DCMA provides contract administration services and support to  combatant commanders during contingency operations. DCMA Is Positioning Itself to Meet Its Missions by Strengthening Its Workforce, Policies, and Procedures

DCMA has undergone significant shifts in its workforce, organizational  structure, and policies and procedures over the past 10 years. After its  formation in the early 1990s, DCMA’s workforce numbers declined and  there was significant erosion of some areas of expertise, such as the cost  and pricing function. Ultimately, the workforce became so out of balance  with workload after 2000 that the organization could not fulfill all of its  oversight functions. A shift to a substantially decentralized, customer- oriented approach was intended to mitigate the impact of this workforce  imbalance, but resulted in a number of unintended consequences, such  as inefficiencies in how work was done at the CMOs. In light of recent,  significant workforce growth, DCMA is rebuilding its expertise in areas  that had been bereft, instituting new, centralized policies and procedures  and developing agency-wide performance indicators intended to gauge  how well the agency is meeting its missions. The agency has steadily increased its numbers  since that time and expects to reach about 13,400 total civilian staff by  2015—about a 43 percent increase from its size in 2008. DCMA has taken several steps to rebuild its cost and pricing capabilities:  In 2009, DCMA created the Cost and Pricing Center, with a mission of  developing and sustaining the agency’s expertise in pricing. The agency currently has 122 indicators  in place, addressing contractor supplier-base issues and DCMA  processes, workload, and resources. To minimize the impact of civilian  deployments, DCMA has established a position for a corps of 250  personnel hired specifically to support the contingency mission, but  CMOs report management challenges with using these resources. Nevertheless, several DCMA officials we interviewed believe that CCAS  deployments have a definite, constraining impact on the agency’s  domestic mission, and CMO officials identified specific examples of how  their operations are affected by deployments. They cited delays in quality  assurance response times, for example, and noted that audits of a  contractor’s processes and contract closeout activities have been delayed  or not done. CMOs we visited noted that the impact of CCAS deployments on CMOs  varies based on the type of deployment (civilian volunteer or EE),  deployment of CMO leadership, and rates of deployment at the CMO. A number of CMO leaders deploy, in part, because  a high proportion of them are military. DCMA has taken steps to mitigate the impact of deployments on  individual CMOs. The agency has also lengthened deployment time frames to  reduce their frequency. We also found that DCMA contracting officers maintained their  determination of many contractor business systems as adequate despite  the fact that the systems had not been audited by DCAA in a number of  years—in many cases well beyond the time frames outlined in DCAA  guidance. DCMA Maintains Adequacy Determination for Contractor Business Systems Even When DCAA Audits Are Outdated

Contractor business systems and internal controls are the first line of  defense against waste, fraud, and abuse on government contracts, and  so the government is at greater risk of overpaying contractors if possible  deficiencies exist in the systems. Recommendations for Executive Action

We recommend that the Secretary of Defense work with DCMA and  DCAA to identify and execute options, such as hiring external auditors, to  assist in conducting audits of contractor business systems as an interim  step until DCAA can build its workforce enough to fulfill this responsibility. We recommend that the Director of the DCMA take the following two  actions:  Identify ways to accurately and transparently reflect the current status  of business systems, such as changing the status of a system to  “unassessed” when a system has not been audited within DCAA’s  time frames. Appendix I: Objectives, Scope, and Methodology

Our objectives were to (1) assess how the Defense Contract  Management Agency (DCMA) is positioning itself to meet its missions; (2)  determine the extent to which contingency missions have impacted  DCMA’s ability to provide oversight and surveillance domestically; and (3)  identify other factors that may affect its capability to conduct oversight  and surveillance domestically going forward. We reviewed Defense  Contract Audit Agency (DCAA) documentation such as relevant sections  of the DCAA Contract Audit Manual and audits related to contractor  business systems.
Why GAO Did This Study

The Defense Contract Management Agency (DCMA) provides contract administration services for DOD buying activities. Its contract management offices (CMO) work with defense contractors to help ensure that goods and services are delivered on time, at projected cost, and that they meet performance requirements. DCMA also supports combatant commanders during contingency operations. As DCMA recovers from years of significant downsizing, GAO was asked to (1) assess how the agency is positioning itself to meet its missions, (2) determine the extent to which contingency missions affect its oversight domestically, and (3) identify other factors that may affect its domestic missions going forward. GAO reviewed regulations, policies, and guidance, analyzed the status of contractor business systems for 17 defense contractors, and interviewed a wide range of DCMA officials.

What GAO Found

After undergoing significant shifts in its workforce, structure, and policies and procedures over the past 10 years, DCMA has taken steps to rebuild its capacity. As the workforce declined, the agency experienced significant erosion of expertise in some areas, such as the cost and pricing function, such that it could not fulfill all of its oversight functions. A shift to a substantially decentralized, customer-oriented approach in the mid-2000s, intended to mitigate the impact of this workforce imbalance, resulted in unintended consequences such as inefficiencies in how work was done at the CMOs. DCMA has since begun to rebuild workforce expertise and has instituted new, centralized policies and procedures. The agency expects to reach about 13,400 total civilian staff by 2015--a 43 percent increase from about 9,300 staff in 2008. DCMA's military workforce has generally ranged between 500 and 600 in recent years. A growing number of DCMA's new employees have been hired using the Defense Acquisition Workforce Development Fund. To help gauge progress in meeting its missions, the agency uses performance indicators for contractor supplier base issues and DCMA processes, workload, and resources. Agency staff deployed on contingency missions are small in number--272-- when compared with the number of total DCMA employees, but several DCMA officials told GAO that deployments have a constraining impact on the agency's domestic mission. CMO officials identified examples of how their operations have been affected by deployments, such as delays in conducting timely quality assurance, audits of contractor processes, and contract close-out activities. The impact of deployments depends on the type of deployment or on certain features of the CMO; the timing of military leaders' deployments; and multiple or extended deployments of civilian volunteers. DCMA has noted support for the warfighter is a high priority for the agency, but has taken steps to mitigate the impact of deployments, such as lengthening deployment time frames to reduce their frequency. To minimize the impact of civilian deployments, DCMA established a position for a corps of personnel to support the contingency mission. Several factors may affect DCMA's ability to meet its missions going forward. One significant source of external risk stems from DCMA's reliance on the Defense Contract Audit Agency (DCAA) to conduct audits of certain contractor business systems. Business systems--such as accounting and estimating systems--are the government's first line of defense against fraud, waste, and abuse. Because of its own workforce struggles, DCAA has lagged in completing a number of such audits and is currently focusing on other high priority areas. GAO found, however, that DCMA contracting officers maintained their determination of many contractor business systems as adequate despite the fact that the systems had not been audited in a number of years--in many cases well beyond the time frames outlined in DCAA guidance.

What GAO Recommends

GAO recommends that DOD work with DCMA and DCAA to identify and execute options to assist in audits of contractor business systems. GAO also recommends that DCMA clarify for CMOs the agency's plans to continue funding existing workforce positions and that it identify ways to accurately reflect the status of contractor business systems, such as changing the status to unassessed when audits are delayed. DOD concurred with the first two recommendations. DOD partially concurred with the remaining recommendation but discussed several planned actions which, if implemented, should improve the transparency of system assessments.