Government Contractor Survey Disses GAO, Says DCAA Audits Are of Lower Quality

By NICK SCHWELLENBACH

Consider the source: the latest government contractor industry survey conducted by Grant Thornton LLP, a contractor consulting firm, shouldn't be seen as the most independent and objective voice when it comes to contracting. Grant Thornton is clearly offering industry's perspective. But the strong words they have on the Defense Contract Audit Agency (DCAA)—long the bane of government contractors—and that of the Government Accountability Office (GAO), which issued two very critical reports on DCAA are worth noting.

Members of Congress and the GAO have praised the new leadership at DCAA for reforms that they say are intended to improve the quality of DCAA audits and the agency's independence. But the Grant Thornton report has a diametrically opposite view:

...in our view, the quality of the audit reports being issued by the DCAA under the new policies is far lower than was the case prior to the GAO reports. It appears that the net result from the GAO reports is that the DCAA’s production-oriented culture has been replaced by a system in which the DCAA takes far longer to issue lower quality reports to a contracting officer who must seek DCAA concurrence before conceding some of the DCAA’s positions in negotiations with the contractor. A possible remedy for the current inefficiencies that plague government contracting would be a statement of the basic principle that an audit report must be completed in a timely fashion if it’s going to be useful as part of an efficient and cost-effective procurement process.

Later in their report, Grant Thornton takes aim at what the GAO chose to examine:

It is unfortunate that the GAO did not focus its attention more closely on the way the DCAA allocates its resources rather than criticizing the DCAA for a perceived lack of independence or inadequate documentation in the work-paper files. Had the GAO focused on substance rather than form, their report could have had a positive impact on the procurement process. Instead, after implementing the GAO’s recommendations, the DCAA’s value to the procurement process seems to have been further diminished.

It's been well-established that DCAA is taking far longer to issue audit reports and that their coverage of contracts has plummeted even as their staff has significantly grown. But the justification has been that the fewer audits produced covering fewer contracts are of higher quality. Grant Thornton's report disputes that and claims that taxpayers are being served less effectively.

Is this a case of industry trying to mislead the public with misinformation? Or is there something to their claims? One thing is true: one measure of success should be whether DCAA is having a greater impact on the procurement process. If it is increasingly marginal and producing lower quality reports, how are taxpayers coming out better?

Perhaps GAO should do as Grant Thornton suggests and look at how DCAA spends its time and if there are better outcomes for taxpayers now than before the reforms took place. That would make a good deal of sense and would constitute important oversight of this extremely critical but largely unknown agency.

Nick Schwellenbach is POGO's director of investigations. Follow @schwellenbach

Comments

[CR Sense]

Wow !! Now they have gone and promoted the "incurred cost" Queen in the Central Region to DRD. This is a person who has really accomplished nothing in her career and has failed as the leader of DCAA's incurred cost backlog audit plan. Another Susan Barajas ? Watch out !!

[Franklin]

"Employee" hit the nail on the head. DCAA is ruled and controlled by "Fear". So many are afraid to do anything, so they spin their wheels all day. DCAA is irrelevant. DCAA exists for DCAA only and their internal CIGIE police. Apogee Consulting has a web site, Google it and read what this fellow has to say. He is right on the mark, DCAA has failed. The entire SES has to be traded to another agency like the past failed Director April Stephenson. DCAA leaders have no idea of the scope of the problems and no clue how to right the boat. DCAA is an irrelevant agency controlled by fear.

[Employee]

Dcaa is hiring a lot of people but they keep giving work away. Now they want to get rid of incurred cost audits at small contractors. What will people in the branch offices be doing? They will staff everyone at the big places and auditors will be sitting around twiddling their thumbs. Our senior mgmt has no clue what they are doing. Why is dcaa even needed now when we do less and less with more and more people. Why are they still hiring when we are giving away all our work. When was the last time any rd or d or someone from policy visited a small contractor? Quality ruined us. They made dcaa irrelevant. We aren't needed. Thanks policy and quality.

[Former DCAA]

DCAA cannot be fixed with the current management in place. The agency will not report problems with large contractors (no problem in crushing the little guys). It is costing the taxpayer millions. Do away with DCAA and hire independent audit firms. They would have to be trained in FAR and CAS but that should not be a problem. DCAA will not report CAS noncompliances because they would rather take the easy way out which is to issue clean reports and not rock the boat. The good ole boy network and fear are running the agency.

[Kate]

Grant Thronton has it right. DCAA can't get out of it's own way. What good are DCAA audits, if they never see the light of day. DCAA is so broken that there is no hope. Total and complete dysfunction. Senior leadership is deaf, dumb and blind.

[dcaa employee]

The current state of the agency is pretty pathetic. You forgot to mention that our internal quality reviews remain dismmal. To fix the agency, they are looking to bring in management from outside who have had no contact with DCAA, contract auditing or really anything we do. To make up for their lack of knowledge, they are bringing back (as mentors) rehired annuitants. Two people doing the job of one.

The GAO really did a job- destroyed an agency when it was in need of a new director and repair.