The Inspector General (“IG”) of the Department of Defense issued a report on October 1, 2015, sharply criticizing the performance of Defense Contract Management Agency (“DCMA”) contracting officers.  In a sample of 21 business system deficiency reports (collected from the 164 reports filed between July 2012 and June 2013) the IG investigation found none that fully complied with DCMA’s obligations under the Defense Federal Acquisition Regulation Supplement.  The overwhelming majority of the reports were deficient in multiple respects, and many of them were severely untimely.

Should government contractors celebrate this public admonishment from the IG?  Probably not.

Although the investigation alleges serious lapses in the timeliness and sufficiency of DCMA’s reports, it rests on the presumption that DCMA needs to be more aggressive in identifying and correcting deficiencies.  The report does not suggest, for example, that the DCMA’s delays result from overzealous investigations or excessive focus on insignificant concerns.  Instead, the report calls for reforms that would increase the incentives for DCMA contracting officers and Defense Contract Audit Agency (“DCAA”) auditors to take swift, aggressive action.    

The most common flaw the IG report alleges is lateness.  In 81% of cases, the IG report asserts, the contracting officer failed to meet the 10-day deadline for issuing an initial determination on reported significant deficiencies or the 30-day deadline for issuing a final determination.  Most reports missed both deadlines, and some contracting officers failed to issue determinations altogether.  Unfortunately, the IG failed to analyze the detrimental effects that contractors suffer during these periods of unexplained delay, or the economic impact of DCMA’s pattern of delinquent and non-responsive conduct.

The IG also evaluated whether DCMA “adequately or timely” evaluated contractors’ responses to initial determinations.  Here again, the investigation failed to examine what kind of evaluation was really needed, or whether an evaluation was justified in the first place.  Instead, the IG begins from the premise that significant deficiencies abound, and that insufficient vigor from DCMA will allow problems to multiply:  “Without conducting an adequate evaluation, the contracting officer may not detect that the proposed corrective actions are insufficient to eliminate significant deficiencies.”  This finding presumes the existence of significant deficiencies and encourages DCMA contracting officers to be more aggressive in critiquing contractors’ corrective action plans, without pausing to consider whether this level of effort is even necessary.

Finally, the IG report proposes an additional investigative measure—one that goes too far even for DCMA.  Regulations already require a Headquarters Board of Review when the DCMA contracting officer rejects the DCAA auditor’s conclusion that a business system deficiency exists.  No Board is required, however, if the contracting officer agrees that a deficiency exists, but dissents from the auditor’s opinion that the deficiency is “significant.”  The IG would require a Board even in those circumstances, adding more investigative burdens despite a DCMA opinion that no “significant” deficiency exists.  The Director of DCMA disagreed with that infringement on contracting officers’ discretion.

DCMA expects to provide supplemental comments by the end of October 2015.  In the meantime, government contractors should bear in mind that DCMA and DCAA remain potent forces, even after these revelations about the serious flaws in their own processes.