Auditing the Auditors: Contractor Oversight AWOL

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This explains a lot: Little league teams have more players than the Defense Contract Management Agency (DCMA) has staffers overseeing how military contractors are spending the government’s money. Contract transactions have spiked 328 percent since 2000, but there are presently a mere 14 contracting officials monitoring them.

It wasn’t always this way. As of 1994, the military’s contracting agency had 102 staffers reviewing the purchases, subcontracts, and other expenditures by the companies on the Pentagon’s payroll. These numbers are contained in the latest report [PDF] by the congressionally chartered Commission on Wartime Contracting, which investigated how the primary agencies responsible for Pentagon contracting—the DCMA and the Defense Contract Audit Agency—are handling their oversight responsibilities. The report, which also found the DCAA is “under-resourced,” blasts the agencies for their lackluster performance on this front, concluding that the lack of personnel “has resulted in a spiraling down of business-system oversight in contingency contracting.” The commission is puzzled how it got to this point: “The wars in Iraq and Afghanistan have been going on for many years and the Commission is at a loss to understand why leadership has not aggressively pursued additional staffing until recently.”

The problems the commission identified go well beyond manpower: Not only do Pentagon contractors lack adequate “internal controls” to insure they are billing the government correctly, resulting in billions in costs that auditors can’t verify, but the DCMA and DCAA “are not effectively working together to protect” the government from getting bilked. Like feuding siblings, the agencies can’t seem to agree on much and wind up sending “mixed signals” to military contractors. For instance, when, the DCAA has previously issued “negative audit findings” concerning a massive KBR logistics contract, “DCMA contracting officials generally contradicted” the findings. According to the commission, the agencies routinely come to divergent opinions. Meanwhile, contract problems have gone “uncorrected for years because the government failed to insist that the contractor make the necessary corrections.” And there’s this:

These two agencies and the contractors have often spent years arguing over whether corrective actions must be accomplished or have been satisfactorily completed in specific cases under dispute. This creates an environment in which contractors can exploit the agencies’ mixed messages and game the system to their advantage.

When it comes to the DCAA-DCMA dynamic, the commission’s co-chair, Michael Thibault, is an expert. He spent 32 years at the DCAA, retiring in 2005 as the agency’s deputy director. The commission offers a withering critique of Thibault’s former agency, concluding that certain of its policies are actually “undermining the significance of” audit findings “and weakening their effectiveness.”

The commission is calling for the government to promptly address the flaws it has indentified: “These findings would be important in peacetime; in wartime they are critical.”

Follow Daniel Schulman on Twitter.

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