In his State of the Union address, President Obama talked of the need to overhaul the way that the government does business in order to make it more efficient. He said,
“We live and do business in the information age, but the last major reorganization of the government happened in the age of black and white TV. In the coming months, my administration will develop a proposal to merge, consolidate, and reorganize the federal government in a way that best serves the goal of a more competitive America.”
The body which is responsible for overseeing the $530 billion in yearly government contracts is Defense Contract Audit Agency. Despite its name, DCAA is also responsible for civilian contracts as well as those for the Department of Defense.
DCAA has been the main authority in auditing government contracts for 46 years. Since it was introduced, the role of DCAA has expanded greatly. However, the staff of DCAA auditors has significantly decreased from the one-time high of 7,000 during the 1990s to the 4,114 auditors it has today. This is the current number after about 500 new auditors were added in the past two years.
After the President’s State of the Union address, the Senate Homeland Security and Governmental Affairs Committee held a hearing on February 1st to discuss the future of how government contracts are overseen.
Government watchdog groups promoted the need for the DCAA’s role to be increased. Some lobbyists even argued for the creation of a solitary, independent audit agency which would function outside of the pentagon and report directly to congress.
Nick Schwellenbach, the director of investigations for Project on Government Oversight, said in his argument, “Unlike most agencies, a new Federal Contract Audit Agency could save more money each year by uncovering waste and fraud than it would cost to run it. The FCAA would provide a needed check on contractors, ensuring that the government is not overcharged for goods and services.”
Despite the implications of Schewellenbach’s statement, DCAA still considers itself to be a good investment. In 2010, DCAA had a return of $5.10 for every dollar spent running the agency. The savings came to a total of $2.7 billion.
While this rate of return does show that DCAA is profitable, it is much less than the past high ROR of $50. Of course, supporters of DCAA could argue that there are fewer instances of fraud and overspending today because of DCAA audits, thus reducing the ROR compared to the past.
One the other side of the hearing argument were lobbyists from industry groups and the private sector. They argued that the role of DCAA shouldn’t be increased. Instead, there was a dire need to increase communication between contractors and auditors as well as increase the level of trust.
The President and CEO of Professional Services Council Stan Soloway said that DCAA auditors were too isolated.
“As most would agree, the quality of an audit and, more importantly, the effectiveness of any response to an audit are tied to the degree of communication that occurs among the parties before and after the audit itself.”
Soloway went on to criticize the current system of pass/fail which DCAA uses in audits. The system treats all deficiencies equally, regardless of severity. After issues are corrected, it can take months or even years before communication is received from DCAA auditors.