlantic region failed to provide adequate audit services. IG substantiated that the DCAA audit team (1) provided inadequate audit assistance in closing contracts by not reviewing final vouchers in a timely manner and (2) inappropriately canceled its review of a progress payment based on direction from a contracting officer who did not have the authority to cancel it.

According to the DCAA/DCMA "rules of engagement" regarding forward pricing rates, forward pricing rate agreements (FPRAs) will be used by DOD contracting officers to set pre-negotiation objectives.  When no FPRA exists, if DCAA forward pricing rate audit recommendations (FPRR) are available, these should be used by the DCMA as a basis for the FPRRs provided to DOD contracting officers.  During negotiations, contracting officers may deviate from FPRAs/FPRRs when there are "solid" reasons for doing so.  For example, a contracting officer may, as a result of more current data, determine the contractor's FPRAs/FPRRs do not accurately reflect the amount of direct labor hours proposed for a current action, thus making the allocation base too low or too high.  However, DOD expects that contracting officers discuss such exceptions with the DCMA CACO or DACO (Ed. note: not DCAA) to document the rationale for their exceptions in their business clearance or negotiation memorandum. 

The attached memorandum has great significance in the conduct of business within DOD.  The memo, issued by the lead DOD procurement organization, essentially dictates to the DCAA how they will operate in conjunction with DCMA.  Note that the Directors of DOD agencies (including DCAA) are recipients of this memo and that DCAA had no meaningful input despite the implication that this is a joint DCMA/DCAA agreement.  DCAA reports to the DOD Comptroller whose name is nowhere to be seen in this document.  In the past, the DOD Comptroller was the DCAA champion and prevented “end runs” by the procurement community and the DOD Inspector General to usurp the DCAA role.  Not so now.