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DCMA’s Property Management System Analysis
Andrew C. Obermeyer, Director, DCMA Business Operations Center
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Business Operations Center
Ensure that suppliers’ have purchasing systems in place that contribute to effective subcontract management. Evaluation of the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting. The CPSR Group’s recent focus has been on improving supplier sourcing practices and promoting intelligent pricing decisions. Set to conduct over 130 reviews in FY16. Ensure that contractors’ property management systems control, use, preserve, protect, repair and maintain the Government property (GP) in their possession. Perform Property Management System Analysis (PMSA) and investigate Property Loss to determine liability PMSAs performed FY15 – 1025 Total acquisition cost of GP - $138,121,543,421 CONTRACTOR PURCHASING SYSTEM REVIEW (CPSR) GROUP PROPERTY GROUP DCMA employs 244 of the s in DoD Total Personnel Authorized: 394 Negotiate settlements for Contracts terminated for the convenience of the Government. Provide technical assistance and guidance to Buying Activities by facilitating policy and procedures and technical support Conduct post-termination briefings. Approve contractors’ settlements with subcontractors. Approve interim payments prior to final settlement. Currently have over 700 actions valued at $26.6B in process. Provide timely, cost effective disposal of excess government property in the possession of contractors. TERMINATIONS GROUP PLANT CLEARANCE GROUP Facilitate the reutilization of Government Property saving time and money that might otherwise be expended in re-procurements. Assure Government Property is disposed of properly and demilitarized when required. Selling surplus Government Property returning proceeds from sales to the Government Clearing Plant Clearance cases while maintaining data integrity in our case files and PCARSS. FY15 cleared 17K cases; Acquisition Cost - $5.9B CPSR Group – travel cost savings of $56k in FY15 as a result of remote access to contractor records Benefits to DOD Customers Property Administrators investigate losses of Government property, and when contractually appropriate, recommend that the contractor be held liable. In FY15, this resulted in the recoupment of $2,982,624. Terminations had negotiated savings of $78.1M in FY15 and has saved $11.8M to date in FY16. Plant Clearance reutilized $500M in Gov’t Property and returned $6.8M to the U.S. Treasury through sales of Surplus Gov’t Property in FY15. FY16 YTD reutilized $185M and sales $2.3M.
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What is our Property mission?
The Property Group ensures that Government Property in the possession of contractors is effectively and efficiently managed as required by FAR – Government Property. 3
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How Do We Perform the Mission?
By performing Property Management System Analyses (PMSAs). A PMSA is a systematic, objective review and evaluation of a contractor's PMS including the procedures and the implementation of applicable property management processes to determine whether the contractor is complying with contractual terms and conditions relating to property management. 4
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Corporate IPTs The Property IPT construct provides a forum in which PAs with oversight of property management systems of a single contractor, regardless of location, can discuss matters affecting those systems in order to achieve consistency in addressing issues and problems, regulatory interpretation and auditing techniques and approaches to ensure the Property Group speaks with one voice to the contractor. Contractor DCMA Property Lead Boeing Randy Scott (Pensacola, FL) Raytheon Deena Day (Denver, CO) Northrup Grumman Len Salazar (Carson, CA) 5
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Low Risk Practice “Low Risk Property” means assets that:
Meet the definition of Equipment, Special Tooling, or Special Test Equipment, as defined at FAR 2.101, FAR and FAR (a). Have a unit acquisition cost less than $5,000. Are not: “material” as defined at FAR and FAR (a). “sensitive property” as defined at FAR and FAR (a). classified assets, i.e. assets for which the existence, description or association with a contractor, Government agency, or particular contract is restricted to those with authorized access and a need to know. computers or other devices capable of storing and transmitting data. “aircraft” as defined at DFARS (a)(1), or “Flight Safety Critical Aircraft Parts” as defined at 41 CFR assets identified with demilitarization code G, P, F, C, or D per DoD Manual M-V3 or considered environmentally hazardous or dangerous to public safety. When low risk practices may be approved PAs shall make contractors aware of the criteria that will be applied to low risk property. Contractors are responsible for developing their own processes and procedures at their facilities. PAs shall not require contractors to implement low risk practices. 6
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Government Property Storage
Objective Determine the costs associated with the storage of Government property at contractor’s facilities as a result of closed contracts/programs, specifically how and by whom the costs are paid. Pilot sites Two major Defense contractors with resident Property Administrators. Initial Findings Pilot review at two major defense contractors identified no issues with storage of Government property that is not accountable to active contracts. There are no storage agreements or contracts in place at either facility. Excess property accountable to active contracts is a continuing concern and is an area of focus for the DCMA Property Group. 7
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Two Types of PMSAs Standard PMSAs require entrance and exit conferences, involve plant visits, formal examinations with detailed workpapers generated and formalized conclusions drawn as to the condition of the contractor's system. The depth and detail of review and analysis are far greater for a standard system analysis than for a limited system analysis. Limited PMSAs or “desk audits” permit less formal testing methods and techniques including contractor responses to a series of questions covering each applicable element of a contractor’s PMS, and interviews of contractor personnel among other methods as appropriate, depending on the risk level, amount and value of property, etc. 8
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How Does Property Schedule PMSAs?
New contractors: Identified during contract receipt and review. Contracts that contain the Government Property (GP) clause and/or GP attachment Initial PMSA scheduled within one year. Within six months if there is sensitive property. Established contractors: Type and frequency of PMSAs determined IAW risk level of contractor’s PMS. When sensitive property is involved, PAs perform annual on-site reviews of records, storage, utilization, and physical inventories processes, regardless of the contractor’s risk rating. 9
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Risk Assessments Performed immediately after each PMSA and validated annually. Based on PMSA results and other sources of reliance, PAs Identify unfavorable future events, Assess the likelihood or probability of unfavorable future events and Estimate the consequence or impact of those events. 10
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Risk Assessments PAs assign each PMS a risk rating of high, moderate or low. High Risk – Requires a Standard PMSA at least annually Moderate Risk - A Standard or Limited PMSA as frequently as conditions warrant, but at least once every 2 years Low Risk - Standard or Limited PMSA as frequently as conditions warrant, but at least once every 3 years PMSA schedules are maintained in the Contract Property Administration System (CPAS) eTool. 11
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PMSA Performance PAs review all applicable elements and processes of the contractor’s PMS as identified at FAR (f)(1)(i through x) including: Written procedures Reports Contractor self-assessment Relief of stewardship Acquisition Utilization Receiving Declaration of excess Discrepancies incident to shipment Consumption Identification Movement Records Storage Receipt and issue system Storage – commingling Physical inventory Maintenance Subcontractor awards and flowdown Disposal Subcontractor reviews Closeout 12
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Audit Process for Records Process
Define the population i.e, the aggregation of documents, records, assets, or actions selected for review due to common characteristics. All records of GP in the contractor’s possession Subject to the judgment and determination of the PA, sampling is used as an efficient and economical method for analyzing a system. One of three different types of sampling may be used: Statistical- A number of items are selected from the population for analysis so that the sample is representative of the entire population from which it was selected. The most widely used sampling plan will discover defects of 10% or more, if they exist, 90% of the time Automated tools ( used to ensure randomness Judgmental- A number of items are selected from the population for analysis without meeting the random selection and sample size criteria of statistical sampling. Purposeful- Known, suspected, or reported conditions of a critical or substantial nature are used to select items, for review to determine the possible adverse systemic impact. Alternative statistical sampling plans that will discover defects of 10% or more, if they exist, 95% or 97 % of the time may be used, depending on circumstances. 13
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Audit Process for Records Process
Determine Sample Size Determined by the Sampling Plan for statistical samples. Randomly Select Sample Using automated tools such as Randomizer.org. to ensure randomness Review each record sampled to determine whether they are complete, containing the 10 data elements required by FAR (f) (1) (iii) (A) Trace the records to the items to verify the balances and locations to test whether the records are current and accurate. Review receiving reports, requisition slips, issue documents, inventory adjustment vouchers, transfer documents, shipping documents, etc. and compare to transactions posted to the record to determine whether there an auditable record of all transactions with posting references supported by documentation. Take a random selection of property from the floor and find their records to test whether record have been established for all GP (1) The name, part number and description, National Stock Number (if needed for additional item identification tracking and/or disposition) and other data elements as necessary and required in accordance with the terms and conditions of the contract. (2) Quantity received (or fabricated), issued, and balance-on-hand. (3) Unit acquisition cost. (4) Unique-item identifier or equivalent (if available and necessary for individual item tracking). (5) Unit of measure. (6) Accountable contract number or equivalent code designation. (7) Location. (8) Disposition. (9) Posting reference and date of transaction. (10) Date placed in service (if required in accordance with the terms and conditions of the contract). 14
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Audit Process for Records Process
Record relevant data on workpapers Analyze the outcome of the sample Determine the Status of Process and System Document findings describing and analyzing the quantitative and qualitative information obtained. Determine if the process is compliant with contractual requirements and explain the rationale for all determinations. Inform Contracting Officer of findings in a Business System Analysis Summary. Describe any deficiencies in sufficient detail to enable the CO to understand whether they materially affect the ability of DoD officials to rely upon information produced by the system. (1) The name, part number and description, National Stock Number (if needed for additional item identification tracking and/or disposition) and other data elements as necessary and required in accordance with the terms and conditions of the contract. (2) Quantity received (or fabricated), issued, and balance-on-hand. (3) Unit acquisition cost. (4) Unique-item identifier or equivalent (if available and necessary for individual item tracking). (5) Unit of measure. (6) Accountable contract number or equivalent code designation. (7) Location. (8) Disposition. (9) Posting reference and date of transaction. (10) Date placed in service (if required in accordance with the terms and conditions of the contract). 15
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After the PMSA If there are any deficiencies, PA indicates whether they materially affect the ability of DoD officials to rely upon information produced by the system. PA issues Level II CARs for deficiencies determined by the CO to be non-significant. Findings are reported to the Contracting Officer (CO) who either approves or disapproves the PMS in accordance with DCMA-INST 131. The CO records the status of the PMS in the Contract Business Analysis Repository (CBAR) eTool. The CO may implement a payment withhold on an individual contract if the contract contains DFARS , Contractor Business Systems and DFARS Contractor Property Management System Administration. PA evaluates the adequacy of all corrective action plans, monitors the performance of corrective actions and determines if corrective actions have been implemented and adequately address the deficiency. 17
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Standard PMSA Timeline
P-30 Notify contractor in writing of PMSA P-30 Request data and documentation from contractor P-30 PMSA Planning PMSA – Entrance Brief, Daily Outbrief, Exit Conference Exit Conference+30 Management review, Report to CO Exit Conference+40 CO approval if no deficiencies, or initial determination Exit Conference+70 Ktr response to initial determination Ktr Response+30 Final determination Ktr Response+45 Corrective Action Plan if requested, due to CO 18
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Subcontractor PMSAs Prime contractor is responsible for performing periodic reviews to determine the adequacy of the subcontractor's property management system. DCMA may perform a PMSA for a subcontractor only when the exceptions listed at FAR (e)(2) apply The Government otherwise would incur undue cost; Successful completion of the prime contract is threatened; or If a contracting officer for a major system acquisition designates certain high risk or critical subsystems or components for special surveillance in addition to requesting supporting contract administration. The prime contractor must also consent to accept the findings. Prime contractor consent is not required for DCMA to perform a PMSA at an alternate site of the prime contractor. 19
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Property Who Performs the Property Mission?
DCMA-AQB Andrew C. Obermeyer Director Business Operations Center Ft. Lee, VA DCMA-AQBY Director – Teresa Lardaro (Ft. Lee, VA) Deputy – David Ryan (Philadelphia, PA) John Conley Management Analyst (Ft. Lee, VA) Michael Karolak Performance Improvement Officer (St. Petersburg, FL) Kitty Olson Management Assistant (Arlington Heights, IL) DCMA-AQBYA Team Lead – Holli Felch (Hartford, CT) DCMA-AQBYF Team Lead – Steven Abramowitz (Orlando, FL) DCMA-AQBYK Team Lead – Deena Day (Lakewood, CO) DCMA-AQBYB Team Lead – Maura Lachance (Boston, MA) DCMA-AQBYG Team Lead – Duke Montgomery (Arlington Heights, IL) DCMA-AQBYL Team Lead – Derek Urban (Phoenix, AZ) DCMA-AQBYC Team Lead – Jack Pocorobba (Philadelphia, PA) DCMA-AQBYH Team Lead – Randy Scott (Crestview, FL) DCMA-AQBYM Team Lead – Leonardo Salazar (Carson, CA) DCMA-AQBYD Team Lead – Vacant (Pittsburgh, PA) DCMA-AQBYI Team Lead – Carmen Strange (Dallas, TX) DCMA-AQBYN Team Lead – Bridgette Harris (Los Angeles, CA) DCMA-AQBYE Team Lead – Henry Pielaet, Jr. (Chantilly, VA) DCMA-AQBYJ Team Lead – Charles Faircloth (San Antonio, TX) DCMA-AQBYO Team Lead – Edwin Hoenig (Ft. Lee, VA) 20
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# of Government Property (GP) Systems
Property Workload Trend Indicator Data as of October 1, 2016 There was a fiscal year (FY) 12 to 13 inecrease in Government Property Systems due to the DCMA system change from DPADS (MOCAS) to the Contract Property Administration System (CPAS) eTool. The contractors that did not have Government Property and/or no Government Property contracts were not brought into the CPAS eTool. The Property Group shows a steady increase in Systems/workload over the past 5 years. The increase is due to better oversight of property contracts coming into DCMA. Newer systems such as Contract Property Administration System (CPAS) and Integrated Workload Management System (IWMS) have given Property Administrator’s better oversight of their workload and contracts associated. The continual use of the DCMA systems will assist in identify new workload in the future. FY 2012 2013 2014 2015 2016 # of Government Property (GP) Systems 1,850 2,130 2,131 2,415 2,599 GP Value $ B $ B $ B $128.9 B $139.0 B GP Line Items 41.0 M 43.7 M 65.6 M 78.9 M 61.0 M Onboard/Authorized 183/185 182/197 174/201 170/199 187/231 Audits Performed 917 1026 1090 1025 980 Audit Target 984 1121 1145 1066 1022 Complete % 93% 92% 95% 96% 21 21
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Property Systems by Status
Data as of October 1, 2016 The DCMA Property Group went through a FY16 4th Qtr. internal audit that identified potential workload not being reviewed/evaluated by PA’s. This potential workload (350 contractor cages) has contributed to the increase in “Not Evaluated” and “New Contractor” systems. The PA’s will conduct risk reviews at the end of the fiscal year to determine the contractor property status and when to schedule a PMSA. Total Systems Approved Approved w/Def Disapproved Pending CO Not Evaluated New Contractor Totals: 2599 1520 85 8 118 269 599 Percentage: 100% 58.5% 3.3% 0.3% 4.5% 10.4% 23.0% 22
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Property Management Challenges
Audit Quality Use of appropriate auditing techniques Improved audit reports Data Integrity Accuracy of CPAS has improved but requires constant attention Contract Receipt and Review Ensure assignment is taken of all contracts with GP Ensure contracts contain required property related clauses Disruption of mission performance due to CRF positions OCONUS obligated positions Aging workforce Appropriate auditing techniques: Exercise reasonable judgment based on facts and data Establish and maintain adequate documentation to support decisions. Identify appropriate population/universe for sampling purposes Determine appropriate sampling methodology Analyze defects from both quantitative and qualitative perspectives 23
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Property Group Workforce
Property Group personnel eligible for retirement Today 3 Years 5 Years On Board # Elig to Ret % Elig to Ret 187 49 26.20% 66 35.29% 88 47.06% 24
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Administration of Government Property Loss
Government typically self-insures against loss. Exceptions: The risk is covered by insurance or the contractor is otherwise reimbursed. The loss is the result of willful misconduct or lack of good faith on the part of the contractor's managerial personnel. The CO has revoked the Government's assumption of risk for loss of Government property due to a determination that the contractor's property management practices are inadequate, and/or present an undue risk to the Government, and the contractor failed to take timely corrective action. 25
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PA’s Role in Property Loss Administration
Within 90 days of receipt of a loss report from contractor in the Property Loss eTool, PA shall: Ensure FAR/DFARS definitions for “loss of Government property are met Determine whether contract imposes risk of loss on Government or contractor Evaluate facts and circumstances Determine if loss was caused by deficiencies in contractor’s PMS 26
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PA’s Role in Property Loss Administration
Based on the findings and conclusions resulting from the actions described on the previous slide, the PA shall either Relieve the contractor of responsibility and liability where the Government bears the risk of loss under the contract, or Recommend the Contracting Officer Hold the contractor responsible and liable for the item’s acquisition cost (in full or in part) Authorize the contractor to repair or replace the property or Determine a form on consideration appropriate for the circumstances. 27
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Property Loss Administration Workload
FY Number of Loss Cases Acquisition Value Percentage Recovered 12 3,479 $1,698,645,547 0.3% 13 5,935 $688,848,155 0.4% 14 4,640 $7,245,306,357 0.2% 15 3,775 $1,809,881,019 16 3,003 $1,352,852,537 0.1% When the loss involved is damage to Government property the acquisition value does not necessarily reflect the amount of loss to the Government. The $7.3 B in acquisition value reflected in FY 14 includes 38 cases of damage to F-2 2 aircraft with an acquisition value of $6.1 B. The total cost of the damage on those 38 cases is $571, Recovered: FY12 = $5,715,097 FY13 = $2,599,284 FY14 = $14,268,026 FY15 = $2,830,691 FY16 = $1,621,895 28
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Priorities as We Look Ahead
Improving PMSA performance via training and assertive performance monitoring Filling vacancies, CRF and Keystone positions Improving Data Integrity Focus Areas FY15 FY16 FY17 Reporting to IUID Registry Utilization Declaration of Excess Subcontractor Control Disposition Contract Receipt and Review 29
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PMSAs Questions? 30
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