Section 102. Wow.

"The bill takes aim at incurred-cost, which aides say are slow, time-consuming and do not deliver substantial enough returns for the taxpayer. In 2016, it took 885 days for the Defense Contract Audit Agency to complete these audits, which accounted for “a pretty small percentage of the net savings the DCAA brings to the government,” an aide said.

The bill's three-tiered answer would be to:

• Let contract officers choose either DCAA or outsource to a qualified private sector auditor.
• Raise the contract-value threshold that requires such audits.
• Require the audits to be done within a year, so to encourage contractors to focus on high-risk audits."

it sounds like Contractor indirect costs have been generally found to be reasonable and in accordance with GAAP and CAS Disclosure Statements. ,Hence the small % of "net savings." It sounds to me like focusing on "net savings" is measuring Contractor fraud, and there isn't enough of it to warrant more audits! Is there some other way to look at it? Is there some more info re the third bullet above? Having difficulty making the connection between speed of audits and "encouraging contractors to focus on high risk audits." Incurred cost audits do not look like high risk when measured against my view of "net savings." Thanks in advance for any additional info.     

When I see this name William "Mac" Thornberry, I subconciously see Marv Throneberry.  Apologies to Marvelous Marv.

LOL, Bob

14 hours ago, Neil Roberts said:

it sounds like Contractor indirect costs have been generally found to be reasonable and in accordance with GAAP and CAS Disclosure Statements. ,Hence the small % of "net savings." It sounds to me like focusing on "net savings" is measuring Contractor fraud, and there isn't enough of it to warrant more audits! Is there some other way to look at it? Is there some more info re the third bullet above? Having difficulty making the connection between speed of audits and "encouraging contractors to focus on high risk audits." Incurred cost audits do not look like high risk when measured against my view of "net savings." Thanks in advance for any additional info.     

You should not assume the small percentage of sustained findings means contractors are doing a good job in segregating unallowable costs. The result could come from a variety of factors, including (but not limited to): (1) DCAA counts as a completed audit "low-risk" audits for which an audit in not actually performed and the contractor's proposal is accepted on its face, (2) DCAA counts as a completed audit any contractor proposals it has determined to be inadequate; the assignment is closed and the problem is transferred to the CO, (3) DCAA auditors are more focused on creating solid working papers than they used to be, (4) contractors are better at hiding costs than they used to be, and/or (5) DCAA is inflating savings on other audits, including "forward priced" audits of contractor proposals that never result in a contract award.

The problem, of course, is that everybody has difficulty in closing-out contracts (and subcontracts) before receipt of final billing rates. Generally speaking, the long pole in that tent is DCAA's ability to perform an audit of claimed costs. If you want to reduce the backlog of ULO's and suchlike, you need DCAA to perform more audits, faster. The agency published stats show it is slower year-over-year, not faster. In comparison to the agency's stats from 2005/2006, the current productivity stats indicate the auditors are moving slower than molasses being poured in the arctic.

Not sure whether this is the answer -- or whether this answer will make it into the next NDAA. However, it's quite an interesting approach. Have DCAA compete in the open market for audit assignments, with the CO as the evaluator of who gets the work. Fascinating.

35 minutes ago, here_2_help said:

Have DCAA compete in the open market for audit assignments

PepeTheFrog loves this idea in principle (using verifiable metrics and market competition to evaluate the efficiency and effectiveness of government programs and agencies) and also in this specific application.

PepeTheFrog thinks the auditing firms would make DCAA look bad.

 

 

3 hours ago, PepeTheFrog said:

PepeTheFrog thinks the auditing firms would make DCAA look bad.

Perhaps. Depends on the evaluation factors. If you create a LPTA competition then you are going to see quality sacrifices.

The only case I know of a head-to-head competition is an audit of a FFRDC from several years ago. Both audits were independently performed and evaluated by [GAO or DoDOIG? can't recall now]. The public accounting firm did indeed make DCAA look bad in terms of quality. However, we didn't have comparable cost data. How much more did it cost to achieve public accounting firm quality standards? Would a buying command be willing to pay that price to achieve the higher quality?

What's the trade space between cost and quality and speed with respect to "incurred cost" audits? That's the open question. You can bet that the public accounting firms who enter this market will have that trade space figured out in about 2 weeks. They already do that analysis as a routine part of financial statement audits.

The thing is, DCAA has been performing such audits for literally decades and they have no clue about such trades. If they did, we wouldn't be having this conversation.

5 hours ago, here_2_help said:

Perhaps. Depends on the evaluation factors. If you create a LPTA competition then you are going to see quality sacrifices.

Assuming the garbage job DCAA does is considered "technically acceptable."

Here is Big Mac's draft bill:  H. R. 2511.  It is best to read through the actual bill since news can be slanted in any manner the writer wants it to be slanted.  

If you wish to check on this guy through the Federal Elections Commission, you can do so here.  He is from the 13th District in Texas.  If you do that, remember he is a 20 plus year incumbent who faced token oppostion.  That explains the small amount of funds needed in his campaign.

Since this is a non-political site, any thoughts you draw should be your own.

 

On 5/18/2017 at 10:16 PM, Neil Roberts said:

it sounds like Contractor indirect costs have been generally found to be reasonable and in accordance with GAAP and CAS Disclosure Statements.

Neil:

What role do you think the GAAP play in determinations of the reasonableness of indirect costs?

I don't know, Vern. I was relying on DCAA CAM 6-102.1 Incurred Cost Audit Objectives which reads as follows:"The auditor's primary objective is to examine the contractor's cost representations, in whatever form they may be presented (such as interim and final public vouchers, progress payments, incurred cost proposals, termination claims and final overhead claims), and to express an opinion as to whether such incurred costs are reasonable, applicable to the contract, determined under generally accepted accounting principles and cost accounting standards applicable in the circumstances..."

Neil:

Please ignore my question. I misread your post to say that contractor indirect costs have been found reasonable in accordance with GAAP, but you did not say that.

Vern

No problem, Vern. BTW, happy new life adventure. Have fun!