Pentagon’s contract examiners need to cooperate

Introduction

Two Pentagon agencies that share responsibility for overseeing how big contracts are carried out should stop their squabbling and work together, according to a Defense Department inspector general report.

In the complex, multi-billion-dollar world of military contracts, two separate entities act as watchdogs over how companies spend taxpayer money. The Defense Contract Audit Agency (DCAA), which reports to the Pentagon’s comptroller, audits contracts for compliance and recommends improvements. The Defense Contract Management Agency (DCMA), which reports to the department’s undersecretary for acquisitions, works more closely companies to ensure they stay on budget and on schedule, and has the power to withhold payment for shoddy work.

The Pentagon’s internal watchdog found that on two occasions in 2008, the management agency’s Tucson, Ariz. office failed to give its sister audit agency enough time to review an unnamed company’s compliance with key requirements for contracts of $20 million or more. That means the management agency assessed the contractor’s business system without input from the audit agency, the inspector general said. Going forward, the management agency should not set “an arbitrary and inflexible time frame to conduct reviews at all major DoD contractors,” the report said.

Another problem: the management agency is too friendly with the companies it polices. In one instance, it told a contractor in advance that both Pentagon oversight entities were examining the company’s contract compliance, the watchdog’s report said. And two other times, the Tucson office helped a contractor create a plan resolving some problems. The management agency should “prohibit joint surveillance reviews or other joint activities with contractors that could compromise independence and objectivity,” the inspector general said.

Quick Fact: The unnamed contractor at the heart of the squabble between the two Pentagon agencies made “very little progress” after four years in correcting noncompliances turned up by Pentagon auditors in 2003. “At a minimum, DCMA [management agency] should have immediately suspended validation of the contractor’s system based on the contractor’s lack of progress,” the report said.

Other new reports released by federal watchdogs:

FINANCE

* Internal Revenue Service expects filings by small business partnerships, subchapter S firms to jump more than 39 percent between 2006 and 2015 (OIG)

* Broadcasting Board of Governors overstates depreciation by $1 million, understates net book value of some items by up to $19.7 million (OIG)

ENERGY

* Energy Dept’s Los Alamos National Laboratory has yet to fully adopt several “critical” nuclear safety measures (OIG)

* Energy Dept has spent less than 9 percent of $3.2 billion in stimulus funds for energy efficiency block grants, creating or saving about 2,265 jobs (OIG)

HEALTH CARE

* Medicare overpays $13.8 million to physicians who incorrectly used codes indicating services were performed in their offices rather than in hospitals (OIG)