contractor business systems · 2019-05-15 · level iii – issued by aco •not promptly...
TRANSCRIPT
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Contractor Business Systems
Intro and Updates
(May 2019)
By Jason RathsackUpdated 5/8/19
NCMA Wisconsin Chapter
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DISCLAIMER: The views expressed are not necessarily representative of DCMA. We are here to present on behalf of NCMA, Wisconsin Chapter. Although much of the information contained within is public knowledge, any opinions expressed are those of the presenter alone. If you have any questions, feel free to contact Jason Rathsack at [email protected]
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Agenda
A. Pledge of AllegianceB. IntroductionC. Contractor Business Systems IntroD. GAO FindingsE. Q&A Session
NCMA Wisconsin Chapter
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The FAR-side of the Planet
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NCMA Wisconsin Chapter
DoDNon-Commercial
Commercial
ConstructionGSA
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252.242-7005 Contractor Business Systems Procedures Withholds
(1) Accounting system: DFARS 252.242-7006
(2) Earned value management system: DFARS 252.234-7002
(3) Estimating system: DFARS 252.215-7002
(4) Material management and accounting system: DFARS 252.242-7004
(5) Property management system: DFARS 252.245-7003
(6) Purchasing system: DFARS 252.244-7001
NCMA Wisconsin Chapter
What is a Contractor Business System?
252.242-7005Applicable to CAS Covered Contracts Only (242.7001)
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Business System requirements can be both contract specific and based on Government sales:Contract typeCompetitive vs. Sole SourceContract valueEquipmentComplexity or criticality of requirementTotal qualified sales during an accounting period
NCMA Wisconsin Chapter
CBS – Does this apply to me?
You don’t need the CBS Clause in your contractto be subject to the requirement
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NCMA Wisconsin Chapter
Contractor Business System UpdatesDFARS 252.242-7005
EVMS
MMAS
Estimating System
Purchasing System
Accounting System
Property Management System
Thre
shol
ds, R
isk
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Applicability – DFARS 215.407-5; Estimating Systems – Disclosure
NCMA Wisconsin Chapter
(b)(1) DoD policy is that all contractors have acceptable estimating systems that consistently produce well-supported proposals that are acceptable as a basis for negotiation of fair and reasonable prices.
(b)(2)A large business contractor is subject to estimating system disclosure, maintenance, and review requirements if;
> $50 M in CCOP or >10 M in CCOP with known issues or risks
Include 252.215-7002 Cost Estimating System Requirements in all contracts containing CCOP (>$2M, sole source, non-commercial)
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NCMA Wisconsin Chapter
CCOP• Large and Small Businesses are required to maintain
an acceptable Estimating System
$10M• Large business may be subject to 17 System
Requirements based on ACO/PCO concurrence
$50M• Large Business subject to 17 System Requirements• Withholds if contractor has a CAS Covered contract
Applicability – Estimating System
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DCMA Policies - CBS
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NCMA Wisconsin Chapter
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NCMA Wisconsin Chapter
Confused? See Handout
System Description Factors for Including the Business System Criteria in Contracts
Accounting
System or systems for accounting methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for reporting in compliance with applicable laws, regulations, and management decisions. Systems may include subsystems for specific areas such as indirect and other direct costs, compensation, billing, labor, and general information technology.
Cost-reimbursement, incentive type, time-and-materials, or labor-hour contracts; or contracts that provide for progress payments based on costs or on a percentage or stage of completion.
Estimating
Policies, procedures, and practices for budgeting and planning controls, and generating estimates of costs and other data included in proposals submitted to the government in the expectation of receiving contract awards.
Contracts awarded on the basis of certified cost or pricing data. Additional requirements apply when the contractor is considered a large business and, in the preceding fiscal year, either received Department of Defense prime contracts or subcontracts, totaling:
• $50 million or more for which certified cost or pricing data were required; or• $10 million or more (but less than $50 million) for which certified cost or pricing data were required; and the procuring contracting officer, with concurrence or request of the administrative contracting officer, determines it to be in the best interests of the government.
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NCMA Wisconsin Chapter
Confused? See HandoutSystem Description Factors for Including the Business System Criteria
in Contracts
Purchasing
System or systems for purchasing and subcontracting, including make-or-buy decisions, the selection of vendors, analysis of quoted prices, negotiation of prices with vendors, placing and administering of orders, and expediting delivery of materials.
Contracts that include the standard FAR subcontracts clause.a The subcontracts clause generally is included in cost-type contracts and certain other types of contracts that exceed the simplified acquisition threshold.
Property Management
System or systems for managing and controlling government property.
Contracts that include the standard FAR government property clause.c The government property clause generally is included in cost-reimbursement, time-and-material/ labor hour, or fixed price contracts where property is expected to be furnished by the government or a contract for commercial items where government property exceeds the simplified acquisition threshold and the contractor is directed to use government property.
Earned Value Management
A system for project management that effectively integrates the project scope of work with cost, schedule and performance elements for optimum project planning and control.
Cost or incentive contracts valued at $20 million or more and certain other contracts for which earned value management is applied.
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NCMA Wisconsin Chapter
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• Why?2018 NDAA: GAO to evaluate DOD implementation of Business System Review legislation. The review focused on:
1) the changes DOD made to its review process and;2) the extent to which DOD is ensuring timely business
system reviews.
NCMA Wisconsin Chapter
CBS – GAO Report #GAO-19-212
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Findings? Good!1) Clarify the roles and responsibilities of DCMA and DCAA in
conducting CBS reviews and consolidate the number of reviews to be performed;
2) Clarify how often DOD should conduct CBS reviews; 3) Establish what criteria are used to evaluate a contractor’s business
system; 4) Establish timeframes by which ACOs are to make a determination
on the adequacy of the contractors’ business systems; and 5) Implement the use of payment withholds for contractors that are
found to have significant deficiencies in their contractor business systems.
NCMA Wisconsin Chapter
CBS – GAO Report #GAO-19-212
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NCMA Wisconsin Chapter
Overall - CBS Audit/Review Findings Full Audits or Reviews Completed 2015 - 2017
Agency Business system Reviews completed
Reviews where significant
deficiencies were found
% of reviews where significant deficiencies
were found
DCAA Accounting 3 0 0%Estimating 9 7 78%
Material Mgmt & Accounting 12 9 75%
DCMA Purchasing 330 260 79%Property Mgmt 2,934 26 1%
EVM 891 9 1%
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Good but……• No mechanism to monitor frequency of CBS reviews• DCAA has performed few CBS audits since 2013 when
they focused resources on Incurred Costs• DCAA plans to increase CBS Audits but success will
depend on:– shift resources from other audits;– to use public accounting firms to conduct other, non-
business system audits; and – DCAA staff’s ability to execute new audit plans in a timely
manner.
NCMA Wisconsin Chapter
CBS – GAO Report #GAO-19-212
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NCMA Wisconsin Chapter
What does this mean for you?
0
5
10
15
20
25
30
Accounting Property Purchasing Estimating MMAS EV
DCMA Milwaukee Biz Systems – 2019
Approved Disapproved Not Evaluated
Business System Approved Disapproved Not Evaluated
Accounting 27 1Estimating 1 1Property 25 1Purchasing 3MMAS 1EVGrand Total 56 3 1
30 of 60 Business Systems >3 Years Old21 Accounting, 9 Property
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NCMA Wisconsin Chapter
What does this mean for you?
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NCMA Wisconsin Chapter
CBS – GAO Report #GAO-19-212
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Who are my POCs?
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NCMA Wisconsin Chapter
Oshkosh, WI: Michelle Houtman, 920-252-8400, [email protected]
Milwaukee, WI: Larry Kolb, 414-299-5659, [email protected]
South Bend, IN: Radames “Ray” Gandia, 574-334-4817, [email protected]
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• Pay attention to applicability – Prime and SUB!• Understand the terminology
– What is a significant deficiency?
• Understand the requirements before you propose• Are you prepared? If not, are you showing good faith effort?
AskQuestions
Now!
NCMA Wisconsin Chapter
Tips and Recommendations
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Submit your Questions to WPI Staff or email to
NCMA Wisconsin Chapter
Q&A Session
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Corrective Action ProcessOverview
(May 2019)
By Jason RathsackUpdated 5/8/19
NCMA Wisconsin Chapter
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Agenda
A. RegulationsB. What is a CAR?C. ProcessD. Corrective Action PlansE. Examples
NCMA Wisconsin Chapter
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Regulations – Corrective Action Process
What FAR or DFARS clause outlines the Corrective Action Process?
None?
Many….
NCMA Wisconsin Chapter
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Regulations – Corrective Action Process
• DCMA INST 1201 Corrective Action Process: It is DCMA policy for corrective action to be requested from contractors when contractual noncompliances are independently identified by DCMA personnel performing Contract Administration duties outlined in paragraph (a) of FAR Part 42.302, “Contract Administration Functions
• Shared amongst all functional elements• Guidance covers entire process and is publicly available
NCMA Wisconsin Chapter
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Regulations – Corrective Action Process
• Contract Terms and Conditions – On Time Delivery• 15 CFR 700 Defense Priorities and Allocations System• FAR 52.246-11, Higher-Level Contract Quality
Requirement• Accounting system: DFARS 252.242-7006• Estimating system: DFARS 252.215-7002• Property management system: DFARS 252.245-7003• Purchasing system: DFARS 252.244-7001• DFARS 252-227-7038/9 – Patents
NCMA Wisconsin Chapter
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DCMA Policies – Corrective Action
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DCMA FocusAdministration, Surveillance
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NCMA Wisconsin Chapter
Major Program SupportBusiness System
SurveillanceOn Time Delivery
Negotiation Intelligence
Process ReviewsBusiness System Reviews
Corrective Actions
Low Value Low Risk
DLA Contract Admin
Cost Contract Admin Support
“Kicking Boxes”
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NCMA Wisconsin Chapter
What is a CAR?• A Corrective action Request is
issued to a contractor in response to an identified noncompliance with a contract term or condition
• Must be issued against a valid contractual requirement and the cited noncompliance description must show a clear departure from the contractual requirement.
• Level II and higher CARs shall communicate the contractor response requirements
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NCMA Wisconsin Chapter
•Level III is ineffective or NC is of serious nature•mandatory review of available contractual remedies
Level IV – Issued by ACO
•Issued to KTR Company or Business Segment Mgmt•Serious Non-compliance, significant deficiency, or Level II CAR failure•Requires a written response (CAP for CBS)•May result in contractual remedies (CBS Disapproval + Withhold)
Level III – Issued by ACO
•not promptly correctable, warrant root cause analysis, preventive action, & containment•Issued to management & requires written response
Level II – Issued by Functional Specialists
•NC is minor in nature•promptly corrected by the contractor•no need for root cause determination or further preventive action•issued to the contractor management level responsible
Level I – Issued by Functional Specialist
Seve
rity
of N
C, C
orre
ctiv
e Ac
tion,
Con
trac
tor R
emed
ies
Commercial Contracts – NO CAP
FAR 52.212-4
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CAR Initiation – 4 BucketsNCMA Wisconsin Chapter
Contractor Identified
Customer Identified
Contractor Business Systems
DCMA Identified
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Customer Identified NoncomplianceWhen communicated to and verified by DCMA, the functional specialist should initiate a CAR and manage any corrective actions IAW this Instruction, except when:
1) It is already a reported via Product Quality Deficiency Report (PQDR)
2) A CAR has been initiated by the customer directly to the contractor
When the contractor’s response to the customer PQDR or CAR is inadequate, DCMA may issue a CAR at the appropriate level
NCMA Wisconsin Chapter
Corrective Action Process
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Contractor Identified NoncomplianceIf the noncompliance is contractor self-identified & they take a timely & appropriate action to correct it, a CAR should not be issued, unless:• Contractor takes ineffective corrective actions• Repetitive issues disclosed – cite a weakness in the supplier’s
corrective action process• DCMA led surveillance (i.e. EV, property)Concurrently Identified NoncomplianceDuring concurrent surveillance, a CAR will be issued only after the supplier has made a positive determination or when failure to conduct or document accurately
NCMA Wisconsin Chapter
Corrective Action Process
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Corrective Action – Who is involved?
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NCMA Wisconsin Chapter
CAR Level Pre-Release Coordination Approval For Release & CAP
Acceptance*Issued To Supplier Management Level
I N/a Functional Specialist Lowest Mgmt Responsible to Correct Defect
IIOther functions when impacted. Additional coordination prescribed locally
Functional Specialist Functional level responsible for corrective action
III
CMO Commander/ Director, Legal Counsel, Contract Integrity Center (CIC), applicable Centers (e.g., Property), etc., and applicable customer(s)
ACO/DACO/ CACO (EV has specific instructions)
Top-level manager at business segment or corporate
manager
IV
CMO Commander/ Director, Legal Counsel, CIC, applicable Centers (e.g,. Property), etc., and applicable Customer(s)
ACO/DACO/ CACO/Top level manager at business segment or corporate manager
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CBS & CAR Process
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NCMA Wisconsin Chapter
Business System Review/Audit
Contractor Response to Initial Determination
ACO Receipt of Audit or Analysis Report
Approval – Board of ReviewDisapproval – HQ CBS Review Panel
Approval or Initial Determination of Disapproval
Final Determination and Level III CAR
ACO Develops Determination and Level III CAR Pkg
30/60 Days?
10 Days
30 Days
30 Days? 100
–13
0 Da
ys (a
ppro
x.)
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CAR Communication Process
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NCMA Wisconsin Chapter
ACO notifies affected parties of intent to
issue level III/IV CAR.
DCMA Operational Component
Head/Deputy
Program Managers and Major
Sustainment Commands
Agency Director & Affected Component
Heads
Director responds within 24 hours with
concurrence or issues/concerns.
DCMA Milwaukee Commander
DCMA Chicago CMO Commander
DCMA Chicago Regional
Commander
Program Exec Officer and Senior
Acquisition Exec
CAR Approval
CAR Release
STOP
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CBS & CAR Process – Post FD
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NCMA Wisconsin Chapter
ACO Acceptance of CAP
Approval – Board of ReviewDisapproval – HQ CBS Review Panel
Contractor Corrective Action Plan
Final Determination and Level III CAR
Reanalysis of System
45 Days
15 Days
60 Days to Years 12
0 Da
ys to
Yea
rs
Total Timeline from Audit to Approval:40 days to Years!!
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Final Determination of Disapproval – who reviews it before its approved
Corrective Action ProcessNCMA Wisconsin Chapter
1. Functional Specialist (Auditor)
2. ACO3. Supervisor4. Contracts Director5. CMO General Counsel6. Tertiary Commander7. CMO Commander
8. Regional Commander9. Program Office Execs10. DCMA HQ SME11. DCMA Policy Advocates12. HQ Office of General
Counsel13. Business Operations
Director/DCAA HQ
14. DCMA Director
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What’s HOT?
Corrective Action ProcessNCMA Wisconsin Chapter
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DCMA Inst 1201: Corrective Action Process 3.6. SUBCONTRACT LEVEL NONCOMPLIANCES• Primes have “wide latitude” for controlling supply chain
and are responsible for flowdowns and execution• If a Non-compliance is found at a subcontract level, a
Level I or II CAR shall be issued directly to the subcontractor with notification to the prime contractor via the prime CMO.
• Redact notification to protect proprietary info• Level III CARs at subk level should be issued to prime• Systemic subk issues should result in CAR to prime for
lack of control
Corrective Action ProcessNCMA Wisconsin Chapter
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DCMA Inst 1201: Corrective Action Process 3.6. SUBCONTRACT LEVEL NONCOMPLIANCES• Business Systems are normally only reviewed at
the Prime level with few exceptions (EVMS)• IF the business system is reviewed at subk level,
CARs will be issued directly to sub• When there is no US prime contract; there is no
ACO/DACO/CACO assigned, and; there is no contractor business system determination required to be made, the CMO Commander/Director may release the Level III CAR to the subcontractor
Corrective Action ProcessNCMA Wisconsin Chapter
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Corrective Action Process CAR Levels I & II transmitted directly to subk, with
notification to prime ktr via prime CMO• Redacted for subcontractor proprietary information• Applies to:
• Support contract delegation• Place of Performance (PoP)
CAR Levels III & IV shall be transmitted to prime ktr if:• Existence of systemic lack of prime control • Subcontractor unwilling or unable to implement effective
corrective action• Coordination, Approval, & Distribution IAW DCMA INST
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Production & Manufacturing
• DPAS – Assure timely availability of industrial resources to meet national defense and emergency preparedness Authorized by The Defense Production Act of 1950
• Requires preferential treatment of national defense programs.
• Exec Order 12919 put Department of Commerce in charge of program.
• 15 CFR 700 provides rules for DPAS program. DoD 4400.1-M provides guidance for DoD activities.
NCMA Wisconsin Chapter
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Production & Manufacturing
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Acqu
isitio
n In
sight
Detection to Prevention
Cont
ract
or A
dmin
istra
tive
Cost
s
GOV
Adm
inist
rativ
e Co
sts
Lega
l Cos
ts
Risk
Award
Solicitation
Performance Complete
Incurred Cost Audit
Voucher
COFD
CAR
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Available Resources– DCAA CAM: http://www.dcaa.mil/– DCMA Pricing Guide:
• http://www.dcma.mil/policy/– Contract Pricing and Reference Guides
• https://acc.dau.mil/cprg– Defense Procurement & Acquisition Policy
• http://www.acq.osd.mil/dpap/cpf/– WIFCON
• http://www.wifcon.com/
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Q&A
NCMA Wisconsin Chapter