Wartime Contracting Commission: DOD Must Improve Oversight of Contractor Business Systems

As pointed out this afternoon by the Project on Government Oversight's (POGO) Scott Amey, the Commission on Wartime Contracting in Iraq and Afghanistan released a special report yesterday summarizing their review of inadequate contractor business systems. The report follows up on work the commission did over the summer when it held a hearing on contractors' deficient internal control systems. Based on testimony and evidence from the hearing, the special report lays out five recommendations for the Department of Defense (DOD) to improve oversight of and encourage better business systems from contractors.

As Scott points out, defects in contractors' estimating, billing, purchasing, labor, and compensation systems cost taxpayers billions of dollars annually in unsupported, unallowable, and unreasonable charges to the government. To fight this fraud, the commission recommends:

DOD ensure that government speaks with one voice to contractors – Signs emerged during the summer's hearing that two of DOD's contract management agencies, the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), often contradict each other and send mixed messages to contractors
DOD improve government accountability by rapidly resolving agency conflicts on business systems – The commission uncovered separate government reporting lines of authority for management agencies that often complicate issue resolution.
DCAA expand its audit reports to go beyond rendering a pass/fail option – This was a major issue during the hearing, as commission members felt that DCAA audit reports were not informative enough to help contracting officers make effective decisions.
DCMA develop an effective process that includes aggressive compliance enforcement – Criticized by the commission during the hearing for not motivating contractors to improve business systems, DCMA needs to move on contractors aggressively.
DCAA and DCMA request additional resources and prioritize contingency-contractor oversight workload – With personnel once numbering in the hundreds, DCMA's staff now numbers in the teens and the oversized problems that contingency contracting present require prioritization of resources.

Contractors must improve their business systems in order to provide accurate data to government auditors so that those auditors may accurately gauge contract performance. Unfortunately, the commission cannot propose direct solutions to this problem, but possibly these five recommendations, if implemented, will indirectly bring about more responsible reporting by contractors.

Image by Flickr user Barrybar used under a Creative Commons license.

(Gary Therkildsen 09/22/09)

Comments

by Cameron Clarke (not verified) on 11/03/09

Mr Assad was asked by one of

Mr Assad was asked by one of the commissioners,missed his name but he is the black man originally from texas (as mentioned) , if,on the record, he was in favor of the taxpayers interest over the contractors and that there is no ambiguity on any subject. He answered the second question promising no ambiguity in the next 90 days but did not say on what topic. He basically promised nothing because it is impossible to promise ambiguity due to complications of the English language. He did NOT comment on the taxpayers interest. This slight, I believe, was not an accident. He is a well spoken man and is well aware as to what he says and fails to say. This could imply that he has corrupt interests in this operation and did not want to be on the record saying that statement in fear of the repercussions. He is an auditor and has extensive knowledge in his area and could easily change numbers, especially when giving huge rounded number to the commission. As a citizen, I am requesting that his finances be looked at with fine tooth comb. A man in his position he has the ability to make a lot of illegitimate money. It is the responsibility of the commission to KNOW whether that is the case or not.

by Gary Therkildsen on 11/03/09

The commissioner was Clark

The commissioner was Clark Kent Ervin, and, after witnessing Shay Assad testify several times, I agree that he is a very intelligent man capable of answering that question.

I don't know if I would read that much into Mr. Assad's dodging of the question, though. While he does have a responsibility to the taxpayers, he also has a responsibility to our military forces to provide all the materials they need to get the job done, whatever that may entail.

And while I am not one to defend a bloated, corrupt war industry, Mr. Assad does have to deal with that entity to provide for our soldiers, which, I imagine, may place the interests of the taxpayers in the backseat. Whether that is the way it should be is a separate matter, but I have not heard anything regarding charges of corruption that would impugn Mr. Assad's reputation.

Of course, that's not to say that I would discourage an examination of his financial records, though I believe DOD has a fairly rigorous oversight apparatus regarding employee finances and conflicts of interest, especially at Mr. Assad's level of employment.