Contractor Business System Rule
Presented By:
Kendrick Dickerson, PA, DCMA Property Group
May 3, 2013
Revision #, Date (of revision)
TOPICS
• Basis for the Business System Rule
• Rule language
• Process
• Timelines
• Contractor Actions
• Q&A
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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
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Bottom Line
“Defense agencies must improve their
oversight of contractor business
systems to reduce waste, fraud and
abuse”
Commission on Wartime Contracting
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Six Business Systems
Accounting
Property
Purchasing
MMAS
Estimating
EVMS
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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
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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
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Old Process vs. BSR
Old Process
•Property Administrator:
• Performs risk assessment
BSR Implementation
•Property Administrator:
• Performs risk assessment
• Conducts Entrance Briefing
• Conducts Entrance Briefing
• Performs audit IAW risk plan
• Performs audit IAW risk plan
• Conducts Exit Briefing
• Conducts Exit Briefing
• Property Administrator submits report
of significant deficiencies to ACO
• 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
• 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 (if applicable)
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What is a Significant Deficiency?
DFAR 252.242.7005(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”
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The Process
• If the contractor does not correct the deficiencies, the
CO may follow FAR Part 45.105; i.e., withdraw
assumption of risk, pursue other rights and remedies
• If DFARS clause 252.242-7005 is in the contract, the CO
also pursues a financial withhold
• In addition, The CO will issue a Level III CAR
• If the contractor’s system was previously approved, the
CO would disapprove
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Timelines
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Contractor Actions
• Produce sound, clear, detailed procedures
• Develop robust self-assessment programs (required by
FAR 52-245-1)
• 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
•
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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
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Corrective Action Requests
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Corrective Action Requests
• Level I
• Noncompliances that are minor, promptly corrected
and require no root cause analysis
• PAs may issues a Level I at any time
• Level II
• Noncompliances not promptly correctable and
warrant root cause analysis and preventive action
• PAs may also issue a Level II at any time
• Level III
• Noncompliances of a serious nature and constitute a
significant deficiency
• Level III Issued by a Contracting Officer
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