October 13, 2019

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DCAA's Promises Of A "New Mode of Operation" Leading To "Mutually Beneficial Relationships" Evaporate Within Less Than Three Months

Just three months ago, newly appointed DCAA Director Patrick Fitzgerald told contractors and acquisition agencies that his agency’s new mode of operations would aim at developing “mutually beneficial relationships” with both contractors and DOD acquisition agencies. DCAA would spring “no surprises” on contractors; it would conduct “more frequent communication with” them; DCAA would assure the provision of “responsive and timely services to agency stakeholders”; and – in a marked sea change from its traditional attitude, DCAA would abide by DOD direction that, while “the contracting officer and auditor work together… it is the contracting officer’s ultimate responsibility to determine fair and reasonable contract values.” (DCAA, Director’s Message, CODSIA Operating & Policy Committees Meeting, March 10, 2010, ppt slide 12; Memorandum, Office of the Undersecretary of Defense for Acquisition, Technology and Logistics, Subject: Resolving Contract Audit Recommendations, December 4, 2009). 

What’s the phrase? “Significant if true”?

“The issuance of a report is not intended to limit or prevent discussions of findings, conclusions, and recommendations with …contractor personnel…such discussions are encouraged.”  CAM 10-101 (c).

  • “Findings should be presented in an objective and unbiased manner .…”  CAM 10-103.2(b).
  • Interim Conferences are to be conducted “with the contractor as necessary to obtain a full understanding of the basis for each item in the contractor’s pricing data or other cost representation…with further discussions to be conducted as the audit progresses.” CAM 4-303.1 (“General Procedures for Interim Conferences”).
  • Exit conferences are to be held “[u]pon completion of the field work on each … assignment” at which the audit results are to be “summarized.”
  • During the exit conference the auditor is to request “the contractor’s reaction to any audit exceptions … for inclusion in the audit report.”
  • The auditor is to “[d]ocument the exit conference in the working papers, including … specifically discussed items and associated contractor’s reaction … [thus providing] the information to be incorporated in the audit report ….” CAM 4-304.1 (“General Procedures for Exit Conferences”).

DCAA’s behavior is obviously inconsistent with the mutually beneficial relations envisioned by Director Fitzgerald’s supposed new mode of operations.  But it is also in direct conflict with the explicit recent instructions of its own audit manual because it:

  • “Prevent[s] discussions of [audit] findings, conclusions, and recommendations with … contractor personnel.”
  • Limits the possibility of presenting findings in an “objective and unbiased manner.”
  • Limits the conduct of interim conferences with the contractor.
  • Precludes the conduct of exit conferences “[u]pon completion of … field work.”
  • Precludes auditors from using the exit conference to request “the contractor’s reaction to any audit exceptions … for inclusion in the audit report.”
  • Precludes the incorporation of “specifically discussed items and associated contractor’s reaction … in the audit report….”

It is difficult to know what to make of an agency that describes itself on its home page as “Dedicated To Providing Timely and Responsive Audit and Financial Advisory Services In Support of Our National Defense,” yet behaves in a manner directly contrary to its own explicit—and newly-minted—instructions.  For those of you familiar with the fable of the scorpion and the crocodile, maybe the answer is just that simple – “I can’t help it; it’s my nature.” In this regard, we have previously written about (1) how DCAA has engaged in the dark art of intimidation (with historical perspective); (2) how a contracting officer’s mere disagreement with the DCAA could result in DCAA’s referral of that officer to the IG; and (3) explored the “Top Ten Reasons DCAA Should Let COs Do Their Bloody Job.”  What can we say? Promises are not action. As they say on the Continent, plus ça change, plus c’est la même chose. 

By the way, in the fable, the scorpion ends up sealing his own demise. Now there’s something to dream on.


Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.


About this Author

John W. Chierichella, Sheppard Mullin Law Firm, International Trade Attorney

John Chierichella is a partner in the Government Contracts and Regulated Industries Practice Group in the firm's Washington, D.C. office.

Areas of Practice

Mr. Chierichella has a broad range of experience in government contract matters, including bid protests, claims and appeals, cost and CAS issues, teaming disputes, GSA's Multiple Award Schedule (MAS) Program, compliance reviews and internal investigations, and qui tam and other False Claims Act litigation.