DCMA Perspective: Key Subcontracting Practices for Maintaining Approved Business Systems

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2 DCMA Perspective: Key Subcontracting Practices for Maintaining Approved Business Systems Breakout Session I Andrew Obermeyer, CPCM, Fellow Director, Business Operations Center, Defense Contract Management Agency (DCMA) Friday, March 28 9:00am 10:15am

3 Centralized Lines of Service Functions: Evaluate contractor s purchasing systems and provide expert recommendations whether to approve or withhold/withdraw approval of the system. Arrange timely and cost effective reutilization, sale, and disposal of excess government property in the possession of contractors. Settle contracts terminated for the convenience of the Government. Evaluate the adequacy of contractor s property management system to ensure Government Property in the hands of contractors is appropriately managed. 2

4 What is our CPSR mission? Ensure that suppliers have purchasing systems in place that contribute to effective subcontract management. Effective subcontract management includes development of, as well as performance to internal policy and procedures, public laws and adequacy of cost and price analyses performed on subcontractors. 3

5 How Do We Perform the CPSR Mission? Annual FY Eligibility Tasker includes Risk Assessment (RA) template Qualifying Sales of $25 million Subcontracting volume, complexity and dollar amount Contractor past performance ACO identification of risk Spreadsheet built from MOCAS data about 600 CAGE codes yielding 375 potential reviews ACOs perform RA using policy templates Eligibles determined by CPSR review team with ACO input and coordination 4

6 How Do We Perform the CPSR Mission? Contractor Purchasing System Reviews Evaluation of the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting Complete evaluation of a contractor s purchasing of material and services, subcontracting, and subcontract management from development of the requirement through completion of subcontract performance Report findings to Contracting Officer providing a basis for granting, withholding, or withdrawing approval of the purchasing system Review corrective action plan for effectiveness and validate implementation 5

7 How Do We Perform the CPSR Mission? Types of CPSRs Initial Comprehensive Special Follow-up First two types include same 24 elements of analysis listed at DFARS (c) Last two types are tailored to need 6

8 How Do We Perform the CPSR Mission? CPSR Timeline R-120 Final Schedule Agreement R-90/60 CPSR Data Questionnaires to CO R-90/60 CPSR Data Questionnaires to Contractor POC R-30 Policy and Universe Reviews R-30 Request T&Cs, Purchasing/Procurement forms from Ktr Review Entrance Brief, Daily Outbrief, Exit Conference R+20 CPSR Report due to CPSR Management R+30 Management review, BOR complete, Report to CO R+40 CO approval if no deficiencies, or initial determination R+70 Ktr response to initial determination R+115 Corrective Action Plan if requested, due to CO 7

9 Who Performs the CPSR Mission? Fort Lee, VA Boston, MA Smyrna, GA Phoenix, AZ Dallas, TX DCMA-AQB Andrew C. Obermeyer Director Business Operations Center Ft. Lee, VA DCMA-AQBC Elizabeth Alicea Director CPSR Group Boston, MA Management Assistant GS-07 DCMA-AQBCA Northeast Team (Boston, MA) Supervisory Procurement Analyst (Vacant) DCMA-AQBCB Southeast Team (Smyrna, GA) Hannah Ressler Supervisory Procurement Analyst DCMA-AQBCC Northwest Team (Phoenix, AZ) Richard Saltzman Supervisory Procurement Analyst DCMA-AQBCD Central Team (Dallas, TX) Karen Zinn Supervisory Procurement Analyst 8 - Procurement Analysts, GS Procurement Analysts, GS-11/ Procurement Analyst, GS Procurement Analysts, GS-12 1 Procurement Analyst, GS Procurement Analysts, GS-12 3 Procurement Analyst, GS-11/12 1 Procurement Analyst, GS-11 7 Procurement Analysts, GS-12 1 Procurement Analyst, GS-11/12 8

10 CPSR Performance Overview FY10 FY11 FY12 FY13 FY14 Risk Assessments Eligible Scheduled Completed Carried Over Authorized/Onboard 30/26 44/24 44/31 44/35 44/36 9

11 CPS Status ACO decisions recorded in CBAR by CAGE Code 13 Disapprovals 667 Approvals 75 Not Evaluated 3015 Marked as N/A Business System Determinations are made by ACOs And in some case PCOs But not by Business Operations Center personnel 10

12 CPSR Management Challenges Risk Assessments Received Larger number of reviews completed in FY10 resulted in decrease in RAs in FY11 In FY12 and FY13 the number of RAs sharply increased after the New Business System rule, 5/8/11 Number of Reviews performed has decreased while personnel has increased FY10 78 completed with 26 Procurement Analysts One Analyst performed a review in FY10 vs two analysts now Length of review increased (two weeks on average vs one week) and more in depth reviews performed now vs FY10 FY14 Goal is 125 reviews FY13 travel budget constraints resulted in 26 of the 32 carry overs 11 11

13 Consent to Subcontract Mission Consent to Subcontract Desk Audits Advance notification and consent required if the prime does not have an approved purchasing system and Government is assuming a large portion of the contract risk ACO submits the request to CPSR team Procurement Analyst reviews and provides recommendation Averaging 15 reviews per month SOP written and training provided - completed September

14 CPSR Priorities as We Look Ahead Integrity of the Schedule FY 2013 travel restrictions and furloughs resulted in more cancelled vs conducted reviews (57 conducted and 61 cancelled) Cycle Time Metric report issued in 30 days FY 2013 metric was 7% on time vs goal of 85% FY13 began at 300, FY14 at 150, Feb at 78 days (18%), 7 reports delinquent Close the system gap between report issued and determination made Personnel to support mission 35% turnover in FY12 Counterfeit Parts policy update to guidelines 13 13

15 Who Performs the Property Mission? DCMA-AQB Andrew C. Obermeyer Director Business Operations Center Ft. Lee, VA Michael Karolak Performance Improvement Officer St. Petersburg, FL DCMA-AQBY Cynthia Thrailkill Director Property Administration Group Wright Patterson AFB, OH David Ryan Deputy Director Philadelphia, PA 1 Management Analyst (GS-11) 2 Management Assistant (GS- 07) 16 Property Administration Group Teams 197 Property Administration Group Personnel Located throughout the world supporting DCMA CONUS and OCONUS Operations 14

16 Property Workload Trend Indicator FY # of Government Property (GP) Systems 3,492 2,882 1,850 2,142 GP Value $ B $ B $ B $ B GP Line Items 30.5 M 30.5 M 41.0 M 61.9 M Onboard/Authorized / /197 Audits Performed Audit Target

17 Property Management Oversight Risk Assessments Based on: Contractor past performance Inherent risk (i.e. AA&E, classified items/data) Loss Investigations Investigate reports of loss Relieve contractor or recommend liability to CO Ensure corrective actions taken to prevent recurrence Property Management System Analyses Audit contractor s property management system and determine whether procedures and controls comply with (F) Report findings to Contracting Officer (CO) Re-analyze corrective actions to ensure implementation 16

18 Subcontractor Property Control Contractor Requirements FAR (f)(v) (A) The contractor shall award subcontracts that clearly identify items to be provided and the extent of any restrictions of limitations on their use. The contractor shall ensure appropriate flow down of contract terms and conditions. (B) The contractor shall assure its subcontractors are properly administered and reviews are periodically performed to determine the adequacy of the subcontractor s property management system. 17

19 Subcontractor Control Audit Criteria PAs test for compliance with the requirements of (f)(v): Review purchase orders to ensure Government property is clearly identified and that appropriate clauses and instructions are flowed down, Evaluate the documentation of the prime contractor s periodic reviews to confirm they are sufficient to determine the adequacy of the subcontractor's property management system, and Assess the prime contractor s management of losses of GP in the possession of subcontractors including the identification of root causes and the implementation of effective corrective action. 18

20 Overall Property Systems Status ACO decisions recorded in the Contract Property Administration System (CPAS) by CAGE Code 20 Disapprovals 1735 Approvals 188 in pending status Awaiting Contracting Officer Determination Business System Determinations are made by Contracting Officers Majority of deficiencies: Poor procedures No flow down of clause requirements 19

21 Conclusions The Business Operations Center s centralized expertise adds value in protecting the government s interest in subcontract management ACO make independent determinations on Business systems Questions? 20