A few issues back I indicated that DCAA was apparently reviewing all public vouchers. However, it turns out that DCAA is not doing 100% but is reviewing many more vouchers than previously. New contractors and a statistical sampling of other contractors’ vouchers are subject to review. DoD issued a clarification to a proposed rule that would amend DoD's voucher processing procedures and better accommodate the use of Wide Area Workflow (WAWF) to process vouchers.

DFARS 231.205-18 was effective January 30, 2012, and required major contractors to report independent research and development projects to DOD. The intent is to provide DOD with greater visibility into IR&D projects in order to take advantage of technological developments and avoid duplication of efforts. Failure to report renders costs unallowable.

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 Department of Defense Inspectory General, over 80% of the undefinitized contractual actions (UCAs) entered into over a six-year period did not meet statutory and procedural requirements. Consequently, the Inspector General has concluded that DOD assumed additional cost risk, may have paid excessive profits and may have paid more than fair and reasonable prices.

According to the Department of Defense Inspectory General, over 80% of the undefinitized contractual actions (UCAs) entered into over a six-year period did not meet statutory and procedural requirements. Consequently, the Inspector General has concluded that DOD assumed additional cost risk, may have paid excessive profits and may have paid more than fair and reasonable prices.

The most common failures were not definitizing actions within the 180-day time frame and failure to determine whether contractor profits reflected work performed during the undefinized period. Other problems included improper justification to issue a UCA and failure to adequately support UCA authorization requests.  

A GAO reports that DOD will close relatively few of its contingency contracts within required time frames due to poor contract administration and other problems. DOD does not know how many Iraq contracts are eligible for closeout; however, data indicate at least 58,000 contracts were awarded there between fiscal years 2003 through 2010. Another 42,000 Afghanistan contracts also need to be closed.

According to the DOD Inspector General (IG), DCAA tacks agency-wide guidelines on the timeliness of data tested during audits of contractor systems. Furthermore, the lack of guidelines delays DCAA contractor business system reviews. The Director of DCAA has agreed and promised guidance by November 2011 (tomorrow).

DOD contractors must now display DOD inspector general fraud hotline posters in common work areas within business segments performing work under the contract and at contract work sites.  This DFARS rule takes effect immediately, implements the recommendations of the DOD inspector general by amending the Defense Federal Acquisition Regulation Supplement to supersede Federal Acquisition Regulation 52.20314(c), which applies generally to federal contractors and exempts them from displaying agency fraud hotline posters if the contractor has implemented a business ethics and conduct awareness program including a reporting mechanism such as a hotline poster.

Click to view the DFARS and PGI 

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.

The news of Defense Secretary Robert Gates’s announcement that the Pentagon will dissolve the U.S. Joint Forces Command and cut thousands of defense contractors from DoD payroll sparked opinions ranging from outrage to full fledged support.