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Evaluating the Defense Contract Auditing Process

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By: Capital Edge Consulting

The Director of the DCAA and selected industry representatives testified April 6th in front of the House Armed Services Committee regarding the current state of the DoD contract auditing process, i.e., the DCAA.  Not surprisingly, the views of the DCAA and industry were quite opposing based on a read of the written testimony.  A high-level synopsis of the testimony is as follows:

DCAA

  • Significant focus on the reduction of the incurred cost backlog (about 30% of the written testimony)
  • Primary focus on ROI for Agency performance evaluation purposes
  • Staunch resistance to certain acquisition reform initiatives (use of third-party auditors and CPA requirement for GS-14 level managers)

Industry

  • Return to traditional definition of the DCAA mission, roles and responsibilities – advisors to the acquisition community, not debt collectors, independence not isolation, collaborative not unilateral
  • Broader use of DCAA auditors to address other audit areas valuable to the overall acquisition process
  • Movement away from ROI as the primary focus on measurement of DCAA success
  • Change in auditor behavior to better apply GAGAS principles, including determination of materiality or significance and use of professional judgment
  • Staunch support for use of third-party auditors to compliment the overall contract auditing process

The perspectives of the DCAA and industry are quite different.  The DCAA’s view on the audit quality was narrow and opposed efforts to employ outside reform initiatives that may benefit the acquisition process overall – including the DCAA audit process.  Industry views were broader and addressed several aspects of the overall acquisition and audit processes that, from a holistic approach, may streamline federal procurements and provide better value to both government and contractors.

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