Industry to Pentagon: Fix relationship between oversight agencies

Pentagon officials evaluating ways to streamline operations and reduce overhead need to reform the way the Defense Contract Audit Agency and the Defense Contract Management Agency work together, industry officials recommended Wednesday.

The agencies often provide contradictory guidance, which creates confusion, delays action and drives up costs as conflicts are sorted out, said Ric Sylvester, vice president for acquisition policy at the Aerospace Industries Association, which represents hundreds of military contractors.

Fixing the relationship between DCAA and DCMA and creating a single point of authority on major contracts would help reduce overhead costs, Sylvester said.

The recommendation is one of many steps AIA believes the Pentagon could take to reduce overhead costs immediately. The association submitted a white paper to Pentagon acquisition officials describing their top 10 proposals, culled from nearly 100 recommendations submitted to the Pentagon in July.

The department is engaged in a wide-ranging effort to streamline operations, and has sought input from both industry officials and employees.

The relationship between DCAA and DCMA has been fraught with problems. Earlier this month, Christopher Shays, co-chair of the Commission on Wartime Contracting, called it "dysfunctional" during an oversight hearing highly critical of the agencies. Last week, the Defense Department Inspector General released a report critical of the contract management agency's role in providing the audit agency with critical information regarding a contractor's performance.

Sylvester said conflicts between the agencies are especially apparent when contractors try to set forward pricing rate agreements -- estimates of overhead that can be applied to contracts. "One of the things we're running into is DCAA has to audit forward pricing rate agreements and DCMA plays a role in establishing those, but at times, they're contradictory. DCAA will do something and DCMA will do something else. If they worked together to establish those in a timely fashion that would save us a lot of problems," he said.

The group also recommended the Pentagon reduce the volume of cost and pricing data for all proposals.

"Contracting officers assume a reasonable price can only be based on the submission of voluminous cost data, even for commercial items where data may not be available in the form demanded and for items with several lots of production history," according to the white paper. For example, the paper noted that contractors had to submit 94,000 pages of cost data for the F-22 aircraft multi-year procurement.

Sylvester said the Pentagon's acquisition workforce must have the training and expertise to conduct price analyses and exercise informed judgment when making decisions.

"Once you have bought some of these things and you understand where the costs are, you should be able to do price analysis to be able to figure out if the cost is fair and reasonable," Sylvester said.

An underlying problem is that contracting officers are not encouraged to exercise judgment, he said. "You have a very difficult environment in terms of people second-guessing you. No contracting officer wants to be hauled in front of Congress and be berated because they made a judgment on something that an auditor came along and said was a bad judgment," Sylvester said.

"It's easier to fall back on process and on reams of data and say, 'Look, I followed the process exactly and my judgment is based on 94,000 pages of data, than it is to say, 'I looked at the cost curves and this is what I think is fair and reasonable,' " Sylvester said.

Ashton B. Carter, undersecretary of Defense for acquisition, technology and logistics, is heading the Pentagon's effort to streamline the acquisition process. He is slated to announce the department's plans in September.