Government Contracts Monitor

DCMA versus DCAA Cost Analysis Functions – Who Is Functioning?

November 2, 2015

By: Lindsay Simmons

The Inspector General for the Department of Defense (DoD IG) just completed an evaluation of the corrective actions taken by several DoD components, including the Defense Contract Management Agency (DCMA), in response to the IG’s 2012 Report finding significant shortcomings in the “alignment” of DCMA findings with those of the Defense Contract Audit Agency (DCAA).  DoD IG Report 2016-005.

Many contractors have been frustrated by the disconnects between DCAA and DCMA, some of which have been reported on by the IG, but not necessarily for the same reasons.  The IG’s recent findings are that while “progress” has been made, DCMA “still cannot reliably report on its cost analysis performance and results” and, thus, cannot demonstrate to DoD that DCMA’s cost analyses “can achieve an annual return comparable to the return that the DCAA has achieved.”

Specifically tackled in this Report are the IG’s criticisms of DCMA’s cost analysis case file documentation.  According to the IG, these files still do not demonstrate that DCMA cost analysts “are performing sufficient steps to determine if a contractor’s price proposal represents a fair and reasonable price, as Federal Acquisition Regulation 15.404-1(a)(3) requires.”

What does the IG recommend?  Among other actions, that – 

• DCMA cost analysis function be monitored;
   
• DCMA policies be modified to help ensure that cost analysis case files include sufficient documentation; and
   
• DCMA implement planned corrective actions to enable reliable data collection and reporting of its cost analysis function.

DCMA’s response to the IG’s finding is included in the Report.  Notably, DCMA “is in the process of revising DCMA Instruction 120, Pricing and Negotiation.”  The new revision to this instruction “will emphasize documentation” and will “prompt the analysts to complete, discuss, and document all price analysis activities.”  DCMA plans to issue its updated Instruction by November 30, 2015.

Lindsay Simmons is responsible for the contents of this Article.
© Jackson Kelly PLLC 2015