National Contract Management Association May 10, 2012 Ronald C. Meldonian Regional Director Northeastern Region Defense Contract Audit Agency The views expressed in this presentation are DCAA's views and not necessarily the views of other DoD organizations

2 DCAA Organization Director Patrick Fitzgerald Deputy Director Anita Bales Central Region Tim Carr Vacant Eastern Region Paul Phillips Gary Spjut Northeastern Region Ron Meldonian William Adie Mid-Atlantic Region Ken Saccoccia Steve Hernandez Western Region Donald Mullinax David Johnson General Counsel Defense Legal Service Susan Chadick Assistant Director, Resources Philip Anderson Assistant Director, Policy & Plans Vacant Assistant Director, Operations Tom Peters Internal Review Gerry Reichel Field Detachment Karen Cash Terry Schneider Regions Headquarters Assistant Director, Integrity & Quality Assurance Don McKenzie Executive Officer Joe Garcia Executive Officer Joe Garcia

3 Agency Goals/Priorities “One Agency” with a culture of teamwork, excellence, accountability, mutual respect, integrity, and trust Deliver high-quality audits and other financial services Develop the skills of our motivated professionals Develop effective working relationships with DCAA external stakeholders Ensure the workforce has the right space, the right equipment and the right technology at the right time to successfully deliver on the mission

4 Deliver High Quality Services and Products Agency will use new Strategic Plan to work audit quality and workforce issues Established proposal walk-through and early identification of issues/inadequacies All Raytheon audits under cognizance of one region Issued extensive changes to audit guidance, procedures and processes Authorized additional management/supervisory positions to allow more time on audits Holding Agency-wide Field Audit Office (FAO) Managers Conference annually

5 Making a concerted effort to engage with stakeholders: Issued “Rules of Engagement” Initiated regular high level meetings with contracting community Executives participated at speaking engagements with DoD Procurement and Contractor Associations Issued Joint DCAA/DCMA Directors Memorandums  Established MOU on EVMS  Cost Recovery Initiative Working Relationships with Stakeholders

6 Working Relationships with Stakeholders Requirements Workload and Resources Working with Stakeholders to defer or divest low risk workload - will allow DCAA to focus on higher risk work with larger payback to Warfighter/Taxpayer. Added 500 new employees over the last 2 years DPAP Memorandum (1/4/2011), “Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending: ‘Align DCMA and DCAA Processes to Ensure Work is Complementary”  Increased Thresholds for Price Proposal Audits  Forward Pricing Rate Agreements/Forward Pricing Rate Recommendations  Financial Capability Reviews  Purchasing System Reviews  Contractor Business Systems Rule

7 Incurred Cost Initiative Developed a risk-based approach to working down backlog in a effective manner: Increase staffing Dedicated audit teams (FAO Manager, Supervisors, and auditors) Developed revised incurred cost audit program Delivering an incurred cost auditing refresher training course Continue working with DoD on strategies to better align the limited DCAA resources to the higher risk contracting areas

8 Other DCAA Initiatives Emphasizing annual program plan meetings with contracting officer and contractor to discuss priorities Implementing a project management approach to include detailed milestone plans to facilitate timely completion of audits Enhancing the role of the prime contract auditor in coordinating major subcontract proposal audits under major procurements.

9 Contractor Business Systems The final Business System Rule was issued on February 24, 2012 Defines contractor business systems as the contractor’s  Accounting System  Estimating System  Material Management and Accounting System (MMAS)  Purchasing System  Property Management  Earned Value Management System (EVMS) Currently pilot testing new programs at several contractor locations (accounting system program will be published in the near future).

10 Contractor Business Systems DCAA will report on compliance with the criteria in DFARS DCAA Reports will identify significant deficiencies – defined by the interim Business System Rule as  Shortcomings in the system that materially affects the ability of officials of the DoD to rely upon information produced by the system that is needed for management purposes

11 Contractor Support to Facilitate a More Timely Audit Process Effective contractor proposal walk-throughs Adequate contractor submissions and assertions  Forward Pricing Rate Proposals  Adequate Subcontract Proposals  Adequate CAS cost impact proposals Adequate supporting data in a timely manner and timely access to key contractor personnel responsible for contractor support Real-time DCAA access to contractor systems

12 Forward Pricing Proposal Adequacy Adequate Contractor Proposals – Facilitate Effective Audit  Proposed amounts supported by detailed basis of estimate and supporting documentation  Supporting justification/explanation provided for significant variances between prior buy actual cost data and proposed amounts  Consolidated Bill of Material  Detailed support for additive factors applied to various cost elements Indirect Rates supported by contractor budgetary or trend data Adequate Support for Subcontractor Proposals  Adequate prime contactor cost or price analysis  Adequate subcontract proposal Support for commercial item price reasonableness Proposal reflects anticipated accounting changes

13 WAY AHEAD Continue to build on professionally developing our workforce Reducing learning curve with our new processes and guidance Build on the changes to increase quality of services and products Reduce Incurred Cost audit backlog to support contract close-out Continue to broaden relationship and communication with our stakeholders

14 Additional information on DCAA and Points of Contact available at Defense Contract Audit Agency