DCAA Saves while Contractors Idle

After the February 1st HSGAC Contracting Oversight Subcommittee hearing, the DCAA director, Patrick Fitzgerald has been on a media campaign to tout all the new changes he has implemented and how they have improved the quality of DCAA audits.

According to Fitzgerald, DCAA has saved about $3 billion with a “tightened net” which focuses on singling out defense contracts which are considered high-risk. About these “real savings,” Fitzgerald said,

“I mean there’s a lot of numbers thrown around sometimes, but these are savings determined by the contracting officer saying that they paid less for goods and services as a result of basing their negotiations on our audit reports.”
However, while DCAA may be saving money by forcing contractors to find cheaper alternatives to goods and services, the contractors are paying dearly while they stand by waiting for contracts to be approved.

The subcommittees ranking member Senator Scott Brown, R-Mass, addressed the how the slow audit process was affecting contractors.

“It is costing them real money, real dollars. So, in addition to the healthcare bill, the taxes they are paying, and the regulations they are dealing with, now they are facing audits.”

A year ago, DCAA was criticized because its auditors were purportedly too friendly with contractors. Now, while remedying this criticism and focusing more on high-risk contracts, DCAA has now lost communication with contractors.

When auditors cite deficiencies in a contract, they are no longer making the recommendations about corrective actions. This means contractors must rely upon their own analysts to search out remedies. By the time that deficiencies are corrected, it takes DCAA a long time to approve contractors.

With this pass/fail approach to DCAA audits, contractors are left idling because of minor problems. This idling is costing contractors real dollars in healthcare, managerial costs, taxes, and other costs. Additionally, the amount of lost income is enormous as the contractors often cannot bid on new DCAA contracts until they have been approved by their auditor.

The subcommittee hearing shed light on the need to improve the partnership between contractors and auditors. However, it missed an opportunity to discuss the critical changes needed to improve communication between DCAA contractors and auditors.

For what it is worth, DCAA director Fitzgerald has done a thorough job of addressing the identity criticisms of DCAA during his short tenure. Under his direction, DCAA has hired about 500 new auditors in two years. Instead of just using these auditors to nitpick details of contracts, the auditors are focusing on giving quality audits.

Fitzgerald emphasized that the job of the auditors was to focus on quality, not just quantity.

“To be a really good auditor, you have to be curious. You have to ask that follow-on question. You have to kind of look at things and see if you can connect the dots. Does it all make sense?”

This statement doesn’t include anything about an auditor’s job to communicate with DCAA contractors. While DCAA is on a good start internally, hopefully they will soon address the problems with the auditing process from an industry perspective.