1. Contractor Business System Rule
Presented By:
Cynthia Thrailkill, Director, DCMA Property Group
June 27, 2012
Revision #, Date (of revision)

2. Basis for the Business System Rule Rule language Process Timelines
TOPICS
Basis for the Business System Rule
Rule language
Process
Timelines
Contractor Actions
Q&A 2

3. Why a Business System Rule?
Commission on Wartime Contracting (August 11, 2009):
Contractor business systems with deficiencies “…remain uncorrected, without consequence, for months or even years”
Contractors not held accountable
Clauses are inadequate
Immediate remedies not available to Contracting Officers
No authority to hold accountable with CAP in place 3

4. Commission on Wartime Contracting
Bottom Line
“Defense agencies must improve their oversight of contractor business systems to reduce waste, fraud and abuse”
Commission on Wartime Contracting 4

5. Accounting Property Purchasing MMAS Estimating EVMS
Six Business Systems
Accounting
Property
Purchasing
MMAS
Estimating
EVMS 5

6. The DFARS Clause DFARS 252.245-7003(b):
“The Contractor shall establish and maintain an acceptable property management system. Failure to maintain an acceptable property management system, as defined in this clause, may result in disapproval of the system by the Contracting Officer and/or withholding of payments”
Contractor property management systems must still meet FAR/DFARS requirements and any contract terms and conditions 6

7. So..What’s Changed? Property Administrators will:
No longer send PMSA results to contractors
Send PMSA results to the ACO
No longer determine systems as “adequate” or “inadequate”
Continue to communicate findings to contractors during audits and at exit briefings
Contracting Officers will:
Approve the contractor’s system if there are no significant deficiencies
Determine if contractor deficiencies (if any) are significant
Request corrective action 7

8. Old Process vs. BSR Current Process BSR Implementation
Property Administrator:
Performs risk assessment
Conducts Entrance Briefing
Performs audit IAW risk plan
Conducts Exit Briefing
Sends Summary letter to contractor system status and requests corrective actions
Performs re-analysis after corrective actions implemented
Recommends Withdrawal of Limited Risk of Loss to CO if corrective action not taken
Property Administrator:
Performs risk assessment
Conducts Entrance Briefing
Performs audit IAW risk plan
Conducts Exit Briefing
Property Administrator submits report of significant deficiencies to ACO
CO signs letter to contractor disapproving system and requesting corrective actions
Advises CO of successful corrective action or significant deficiencies
CO advises contractor of continued disapproval and withdrawal of Limited Risk of Loss 8

9. What is a Significant Deficiency?
DFAR (b)
Significant deficiency
“..in the case of a contractor business system, means a shortcoming in the system that materially affects the ability of officials of the Department of Defense to rely upon information produced by the system that is needed for management purposes” 9

10. The Process
If the contractor does not correct the deficiencies, the CO follows FAR Part ; i.e., withdraw assumption of risk, pursue other rights and remedies
If DFARS clause is in the contract, the CO also pursues a financial withhold
If the contractor’s system was previously approved, the CO would disapprove 10

11. Timelines 11

12. Contractor Actions Produce sound, clear, detailed procedures
Develop robust self-assessment programs (required by FAR )
Enables contractors to track their system and identify deficiencies prior to the Property Administrator performing the audit
Identifying the deficiencies and implementing corrective actions provides contractors more “time” to work through the issues.
Implement adequate corrective action
Perform “root cause” analysis
Ensure corrective actions adequately address the root cause of the problem to prevent future findings 12

13. Summary
What does the business system rule mean to DCMA’s overall mission?
Forces consistency of oversight; and
Policy/people/tools
What does the business system rule mean to DCMA’s property mission?
Gives parity with respect to all other contractor business systems; all systems have equal status under the rule
Enhances the importance of property system audits 13

14. Questions? 14