Better Auditing for Better Contracting

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Better Auditing forBetter Contracting

Eight Recommendations to Reorm the Deense Contract AuditAgency and other Federal Government Audit Departments

By Pratap Chatterjee March 2012

www.americanprogress.o



Better Auditing forBetter ContractingEight Recommendations to Reorm the Deense

Contract Audit Agency and other FederalGovernment Audit Departments

By Pratap Chatterjee March 2012



Contents 1 Introduction and summary

4 Background: Contract audit failures

8 Recent audit failures

12 The problems: Metrics, records, experience, and independ

22 Conclusion

25 About the author and acknowledgements

26 Endnotes



1 Center or American Proress | better Auditin or better Contractin

Introduction and summary

Te ederal governmen needs o srenghen audiing o he $530 billion in ax-

payer money ha is awarded annually o conracors in order o make sure ha he

public ges value or dollars spen.1 Te agency wih he greaes share o his work

is he Deense Conrac Audi Agency, which despie is name and locaion wihin

he Penagon is responsible or he lion’s share o audiing governmen conracs.

Te Deense Conrac Audi Agency recovered $2.7 billion in 2010, bu i could

increase his subsanially i i was ully and properly saed and given more und-

ing ogeher wih sucien auhoriy and independence.

Tree years ago, as many as 30,000 audis o governmen conracs a year were

conduced annually.2 Ta number has now plunged o 10,000 audis per year

despie he ac ha he dollar value o conracs issued has remained seady. Te

ime aken o check up on proposed prices beore a conrac is awarded now

sands a 72 days, up rom 28 days only wo years ago.3 Tese dramaic changes

were spurred on by a series o repors by he Governmen Accounabiliy Oce,

he invesigaive arm o Congress, ha suggesed he audiors were doing heir

work oo quickly, and in he process ailing o documen heir work in accordance

wih governmen audiing guidelines.

DCAA responded o hese criicisms by emphasizing addiional work documen-

aion, bu now quesions are being raised i he agency isn’ placing oo much

emphasis on ollowing quesionable pracices ha add litle o he qualiy o

audis, o he derimen o conducing hard hiting audis. “In a ime o scarce

governmen resources and an inadequae conracing workorce, he governmen

mus evaluae where i is mos vulnerable and ocus resources where hey can

mos eecively proec axpayer dollars,” said Sen. Claire McCaskill (D-MO) a a

recen congressional hearing on xing he exising audiing sysem.4

Te Deense Conrac Audi Agency is in charge o audiing all miliary con-

racing, abou $367 billion or 70 percen o all governmen conracing in scal

year 2010.5 In addiion, an asonishing 76 percen o civilian audis were also




perormed by he agency in 2009, according o daa colleced by he sa o he

Subcommitee on Conracing Oversigh o he Senae Commitee on Homeland

Securiy and Governmenal Aairs. 6

Te Deense Conrac Audi Agency is proud o is work—wih good reason. In

he pas he agency has claimed a reurn on invesmen as high o $50 or each dol-lar spen,7 alhough ha number has gone down over he years o $5.10 per dollar

oday, according o he agency’s own esimaes.8 Ta is o say or every dollar ha

he governmen spends on he agency oday, i generaes ve imes as much in

recovered unds and lowered coss.

Te Deense Conrac Audi Agency has also come under re rom whisleblow-

ers, who complain ha he agency is no doing a good enough job. And i’s no

jus angry workers: Te agency rs aced atacks in congressional hearings or an

obsession wih “merics” or nishing as many audis as possible in he shores

possible ime bu conracors are now beraing he agency or aking oo long.

In response o he criical GAO repor and Congressional hearings, he Deense

Conrac Audi Agency has atemped dicul shis in is bureaucraic culure

over he pas hree years. However, many believe ha hese changes have no been

or he beter, bu have acually lessened oversigh o governmen conracors. In

paricular, DCAA now seems o be ocusing on ewer conracs, and his is clearly

no good enough. Consequenly his paper recommends ha Congress should

srenghen his ederal audiing sysem by:

• Hiring more qualied audiors a he Deense Conrac Audi Agency and oher

agencies wih audiing responsibiliies, such as he Deparmen o Energy

• Giving audiors auhoriy o subpoena conracor records, which hey canno

do now

• Naming and shaming companies ha do no have adequae nancial sysems

• Wihholding 10 percen o conracor ees i hey do no have adequae business

sysems in place o creae a nancial incenive o improve accouning sysems

• Moving o risk-based audis and random checks raher han excluding cerain

ypes o conracs such as limiing proposal audis o xed-price conracs over

$10 million and cos-ype conracs over $100 million, as is now he pracice




• Compleing pricing reviews wihin a se number o days so ha he conracing

agencies can issue conracs in a imely manner

• Providing he Deense Conrac Audi Agency wih is own independen general

counsel so ha i does no ace a confic o ineres by relying on he Penagon’s

lawyers

• Evaluaing wheher he Deense Conrac Audi Agency should repor direcly

o Congress raher han o he Penagon as is presenly he case.

In he pages ha ollow, his repor will prole he dieren reasons audis by he

Deense Conrac Audi Agency someimes ail, and wha’s been done o correc

hese ailures in he pas. Tis analysis will pu in perspecive he imporan se o

deailed recommendaions ha conclude his repor.




When a ederal governmen agency decides ha i needs o buy somehing rom

a privae conracor, i urns o one o is employees known as a conracing

ocer who draws up a “reques or proposals” under he guidelines specied in

he Federal Acquisiion Regulaion. Te conracing ocer may ask audiors or

assisance in pricing he conrac and conducing negoiaions depending on he

naure o he conrac. Tese audis, depending on he agency involved, may be

conduced by audiors rom hree sources—he inspecor generals o he respec-

ive agency, he Deense Conrac Audi Agency, or public accouning rms.

All requess or proposals (i public and valued a over $25,000) are supposed

o be made available on a websie called FedBizOps. Many o he conracing

opporuniies posed o FedBizOps require an audi o suppor he negoiaed

price. ypically he conrac ypes or which audi assisance may be required

all ino hree caegories:

• Fixed-price conracs where he conracor provides supporing cos or pricing

daa o esablish he reasonableness o price• ime-and-maerials conracs based on xed, per-hour labor raes• Cos-reimbursable conracs where a conracor submis invoices or allowable

coss incurred

Cos-reimbursemen conracs, oen known as “cos-plus” conracs, provide ha

a conracor ges paid or all allowable coss plus a percenage o he esimaed cos

o perormance as pro.

In he hierarchy o hese hree conrac ypes, ime and maerial conracs are consid-

ered o be he mos risky, ollowed by cos-reimbursemen conracs, and nally xed-price conracs. Each one o hese conrac ypes has several variaions, which

may urher add o he risk assumed by he governmen and/or he conracor.

Background: Contract audit failures




Once an agency awards a conrac i alls o he conracing ocer o monior he

conracor’s perormance. Someimes his uncion is delegaed o an adminisra-

ive conracing ocer or a conracing ocers represenaive.

Audiors work wih conracing ocers beore, during, and aer a conrac is

signed o ry o ensure ha he price paid is air and reasonable, and ha he ax-payer ges he bene o he bargain ha was negoiaed. Audiors can be asked o

evaluae coss and prices during conrac negoiaions, paricularly wih so-called

no bid, or sole-source, conracs. Te audior migh also review an individual con-

racor’s inernal sysems such as billing, labor coss, and qualiy conrol.

Aer a conrac sars, and hrough he nal closeou, audiors can review

invoices o incurred coss o ensure ha a conracor’s claims can be jusied

under governmen regulaions.

Te Deense Conrac Audi Agency audis he vas majoriy o conracs orhe simple reason ha he Deparmen o Deense spends roughly 70 percen

o all ederal conracing dollars. A recen sudy by he Senae Subcommitee on

Conracing Oversigh showed ha 76 percen o all civilian agency audis and a

oal o 89 percen o all ederal conracing audis are also done by he Deense

Conrac Audi Agency. Some agencies are almos wholly relian on he agency or

conrac audiing. Te Deparmen o Healh and Human Services, or example,

has he highes percenage o civilian agency audis perormed by he Deense

Conrac Audi Agency, roughly 90 percen.9

Some governmen agencies use heir own inspecors general insead o he

Deense Conrac Audi Agency. Te General Services Adminisraion, which

buys producs and services or use by oher ederal agencies, esimaes ha is

inspecor general spen $58 million and recovered $1.2 billion in scal 2009 and

2010, a cos savings o almos 20 o 1. Te Deparmen o Educaion inspecor

general spen $255,123 o audi a 2006 conrac wih he Naional Assessmen o

Educaional Progress and recovered $2.93 million or he axpayer in improper

billings and unallowable coss, a savings o almos 12 o 1 compared o he cos.10

A ew governmen agencies use public accouning rms, alhough his is rela-ively rare. Jus 92 ou o he 17,000 conrac audis perormed during 2009 were

perormed by hese rms. Here’s one example: Te Deparmen o Energy hired

he big audiing rm KPMG in May 2010 o audi nancial assisance awards

under he American Recovery and Reinvesmen Ac o 2009. Ingrid Kolb, he




direcor o he oce o managemen a he Deparmen o Energy, says ha he

deparmen underook his unusual sep because i was worried ha he Deense

Conrac Audi Agency had a major backlog—wha she described as “challenges

wih an increasing workload and ewer resources.” Kolb noed ha even hough

her deparmen was happy wih he public accouning rm, he services provided

were no “apples o apples” and ha she preerred o use he Deense Conrac Audi Agency or more “complex” audis. 11

Te consequences o a negaive audi nding can range rom he deerminaion

o a simple unallowable cos o serious criminal charges. In he case o poor bill-

ing procedures, such as a ailure o produce imeshees, audiors can rs ask he

conracor o x he problem by issuing a so-called saemen o condiion and

recommendaion, or declare ha a conracor has “inadequae” procedures, which

can delay or hal paymen o he conracor.12

A nding o a poor business sysem (such as a propery managemen or anaccouning sysem) could also resul in a similar auomaic hold on ull paymens

unil he problems are resolved. Conversely, a company wih good business

sysems is allowed o engage in “direc billing,” which means hey are paid in ull

wihou he need or an audi o each invoice.

Audiors are also supposed o rack down evidence o raud, wase, and abuse such

as “unsuppored” coss (inadequae documenaion o jusiy he charge) or “ques-

ioned” coss (coss ha appear o be oo high or he work done) or “disallowed”

coss (coss ha are conrary o he conrac or rules governing cos charging). In

any o hese cases, an audior issues a “Form 1” ha auomaically resuls in a “wih-

holding” o paymens. I he conracor can jusiy an expense, hen he wihholding

is removed.13 I criminal behavior (such as bribery) is suspeced, hen an audior can

issue a “Form 2000” and reer he mater o he Federal Bureau o Invesigaion or

he Deense Criminal Invesigaion Service, a uni o he Deparmen o Deense. 14

I an audior’s criicism is ound o be valid, hen he ederal governmen can

deny paymen. ypically, some 70 percen o he Deense Conrac Audi

Agency’s wihholds are “susained.” Ta percenage dropped dramaically in

Iraq, provoking sharp criicism ha he miliary commands were caving in ohe conracor or poliical pressure. 15

How oen conracs are audied varies rom agency o agency. In 2009, ederal

agencies perormed roughly 17,000 conrac audis, according o he Senae




Subcommitee on Conracing Oversigh. Tis works ou o one audi or every

$489.3 million spen on conracors. Te precise amoun varies rom agency o

agency. One audi is conduced or every $24.7 million spen on conracors by he

Penagon o one or every $2.5 billion dollars spen a he Deparmen o Jusice. 16

Federal audiors perorm hese rouine asks on as many risky conracs as possiblein order o cach he mos likely insances o wase, raud, and abuse and make sure

ha axpayers ge value or money. Businesses oen grumble abou he bureaucracy

bu as we will see in he nex secion, even hese audis miss signican problems.




In 2008 aer receiving whisleblower complains, he Governmen Accounabiliy

Oce launched an inquiry ino 14 Deense Conrac Audi Agency audis ha

were conduced beween 2003 and 2007 a hree agency oces in souhern

Caliornia. A rs repor rom GAO ound ha in every single one o he 14 audis,

DCAA sa did no have he backup documenaion o suppor heir own dra

conclusions, as is required under generally acceped governmen audiing san-

dards known as GAGAS. 17

A ollow-up GAO repor examined anoher 69 DCAA repors done beween

2004 and 2006 rom around he counry o see i here were sysemic prob-

lems. Tis invesigaion ound 64 o he 69 had “serious problems” and even

he remaining ve “had compliance problems.”18 Tese ndings sen up alarm

bells in Congress, which had ypically looked o he audiors o make sure ha

axpayer money was no being wased.

Te GAO repors discovered hree broad ype o problems: poor qualiy work,

a ailure o repor bad conracors, and an overreliance on limied audis. Le’s

examine each in urn.

Poor quality work

Deense Conrac Audi Agency audiors, or example, spen 2,292 hours

audiing one specic conrac in Iraq held by Parsons Corporaion, a consrucion

company rom Pasadena in souhern Caliornia, worh $516 million. Te audiors

repored o have discovered $89 million in unsuppored and quesioned coss,

bu when GAO examined he audi, hey ound ha he DCAA sa “did noperorm sucien work” o suppor heir opinions, arguing ha he audiing o

he conracors unsuppored coss was slipshod and open o challenge.

Recent audit failures




Similarly, DCAA audiors checked jus 12 o some 22,000 ransacions conduced

beween May and July 2005 by one o he op ve miliary conracors (he com-

pany was no idenied in he repor). In 20 ou o 22 audis reviewed, he agency

did no es o see i he company had submited duplicae invoices. In 6 ou o 9

audis reviewed, DCAA did no check i he company had separaed ou “allow-

able and unallowable” coss.

Finally, a one major miliary conracor, he agency gave he company a clean bill

o healh aer inerviewing jus wo employees insead o examining he com-

pany’s acual accouning sysem.

Failure to report bad contractors

Here are jus hree examples o over 80 audi repors examined by GAO ha

covered conracs issued beween 2003 and 2007. In he rs case, InersaeElecronics Corp., a miliary saellie display manuacurer, was discovered o have

a auly billing sysem in 2005. Tis auly sysem caused i o overbill he govern-

men by a leas $246,000 on one occasion (laer reunded by he conracor) and

poenially anoher $3.5 million in anoher insance. Despie being noied o

hese problems, he Penagon allowed Inersae Elecronics o coninue “direc

billing,” which mean he company was auomaically paid in ull wihou addi-

ional scruiny when i urned in is invoices wihou prior scruiny.19

In he second case, William French, a Deense Conrac Audi Agency supervisor

in Iraq, ordered a saer o sign an audi conduced on Parsons Corp. Te order

was issued aer Parsons complained ha he audior “did no ully undersand is

new policies and procedures” on accouning conrols. Te company was given an

“adequae” opinion in Augus 2006.20

Five monhs laer, Parson’s repair work on he Iraqi police headquarers was ound

o have “plumbing ailures and elecrical res” and evenually all he company’s

work in Iraq was canceled in 2007. 21 Te Deense Conrac Audi Agency nally

wihdrew Parson’s clean audi in December 2008 aer he GAO invesigaion.

Despie his nding agains his oversigh work, French was promoed o WesernRegional Qualiy Assurance Manager or DCAA, and hen o branch manager a

he Pasadena oce ha audis Parsons.22 (French did no respond o requess or

commen on he GAO charges) 23




In he hird case, Paul Hackler, a Deense Conrac Audi Agency supervisory

audior, examined billing pracices a a $835 million cusom-designed manuac-

uring plan buil by a Boeing Inc. subsidiary in Decaur, Alabama, in he mid-

1990s o produce 40 Dela IV rockes per year.24 Te original idea behind he

plan was o pu up saellies o serve he nascen cell phone indusry. Te venure

ailed when cell phone operaors decided o use land-based owers insead.

In 2005 he Air Force Space and Missile Sysems Cener agreed o pay a

monhly reainer o Boeing o mainain a saellie launch capabiliy. Even

hough he governmen was ypically jus buying one rocke every couple o

years, Boeing’s nancial managers seemed o have decided o recoup some

o he original coss by charging infaed ees. An audior also discovered ha

Boeing migh have overpaid salaries oaling $11 million.25

“Despie our documened objecions, upper managemen insruced us o issue an

audi ha ailed o repor numerous violaions and he Air Force awarded Boeing$270 million o pas losses,” Hackler laer esied o Congress.26

Deense Conrac Audi Agency managers also “replaced he supervisory audi-

or and audior, and he new sa worked ogeher o modiy working papers

and change he dra audi opinion rom ‘inadequae,’ o ‘inadequae in par,’ and,

nally, o ‘adequae,” he added. Boeing laer setled his case wihou admiting o

hese allegaions or any liabiliy.

Over-reliance on limited audits

Someimes oher agencies besides he Deparmen o Deense have relied oo

heavily on he Deense Conrac Audi Agency in order o reduce heir own

workload. In such cases, he aul or ailures may lie wih he buying agency raher

han wih DCAA.

Te Deparmen o Energy, or example, recenly jusied paying ou beween $40

million and $60 million a monh o engineering and inrasrucure gian Bechel

Corp. o build a wase reamen plan a he Hanord nuclear sie in Washingon sae,claiming ha he Deense Conrac Audi Agency had issued a clean audi o Bechel’s

billing sysems. Te Deparmen o Energy conduced litle supervision over he

projec, which gradually ballooned rom an 11-year-long $4.3 billion projec saring

in 2000 o a 20-year, $12.2 billion projec now scheduled o end in 2019. 27




A GAO sudy laer ound ha he DCAA audi o Boeing’s billing sysems ha he

Deparmen o Energy relied upon was a cyclical repor done every hree years

or he company as a whole and no on he acual projec. Te ailure o do proper

supervision “exposed he hundreds o millions o dollars spen annually,” accord-

ing o he GAO, “o an unnecessarily high risk o improper paymens.” 28




Why is he Deense Conrac Audi Agency doing a poor job? Four reasons sand ou.

• Pressure o complee audis as quickly as possible, resuling in a mad merics

meldown• Lack o access o proper records, making i hard or audiors o do heir jobs• Lack o qualied personnel, resuling in reduced capaciy o do sucien audis• Lack o independence and auhoriy, making he agency suscepible o pressure

rom conracors and high-ranking ocials

Some o hese problems sem rom he hisory o he agency. A year aer DCAA

was creaed in 1965, i had 3,662 sa in charge o audiing $21.5 billion in con-

racs.29 Over he las our decades, DCAA’s oversigh o conrac dollars expanded

over our-old (aer adjusing or infaion) o a high o $501 billion in proposed

or claimed conracor coss ha generaed 30,352 audis in 2008. 30

Iniially he agency expanded o cope wih he workload, doubling in size by he

early 1990s o over 7,000 sa.31 Bu ollowing he adven o he Clinon admin-

israion’s Re-Invening Governmen iniiaive, he number o Deense Conrac

Audi Agency audi sa was slashed and plummeed o a low o 3,526 in 2003.

Sa cus were reversed ollowing he explosion in conracing ha ook place in

he las decade, and sood a 4,725 sa by mid-2011.

In he las wo years, ollowing he criicism o as and sloppy audiing by DCAA

by he GAO, he agency dramaically slowed down he number o audis i con-

ducs rom over 30,000 in 2008 o jus 17,000 in 2009 and o 10,000 in 2010, wih

he agency now abandoning more audis han i complees. 32

The problems: Metrics, records,

experience, and independence




Mad metrics meltdown

Here’s how his happened. In he 1990s, he Deense Conrac Audi Agency

rs came under severe criicism because i had a backlog o audis, some o

which were seven years old. Bill Reed, hen direcor o DCAA, ordered sweep-

ing changes in how he agency conduced audis in order o cach up and ocomply wih he prevailing senimen ha he ederal governmen had become

over-bureaucraic and bloaed.33 A senior audior rom Caliornia who worked a

DCAA explained wha happened: “We basically closed ou ousanding audis o

procuremen dollars by looking he oher way.”34

Nex, Reed ordered his sa o ocus on perormance “merics,” which he narrowly

dened as he speed a which audis were compleed. “o pu i blunly, cheaper,

aser, beter,” his successor April Sephenson would recall laer. 35 Muliple layers

o supervision and managemen were creaed such o ensure ha sa compleed

even he mos complex o audis in less han 30 days. In ac, audiors complainedha hey spend more ime racking heir eciency under he new “Deense

Managemen Inormaion Sysem” han conducing audiing, deeaing he whole

purpose o working beter. 36

A ormer senior audior a DCAA summed up he process in an online posing on

Governmen Execuive’s websie:

“ypically, a budge will be anywhere om 24 o 40 o 80 hours, depending on he

complexiy o he job. Every audior spends a leas hal o he ime jus seting up

he shell—ormating wha will be done. Te writen repor akes anywhere om 8

o 24 hours o wrie. Wha litle ime ha is le o do he audi is ypically 4 o 16

hours. O course, one should no fnd anyhing wrong - here goes he elapsed days

and or $/hr. merics … Only an idio will blow he budge or an assignmen and

ge a red ligh or missing hose grea “merics.” Only punishmen will be received

or “ailing” o do wha he mgm. wans—he GREEN LIGH.” 37

Anoher wroe in o say: “Mad Merics Meldown! Te applicaion o engineering

and acory foor measuremens o proessional aciviy is a lazy, risk-aversive, ani-

inellecual cruch o poor managemen.”38

For sa who were serious abou heir work, here was only one way o complee

he audiing. “Unless I’m willing—and I have been—o work on my own ime on

weekends, I can’ nish he audis wihin he cerain hours and I don’—and a he




end, when my perormance ges raed, my supervisor will run hrough a summary

o he audis I compleed during he year and how much a percenage I ran over

he budge. And i I ran more han 10 percen, I go dinged,” said Diem Ti Le, a

senior audior in he Sana Ana oce o DCAA in souhern Caliornia wih 20

years o experience a he agency. 39

Audiors who nished quickly and me he merics go promoed aser. Deense

Conrac Audi Agency whisleblowers say ha he sysem eecively encouraged

audiors o ignore wase, raud, and abuse because nding aul wih a conracor

would slow down heir audis and cause hem o miss heir merics. Big miliary

conracors quickly learned ha hey could easily exer pressure on DCAA audi-

ors o give hem a clean bill o healh raher han lose a promoion or being lae

in meeing heir quoa. 40

Supervisors also discouraged audiors rom submiting raud repors unless hey

have complee proo, even hough one o he asks o he audior is o repor suspi-cious behavior or urher scruiny by ederal criminal invesigaors. 41

Lack of access to records

In heory, audiors can issue a subpoena o demand records rom conracors in

order o check i here has been any raud, wase, or abuse. As ar back as 1983,

veeran Deense Conrac Audi Agency audior and whisleblower George

Spanon underlined he need or access o records a a hearing in Congress. “I dey

any audior o be o do a proessional audi wihou he records, no mater how

minimal he limiaions. Te one record he does no see could be he one ha

make he enire audi worhless,” he said.42

Jus a ew years laer, he cours ruled agains DCAA’s subpoena power in a case

agains he Newpor News Shipbuilding and Dry Dock Company. On February

11, 1987, he agency asked Newpor News o produce “ederal income ax reurns,

nancial saemens, and relaed documens” in relaion o a Navy conrac.

Newpor News claimed ha “he documens conain subjecive inormaion ha

is no useul in veriying direc or indirec coss” and no “negoiaions, pricingand perormance” inormaion. In 1990 cours ruled in he company’s avor, sa-

ing ha DCAA “lacked sauory auhoriy.”




Te cour ruling had a chilling eec. For 20 years he Deense Conrac Audi

Agency has never issued anoher subpoena or orced conracors o produce

records, according o an inernal memo writen by hen-DCAA direcor April

Sephenson in 2009.43 Indeed, a Sepember 2009 GAO repor on DCAA “ideni-

ed numerous insances where requess or conracor records were no me” and

ha here was “no evidence” ha DCAA supervisors ook “enorcemen acion, asse ou in DCAA policy.” 44

Tis problem is paricularly acue wih “no-bid” conracs where he ederal govern-

men relies heavily on a single source o provide goods or services and does no

have he bene o compeiion o ensure ha he axpayer is geting he bes price.

While he governmen is heoreically proeced under he ruh in Negoiaions

Ac, which requires conracors o ceriy ha he cos and pricing daa is “curren,

accurae and complee,” some companies don’ always ell he whole ruh abou

heir coss, and DCAA audiors have limied means o gure ha ou.

Te only way o deermine i he company is no overbilling on a xed-price

conrac, or example, is o examine company records. Tis inabiliy o inves-

igae wheher or no he conracors are providing accurae daa has been

a major hurdle or audiors ever since he Newpor News ruling, bu he

Penagon has ailed o remedy his siuaion. On Sepember 11, 2009, an

exasperaed April Sephenson, hen direcor o DCAA, sen an inernal memo

o her bosses proposing ha he law be changed “o expand DCAA’s access o

conracor records required o accomplish our mission” o all “audis, records,

reviews, documens, papers, recommendaions or oher maerial” o conrac-

ors and sub-conracors.45

Te Sephenson memo, which was unearhed by he Projec On Governmen

Oversigh, in July 2011, was never aced upon by he Penagon. Ohers in he

conrac audiing communiy suppor her posiion. “Such barriers o inormaion

… can hijack wha has been proven o be an eecive oversigh mechanism,” said

Brian Miller, he General Services Adminisraion inspecor general, in recen

esimony beore Congress. “Adoping clear, sauory language allowing OIGs

(oces o he inspecors general) o obain conracor records would provide an

eecive ool or us in our conrac audis.”46




Lack of qualified auditors

Shorly beore he reired, Bill Reed was ond o showing his sa a PowerPoin

slide ha claimed ha he cos o a DCAA audi was $116.24 per hour in 2006

compared o he Big Four audi rms such as KPMG and Price Waerhouse, which

billed an average o $162.81.47

Bu in realiy, DCAA’s coss were lower or one simple reason—i had ar ewer

qualied audiors han he Big Four allowing i o pay lower salary coss. In 2011

Parick Fizgerald, he direcor o DCAA, esimaed ha jus 28 percen o his sa

were qualied CPA’s compared o a Big Four rae o closer o 50 percen.48

Te Deense Conrac Audi Agency is also unusual in ha many o is managers and

supervisors are no qualied CPAs, ye hey are required o sign o on audis, a prac-

ice ha would be illegal in he commercial world. Tis pracice has caused dissen in

he ranks o he sa ha are qualied o sign o on audis in public pracice bu pro-hibied a he agency, sending a signal ha loyaly was promoed over compeence.49

“By permiting non-CPAs o manage CPAs in audi work, DCAA culure has urned

he esablished audiing proession on is head,” a 20-year veeran o DCAA in

norhern Caliornia says. “I is he equivalen o a novice direcing a journeyman on

how o build a house or conduc any oher rade or proession ha has developed

and rened is purposes and sandards over he cenuries.” He esimaed ha in one

year audis o $2.8 billion o he $4 billion were pu under he responsibiliy o non-

CPAs supervisors a he Peninsula branch oce jus souh o San Francisco.50

Te GAO also discovered ha one DCAA oce, locaed a Norhrop Grumman

Corp.’s oces in El Segundo, Caliornia, asked inexperienced rainees who had no

proper supervision o conduc a leas 18 complex “orward pricing” audis even

hough hey had never done a single audi beore in heir lives. (Te 18 audis were

par o a larger pool o 62 problem audis or conracs worh over $6.4 billion.) 51

Lack of independence and authority

In he 1990s, Deense Conrac Audi Agency managemen sared o oer more

suppor o conracors and o miliary buyers like he Air Force and he Navy, possibly

compromising is audi independence. Te agency has also buckled o pressure rom

conracors o back o on cerain issues such as advice on prices and reporing raud.




Under he label o “re-invening governmen,” or example, which ook place

under he Clinon-Gore adminisraion, he Deense Conrac Audi Agency, led

by Bill Reed, sared o copy some o he more quesionable pracices o he Big

Four commercial audi rms who were oering “consuling” services o Forune

500 companies on how o “manage” heir axes and accouning sysems.

DCAA, or example provided consuling services via “nancial liaison audiors” o

work a various major miliary commands such as he U.S. Air Force and U.S. Army

while simulaneously creaing “inegraed produc eams” where DCAA audi-

ors would work wih conracors and governmen procuremen ocers o make

join decisions on how bes o speed up awards o conracs involving he conrac

requiremens, design, source selecion, and audiing.52 A one poin DCAA launched

a scheme called he Conracor Risk Assessmen Group ha permited reduced

audi oversigh or companies in reurn or a sysem o sel-regulaion. 53

Te pracice o “consuling” by ceried audiors in he commercial world ceasedollowing he Enron Corp. scandal, which led o he collapse o he big accoun-

ing rm Arhur Anderson and he passage o he Sarbanes-Oxley Ac in 2002,

which prohibied he pracice. Bu he Deense Conrac Audi Agency coninued

similar pracices unil 2008, when a series o damning GAO repors led DCAA o

dismanle he program.54

Governmen audiors also are expeced o provide an assessmen o proposed prices

(known as “orward prices”) during conrac negoiaions, in order o preven con-

racors rom charging oo much or specic iems or labor caegories. While con-

racing ocers are no required o comply wih he advice o audiors, his advice

provides a good check and balance and ensures ha he axpayer ges a air price.

Te oce o Deense Procuremen and Acquisiion Policy sen ou a memo on

January 4, 2011, o make clear ha he conracing ocers should indeed ollow

he cos or prices recommended by he Deense Conrac Audi Agency. 55

Conracors launched a major pushback because hey realized ha his would

disrup he cozy relaionship beween he Penagon buyers and sellers. “Tis

clearly coninues he ongoing diminishmen in he discreion and prerogaives o conracing ocers, who now are reduced o “rubber-samping” DCAA’s deermi-

naions,” wroe John W. Chierichella and Ryan E. Robers, who work on govern-

men conracing or he law rm Sheppard Mullin. 56




Lawmakers disagree. “I like he idea ha audiors are elling conracing repre-

senaives wha he prices should be. You know, in my book, ha’s good news,”

said Sen. Claire McCaskill (D-MO) a a recen congressional hearing. “I hink

ha here is jus a ne line beween cooperaion and co-oped. And I hink

independence—an audior always has o err on he side o no being co-oped,

which means maybe a litle less cooperaion. I’m no sure ha conracing ocersradiionally—paricularly in he Deparmen o Deense have aken ha, heir

independence is no somehing ha is ron and cener like i is wih an audior.” 57

Audiors are also expeced o repor any suspicious aciviy ha indicaes pos-

sible raud by lling ou a Form 2000 and giving i o DCAA managemen.

Reporing such aciviy, however, can slow down audis, and cerain managers

have been accused o discouraging his pracice, according o a repor rom he

Cener or Public Inegriy. 58

One example o his was a leaked January 2008 memo writen by a DeenseConrac Audi Agency branch manager who reused o pass on a raud repor.

“I is my conclusion ha here is no a sucien basis or suspicion o raud

or oher irregulariy, hereore, I will no orward a copy o he Form 2000 o

Headquarers,” he manager wroe. 59

While here is no daa o show how widespread his problem is, DCAA man-

agemen issued a memo in February 2009, o clariy he rules noing ha: “No

atemp should be made o dissuade an audior rom compleing and submiting a

DCAA Form 2000.” 60

Attempts to fix the problems

By he end o Sepember 2008, April Sephenson, who was hen direcor o he

Deense Conrac Audi Agency, announced a number o changes—18 ou o 19

o he merics were o be scrapped while Webmerics (a sa perormance man-

agemen soware program) was shu down. 61

A new se o 11 new “sandards,” which included 8 measurable “merics,” wasannounced. “Te key o successul perormance measures is o measure he

righ perormance,” Sephenson wroe. “Te wrong ype o behavior and/or

resuls may occur i he wrong perormance measures are used, or i he correc

perormance measures are used improperly.” She appoined Karen K. Cash,




DCAA’s assisan direcor or operaions, o ollow up on sa complains, which

were invied via an anonymous websie.

Sephenson also sa down wih he Deense Business Board (a Penagon advisory

board se up by Donald Rumseld composed o senior execuives rom major

miliary conracors) o seek heir advice. Te board quickly came up wih several vague suggesions such as creaing a new business plan, cenralizing managemen,

and hiring an ombudsperson. 62

A litle less han one year aer he new merics were announced, April Sephenson

wen beore he Senae o announce ha her agency had underaken “50 specic

improvemen acions” and had more planned over he nex ew years. Sa “eed-

back was avorable as mos employees repored ha hey did no eel pressure o

mee he perormance measures on individual assignmens,” she said. 63

Bu whisleblowers coninued o wrie ino Governmen Execuive o say hahe changes were “cosmeic” and ha “he new perormance measures have been

eiher ineecive or enorced sporadically.” Te magazine repored ha “audiors

presened documens and e-mails indicaing ha hey sill are being pressured o

hand in heir work premaurely.” 64

Te whisleblowers have been successul in persuading ohers ha DCAA was no

spending enough ime audiing each separae conrac. Bu insead o coninu-

ing o improve audiing on conracs ha were radiionally subjec o audi, he

Penagon has responded by having DCAA work on audiing ewer conracs and

by subsanially shrinking he pool ha i is subjec o audi. On Sepember 17,

2010, he agency raised he hreshold or checking up on xed-price conracs

rom $700,000 o $10 million and rom $10 million o $100 million or cos-plus

conracs. In order o make up or he conracs ha would no longer be audied,

he agency proposed ha i would help conracing ocers o deermine “air and

reasonable” prices during negoiaions.65

oday i appears ha he Deense Conrac Audi Agency has been hrown ino

reverse gear, wih complains saring o emerge ha he agency is aking oo long

o complee work. For insance, he agency esimaed ha a ypical “conracorpricing review” ook 28 days o complee in 2008, bu wo years laer he average

ime or he very same work ook 72 days. “Some o our audis ake longer because

we are doing a more comprehensive job,” said Parick Fizgerald, he new DCAA

direcor, in an inerview wih Governmen Execuive magazine. “I here are oher




acors ha are causing us o ake longer, we need o do a deep dive on hose and

ry o gure ou how miigae or o alleviae hem.” 66

Te Deense Conrac Audi Agency has already chalked up new ailures because

o his slowdown. One recen example is Columbus, Ohio-based Mission

Essenial Personnel, LLC, which was awarded an iniial ve-year-conrac by heDeparmen o Deense’s U.S. Inelligence and Securiy Command (worh up o

$414 million o provide 1,691 ranslaors in Aghanisan in Sepember 2007 ha

was laer expanded dramaically o suppor he ens o housands o soldiers ha

he Obama adminisraion was surging ino he counry.67 Te privae company

employed 6,800 ranslaors in Aghanisan and billed $629 million in revenue in

2010 alone, a dramaic increase rom is iny 2005 revenues o $6.7 million.68

In July 2010 he Commission on Warime Conracing discovered ha he

Deense Conrac Audi Agency had ailed o conduc a single business sysems

audi or Mission Essenial Personnel. Asked o explain his ailure, DCAA Direcor Parick Fizgerald explained ha he conrac grew quicker han

expeced. “Are we behind he curve? Yes. We should have been in here quicker,”

he old he commissioners a a hearing in Congress. “Our experience has shown

ha when conracors grow ha as, he procedures, processes, and sysems have

rouble keeping up wih ha growh, increases he risk o he U.S. governmen.” 69

Ye a series o condenial governmen repors writen by conracing ocers in

Aghanisan in 2009 and 2010 ha were laer obained by he Associaed Press

showed ha Mission Essenial Personnel’s billing sysems were already ailing.70 An

AP aricle quoed he inernal repors ha alleged ha he company had no idea

wha unis he linguiss were working wih or i hey were even showing up or

work. “MEP’s inabiliy o rack heir linguiss coninues o be a problem,” a repor

writen in lae 2009 claimed. “Despie MEP’s acknowledgmen o his issue litle

has been done o correc he problem.” Anoher miliary repor said: “MEP’s lin-

guis accounabiliy compleely collapsed ... ollowing monhs o deerioraion.” I

go worse: ranslaors who had reurned o he Unied Saes coninued o be paid

according o anoher repor writen in lae summer o 2010.

Par o he problem was ha ranslaors could log ino Mission EssenialPersonnel’s compuer sysem rom anywhere in he world and submi ake

imeshees. “MEP does no have in place an eecive, sysemic mehod o insur-

ing ha heir U.S.-hire linguiss are acually a heir duy locaion perorming he

services hey are being conracually paid o do,” he repor said. 71




Te company says i has since red he ranslaors ha were cheaing. In a sae-

men o he Associaed Press, Mission Essenial Personnel said he miliary had

never alered he company o “any linguis accounabiliy problems.”

Ye, he quesion remains: Had he Deense Conrac Audi Agency done a ull

audi o he company’s billing sysems and labor managemen pracices beween2005 and 2010, i is possible ha his problem could have been caugh earlier.

Te Deense Conrac Audi Agency says i is working o cach up. Te agency

hired 500 addiional audiors in 2010, and plans o add anoher 1,000 by 2014.

“We are also working o prioriize audi workload and make sure ha high-risk

audis are idenied and compleed in a imely manner,” a Penagon spokesperson

explained, noing ha he agency was working o creae a new sraegic plan and o

re-assess he new perormance measures inroduced in 2008. 72




Recommendations for reform

Tree years ago he Deense Conrac Audi Agency came under re or an obses-

sion wih geting hrough oo many audis, oo quickly. “We’re alking abou seri-

ous sirens, bells and whisles all going o a he same ime,” said Sen. McCaskill

a a 2008 hearing in Congress. “I hink he sysem is ailing. Te culure is broken,

he perormance merics are broken, and he oversigh is broken.” 73

oday he opposie is rue—conracors are now complaining abou he audi-

ors aking oo long o deermine prices. I is clear ha he ederal governmen

needs more proessionally qualied audiors o ge he job done. “DCAA canno

always accommodae non-Deparmen o Deense requess or audi suppor,”

said Tomas Skelly, he direcor o budge services a he U.S. Deparmen o

Educaion, in a recen congressional esimony. “Obaining audi suppor rom a

non-governmenal rm can be cosly and ime-consuming.” 74

In addiion o a lack o qualied sa, here is also an agreemen among senior audi-

ors on some o he basic issues ha wheher hey work a he Deense Conrac

Audi Agency or a he inspecors general oces a oher governmen agencies here

is a lack o access o records as well as a lack o independence and auhoriy.

“We need a conrac audi agency ha is no araid o is own shadow,” says

Nick Schwellenbach, direcor o invesigaions or he Projec On Governmen

Oversigh. “We need an independen and muscular audi agency ha proecs he

axpayers’ ineress.” 75

Te ollowing eigh recommendaions, i implemened, will help preven wase,raud, and abuse in conracing and saeguard axpayer dollars:

Conclusion




Hire more qualified auditors to work at the Defense Contract Audit Agency

and the inspectors general offices of other government agencie s

Every year, here is a naural atriion o people reiring or aking oher jobs.

Raher han relying on hiring a he lowes levels and promoion by senioriy,

audiors wih proessional qualicaions should be brough in o raise he raio o

proessional/nonproessional sa rom one in our o one in wo. All governmenconracs audis should only be signed by proessional audiors.

Implement former De fense Contract Audit Agency Director April Stephenson’s

proposal to change to the law giving the agenc y greater subpoena powers

Sephenson proposed “o expand DCAA’s access o conracor records required

o accomplish our mission” o all “audis, records, reviews, documens, papers,

recommendaions or oher maerial” o conracors and sub-conracors.76 Tis

would allow he agency o subpoena any documens hey need o do a horough

audi. Civilian agencies should ollow sui.

Enact the proposed Pentagon rule that would allow contraction officers

to hold back up to 10 pe rcent of payments if a contractor’s business systems

contained “deficiencies”

Tese business sysems include accouning, earned value managemen, esima-

ing, maerial managemen, purchasing, and propery managemen sysems.77

Conracors have sen in hundreds o complains abou he proposed rule, bu

he Penagon should hold rm and implemen i as proposed. Civilian agencies

should also ollow sui.

Name the companies that have inadequate business systems

A name and shame campaign o he op 100 conracors wih inadequae inernal

conrol sysems could be a powerul incenive o give he ederal governmen he

ammuniion o limi payous o companies ha do no comply.

Limiting Defense Contract Audit Agency audits of fixed-price contracts

to a minimum of $10 million and cost-plus contracts to $100 million

should be scrapped

Allowing enire groups o conracs o escape audiing creaes perverse incenives.

DCAA should rever o he conrac audi hresholds ha were in eec prior ohis change.




Encourage contracting officers to follow the Defense Contract Audit Agency

“forward pricing” recommendations

Te Penagon should hold rm o is January 4, 2011 recommendaion or govern-

men buyers o ollow he advice o he audiors on wha consiues reasonable

prices. I is no accepable, however, ha DCAA akes 72 days o issue an opinion

on hese prices. Te goal should be 30 days in order o imely suppor conracawards. Tis issue may well be resolved i he agency hires more audiors.

Ensure the Defense Contract Audit Agency is given its own general counsel to pro-

vide it with independent legal advice

I should be noed ha he Penagon inspecor general was recenly provided wih

a general counsel or ha very reason.78 Inspecors general o ederal agencies

canno be beholden o he senior managemen o heir agencies i independence

is o be mainained. I should be noed ha such an oce could also help DCAA

subpoena conracors or access o records.

Allow the Defense Contract Audit Agency to report directly to Congress

Since he direcor o he Deense Conrac Audi Agency repors o and is raed by

he comproller o he Deparmen o Deense here is a percepion o bias unlike

he inspecors general who have much more independence and reedom in wha

hey choose o examine.




About the author

Pratap Chatterjee is a journalis and he auhor o wo books on miliary conrac-

ing - Iraq, Inc. (Seven Sories Press, 2004) and Halliburon’s Army (Naion Books,

2009). He worked as a visiing ellow a he Cener or American Progress rom

2010 o 2011.

Acknowledgements

Tis repor was writen wih he help o he Doing Wha Works eam, noably

Gadi Decher and Reece Rushing. Te Tursday wriing workshop group helped

me hone my journalisic wriing ino a more rigorous policy orma while Ed

Paisley and his eam helped edi his repor.

My work in his eld over he las 10 years has been inormed a every sep o he way by many whisleblowers who mus remain anonymous. Richard C. Loeb,

ormerly o he Oce o Federal Procuremen Policy provided valuable eedback

as did Gary Terkildsen o OMB Wach, and Scot Amey and Nick Schwellenbach

o he Projec On Governmen Oversigh.

Las, bu no leas, I would like o hank Kaherine McFae and he Ford

Foundaion, which provided he nancial suppor o make his repor possible.




1 Federa Procurement Data System ures: Usaspendin.ov, avai-ae at ttp://usaspendin.ov/expore?sca_year=2010&ta=by+Aency&romsca=yes&carryters=on&Sumit=go.

2 Apri Stepenson, Testimony eore te Senate homeand Securityand governmenta Aairs Committee, Septemer 23, 2009.

3 Roert brodsky, “beeauered Deense audit aency crats newvision or te uture,” Government Executive magazine, Juy 8, 2010.

4 hearin o te Senate Sucommittee on Contractin Oversit inSenate homeand Security and governmenta Aairs, Feruary 1,2011.

5 Federa Procurement Data System ures.

6 Senate Sucommittee on Contractin Oversit in Senate home-and Security and governmenta Aairs, “Contract Audits at FederaAencies” (2011).

7 DCAA reported savins o $51 or every doar spent in 1984. “Direc-tor’s Messae,” DCAA buetin, ( Decemer 1984).

8 DCAA reported savins o $5.10 or every doar spent in 2010.“Aout Us,” avaiae at ttp://www.dcaa.mi/.

9 Senate Sucommittee on Contractin Oversit in Senate home-and Security and governmenta Aairs, “Contract Audits at FederaAencies.”

10 Tomas P. Skey, Testimony eore te Senate Sucommittee onContractin Oversit in Senate homeand Security and govern-menta Aairs, Feruary 1, 2011.

11 Inrid Ko, Testimony eore te Senate Sucommittee on Con-tractin Oversit in Senate homeand Security and governmentaAairs, Feruary 1, 2011.

12 DCAA Contract Audit Manual . 2009.

13 Deense Federa Acquisition Reuation Suppement, avaiae atttp://www.acq.osd.mi/dpap/dars/darspi/current/index.tm.

14 “Ofce o te Deputy Inspector genera or Poicy and Oversit -Audit Poicy and Oversit: Fraud Reerras,” avaiae at ttp://www.dodi.mi/inspections/apo/raud/raudreerras.tm.

15 Commission on Wartime Contractin in Iraq and Aanistan,“Interim Report: At Wat Cost?” , (2009). See aso: Apri Stepenson,

Testimony eore te Commission on Wartime Contractin in Iraqand Aanistan, May 4, 2009.

16 Senate Sucommittee on Contractin Oversit in Senate home-and Security and governmenta Aairs, “Contract Audits at FederaAencies.”

17 government Accountaiity Ofce, “Aeations Tat Certain Auditsat Tree locations Did Not Meet Proessiona Standards Were Su-stantiated,” gAO-08-057, Report to Conressiona Addressees, Juy2008.

18 government Accountaiity Ofce, “DCAA Audits: WidespreadProems wit Audit Quaity Require Sinicant R eorm” (2009).

19 government Accountaiity Ofce, “Aeations Tat Certain Audits

at Tree locations Did Not Meet Proessiona Standards Were Su-stantiated.” Te name o te company was reveaed ater. See Danahedpet, “Pentaon Auditors Pressured To Favor Contractors, gAOSays,” The Washington Post, Juy 24, 2008.

20 government Accountaiity Ofce, “DCAA Audits.”

21 Amit R. Paey, “heraded Iraq Poice Academy a ‘Disaster’,” The Wash-ington Post , Septemer 28, 2006. Te canceation notice was issuedy te U.S. Army’s Suspension and Dearment O fce on Marc 27,2007. Reported in Specia Inspector genera or Iraq Reconstruction,Apri 2007 Quartery Report, Appendix K.

22 Autor interview wit DCAA source, Septemer 30, 2009.

23 Wiiam Frenc did not respond to emais and pone cas madey te autor in Feruary 2012 to request comment on te gAO’sreport.

24 Pau hacker, Testimony eore te Senate homeand Security andgovernmenta Aairs hearin on Department o Deense ContractAssemy-line Audit Reorm, Septemer 10, 2008.

25 Iid.

26 Iid.

27 government Accountaiity Ofce, “hanord Waste Treatment Pant:Department o Enery Needs to Strenten Contros over Contrac-tor Payments and Project Assets” (2007).

28 Jeanette Franze,“Roe in h epin Ensure Eective Oversit andReducin Improper Payments,” Testimony eore te Senate Su-

committee on Contractin Oversit in Senate homeand Securityand governmenta Aairs, Feruary 1, 2011 .

29 DCAA Bulletin, 35t Anniversary Issue, 36 (2): 2000.

30 Stepenson, Testimony eore te Commission on Wartime Con-tractin in Iraq and Aanistan.

31 Remarks y Micae Tiaut, ormer deputy director o DCAA atApri 19, 2010 earin o te Commission on Wartime Contractin inIraq and Aanistan.

32 Senate Sucommittee on Contractin Oversit in Senate home-and Security and governmenta Aairs, “Contract Audits at FederaAencies”; Patrick Fitzerad, DCAA director, Testimony eore teSenate Sucommittee on Contractin Oversit in Senate home-and Security and governmenta Aairs, Feruary 1, 2011.

33 Apri Stepenson, Testimony eore te Senate homeand Securityand governmenta Aairs hearin on Department o DeenseContract Assemy-line Audit Reorm, Septemer 10, 2008.


35 Stepenson, Testimony eore te Senate homeand Security andgovernmenta Aairs hearin on Department o Deense ContractAssemy-line Audit Reorm.

36 Eizaet Newe and Roert brodsky, “Former empoyees say Deenseaudit aency is ‘roken,’”Government Executive, Auust 6, 2008. Seeaso: Diem Ti le, Testimony eore te Senate homeand Securityand governmenta Aairs hearin on Department o Deense Con-tract Assemy-line Audit Reorm, Septemer 10, 2008.

37 Comment y “ormer Senior Auditor or DCAA,”Juy 25, 2008, avai-ae at ttp://www.ovexec.com/maiaDetais.cm?aid=40541.

38 Comment y “Contract Speciaist,” Auust 7, 2008, avaiae at ttp://www.ovexec.com/maiaDetais.cm?aid=40672.

39 Diem Ti le, Testimony eore te Senate homeand Security andgovernmenta Aairs hearin on Department o Deense ContractAssemy-line Audit Reorm.

40 gAO Report # 08-857. Op. Cit; Diem Ti le, Testimony eore teSenate homeand Security and governmenta Aairs hearin onDepartment o Deense Contract Assemy-line Audit Reorm.

Endnotes

http://www.dcaa.mil/

http://www.acq.osd.mil/dpap/dars/dfarspgi/current/index.html

http://www.acq.osd.mil/dpap/dars/dfarspgi/current/index.html

http://www.dcaa.mil/




41 Nick Scweenac, “Pentaon contract raud poicy may not matcreaity,” Center or Puic Interity, Feruary 10, 2009.

42 Nick Scweenac, “Deense Contractors bock Auditor Access toRecords,” Time, Juy 22, 2011.

43 United States of America, v. Newport News Shipbuilding and Dry Dock Company , United States Court o Appeas, Fourt Circuit, 900 F.2d 257.Cited in a memo rom Apri Stepenson to Say Assad, director o Deense Procurement and Acquisition at te Department o Deense,Septemer 13, 2009, avaiae at ttp://www.poo.or/resources/contract-oversit/dcaa-eisative-proposas-sumitted-in-septem-

er-2009.tm.

44 gAO Report # 09-468. Op. Cit.

45 Nick Scweenac, “Pentaon leisative Proposas to StrentenContractor Oversit Sot D own Internay,” Juy 14, 2011.

46 brian Mier, Testimony eore te Senate Sucommittee on Con-tractin Oversit in Senate homeand Security and governmentaAairs, Feruary 1, 2011.

47 Transcript o speec y bi Reed, DCAA Director, Feruary 20, 2006.

48 Fitzerad, DCAA director, Testimony eore te Senate Sucom-mittee on Contractin Oversit in Senate homeand Security andgovernmenta Aairs.


50 Iid.

51 government Accountaiity Ofce, “Aeations Tat Certain Auditsat Tree locations Did Not Meet Proessiona Standards Were Su-stantiated.”

52 gordon hedde, actin inspector enera o te Department o Deense, Testimony eore te Senate homeand Security andgovernmenta Aairs, hearin on Department o Deense ContractAssemy-line Audit Reorm, Septemer 10, 2008. Apri Stepenson,

Testimony eore te Senate homeand Security and governmentaAairs, hearin on Department o Deense Contract Assemy-lineAudit Reorm, Septemer 10, 2008.


54 Stepenson, Testimony eore te Senate homeand Security andgovernmenta Aairs hearin on Department o Deense ContractAssemy-line Audit Reorm,

55 Nick Scweenac, “Te Diminisin Roe o DCAA in te Penta-on Means Increased Risk to Taxpayers,” Project on g overnmentOversit, Feruary 10, 2011.

56 Jon W. Ciericea and Ryan E. Roerts, “DCMA Updates ForwardPricin Rate Recommendation Poicy,” govCon o, Seppard Mu-in, Marc 16, 2011.

57 McCaski spoke at te Senate Sucommittee on ContractinOversit in Senate homeand Security and governmenta Aairsearin on Feruary 1, 2011 earin.

58 Nick Scweenac, “Pentaon contract raud poicy may not matcreaity,” Center or Puic Interity, Feruary 11, 2009.

59 Iid.

60 Iid.

61 Roert brodsky, “Deense auditors express optimism aout new jostandards,” Government Executive, Octoer 2, 2008.

62 “Independent Review Pane Report on te Deense Contract AuditAency Report FY09-1,” Deense business board, Octoer 2008.

63 Stepenson, Testimony eore te Senate homeand Security andgovernmenta Aairs Committee.

64 Roert brodsky, “Six monts ater scatin review, proems atDeense audit aency persist,” government Executive, Feruary 20,2009.

65 Kennet J. Saccoccia, DCAA Assistant Director, Poicy and Pans,“Increased Tresods or Price Proposa Audits,” Octoer 18, 201 0.

66 Roert brodsky, “beeauered Deense audit aency crats new visionor te uture,” Government Executive, Juy 8, 2010.

67 U.S. Inteience and Security Command contract No. W911W4-07-D-0010. See aso earin o te Commission on WartimeContractin in Iraq and Aanistan, Juy 26, 2010.

68 Ricard lardner, “Famiies sue ater sodiers’ deats,” AssociatedPress, Juy 12, 2011.

69 Patrick Fitzerad testimony to te Commission on Wartime Con-

tractin in Iraq and Aanistan, Juy 26, 2010.

70 Ricard lardner, “Famiies sue ater sodiers’ deats.”

71 Iid.

72 Autor interview wit Pentaon spokesman, Auust 17, 2010.

73 Sen. Caire McCaski speakin at te Senate homeand Security andgovernmenta Aairs hearin on Department o Deense ContractAssemy-line Audit Reorm, Septemer 10, 2008.

74 Skey, Testimony eore te Senate Sucommittee on ContractinOversit in Senate homeand Security and governmenta Aairs.

75 Testimony o Nick Scweenac, Project On government Over-sit, eore te Senate Sucommittee on Contractin Oversitin Senate homeand Security and governmenta Aairs, Feruary 1,2011.

76 Scweenac, “Pentaon leisative Proposas to StrentenContractor Oversit Sot Down Internay.”

77 Roert brodsky, “Deense revises rue on contractor usiness systemspersist,” Government Executive, Decemer 6, 2010. See aso ProposedRues on Deense Acquisition Reuations System, Federa Reister,Decemer 3, 2010.

78 Te Inspector genera Reorm Act o 2008 created an independentenera counse or te Department o Deense ofce o te Inspec-tor genera.



About The Center for American Progress

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Better Auditing for Better Contracting

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