Posts Tagged ‘GAO’

HUBZone Firms have Priority for Set-Aside Contracts

Friday, March 12th, 2010

The Federal Government normally seeks “full & open” competition for the its procurements.  But under certain circumstances, procurements can be set-aside so that only firms in certain socio-economic classes are eligible to bid.  Currently, the Government can set-aside procurements for 8(a) firms, Service Disabled Veteran-Owned firms, and firms located in a Historically Underutilized Business Zone (HUBZone).  The Government’s position has been one of set-aside parity.  None of these firms have a greater right to set-aside contracts than the others.

However, the Government “set-aside parity” approach is not in accordance with the enabling statutes.  The Contracting Officer “shall” set-aside certain procurements for HUBZone firms.  The Contracting Officer “may” set-aside certain procurements for 8(a) or Disabled Veteran firms.   The General Accountability Office (GAO) ruled in May, 2009 that the plain meaning of the words “shall” and “may” give the HUBZone firms first priority in setting aside contracts. (more…)

The Verdict is in; More Awards are Protested but Less Protests are Sustained

Thursday, January 28th, 2010

According to the statistics recently released by the General Accounting Office (GAO), 1,989 protests were filed in calendar year 2009, a 20% increase over 2008.  Some have conjectured that the economy has motivated more losing bidders to file protests.  However a significant part of the increase is due to changes in the regulations which allow different types of procurements to be protested to GAO.  Protests involving task order awards, A-76 outsourcing decisions, and Transportation Security Administration procurements accounted for a large percentage of the increase.

Though the number of protests are up, the percentage of protests sustained by GAO actually decreased.  GAO decided 18% of the protests in favor of the protested, compared to 21% in 2008.   This is a sign the increase in protests is not attributable to an increase in poorly conducted procurements.  Of course, a protest can be beneficial to contractors even if they don’t technically win.  Often incumbent contractors protest and are able to continue work on their contract while the protest is being decided.  That can result in months of additional revenue and profit even if they ultimately lose the protest.

DCAA Audit Director, April Stephenson, Reassigned

Tuesday, October 27th, 2009

On October 26, 2009, the Associated Press reported “The Pentagon’s chief auditor was forced from her post Monday following sharp criticism from lawmakers over failures to hold defense contractors accountable for overcharges and poor performance.”

Robert Hale, Pentagon comptroller, announced Patrick Fitzgerald, Director of the Army Audit Agency to replace Stephenson on November 9, 2009. Hale told DCAA’s employees that Fitzgerald “has an excellent reputation as a successful manager of a large, geographically diverse audit organization. … I believe that Mr. Fitzgerald is particularly well qualified to guide DCAA during this period.” Fitzgerald brings to the position over 30 years of audit experience and has also been heading the oversight committee created by Hale to monitor DCAA. (more…)

DCAA Audits – Deficient once Again

Wednesday, September 30th, 2009

The latest report on DCAA by the General Accounting Office (GAO) released September 2009 entitled “Widespread Problems with Audit Quality Require Significant Reform” marks an embarrassing moment for DCAA. The GAO found audit quality problems at DCAA offices nationwide including; compromise of auditor independence, insufficient audit testing, and inadequate planning and supervision.Here are just a few of the highlights:

• DCAA auditors spent 530 hours to support an audit of a non-existent billing system and reported adequate controls
• On another billing system audit an auditor told GAO he did not perform detailed tests because “the contractor would not appreciate it”
• On an accounting system audit, the supervisory auditors directed audit staff to delete some audit documents, generate others, and in one case, copy the signature of a prior supervisor onto new documents making it appear that the prior supervisor had approved a revised risk assessment. The supervisor who approved the altered documents was later promoted.

In total DCAA rescinded 80 audits cited in the last two GAO reports. (more…)

DCAA, Out of the Frying Pan and into the Fire – GAO Finds More Audit Failures

Monday, August 17th, 2009

Contractors can expect continued “diligence” from DCAA for the foreseeable future.  GAO’s  latest draft report (leaked) indicated that, of the 37 audits reviewed, ALL were found deficient with General Accepted Government Auditing Standards (GAGAS). Contractors will inevitably continue to feel the additional squeeze as DCAA continues to tighten audit procedures to regain the Agency’s reputation. 

The latest GAO report will result in more criticism of DCAA and justifiably so.  A public accounting firm would be out of business if a peer review resulted in such significant negative findings.  But that said; everyone should keep in mind that this review covered audits conducted in 2004-2006 BEFORE the initial scathing GAO report was released.   So while DCAA does have internal quality issues, it is logical to assume that the deficiencies would be similar to the one’s identified in last year’s report.  At this point, the more important question is “has quality improved on current audits”?  That question will not be formally answered until GAO reviews DCAA’s 2008 / 2009 audits which were mostly conducted after the first report was issued and after DCAA implemented new quality control procedures. 

Aronson strongly recommends that contractors take this time to focus on their internal systems. Review your systems for proper compliance, documentation, and implementation.  Contractors should maintain written policies and procedures specifically related to timekeeping, travel, accumulation of direct and indirect costs, and exclusion of unallowable costs at a minimum.  Contractor should educate appropriate employees on the Federal Acquisition Regulation and the basics of the Cost Accounting Standards.  Due to recent scrutiny over compensation contractors should have adequate documentation of performance based compensation plans.  Finally, keep the communications open between your organization and your DCAA representative, be prepared to respond to DCAA’s requests for reasonable information within 5 days, and document your responses and interactions in writing.  

Also, Aronson would like to obtain feedback from our loyal blog readers assessing the current state of DCAA audits.  You can respond by commenting to this posting or you can send an email to nmitchell@aronsoncompany.com.  We promise to keep all individual email responses confidential and we will only share the compiled results in a future blog post. Please share your thoughts on the following:

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SBA Proposes New Requirements for the HUB Zone Program

Thursday, April 16th, 2009

The Small Business Administration (SBA) has proposed some changes to the Historically Underutilized Business Zone (HUB Zone) program.  Currently, HUB Zone firms must certify their eligibility at the proposal stage of a HUB Zone set aside competition.  Pursuant to the proposed rule, HUB Zone firms will now be required to certify their eligibility again, prior to award of the contract.  Thus firms that have lost their eligibility between the beginning of the competition and the award of the contract would not be able to receive HUB Zone set aside contracts.   Also, the proposed rule requires participants to purchase materials manufactured or produced in HUB Zones.  There is an exception for contracts of less than $25,000.  Lastly, prime contractors would have to confirm that their subcontractor is a certified HUB Zone small business by reviewing the Central Contractor Registration (CCR) database or checking with the SBA.

The proposed changes are undoubtedly in response to several recent General Accountability Office (GAO) reports that found ineligible firms receive significant contracts and that outright fraud was all too common.  As this rule is still dependent on self certification it would not seem to address the allegations of wide spread fraud raised by GAO.  After all, if you’re capable of lying once, I don’t see any reason you wouldn’t lie twice.  The real problem is that SBA doesn’t seem to have a good process for determining whether a prospective HUB Zone firm is lying on their application / certification.

The proposed rule was published in the April 13th edition of the Federal Register.  Comments are due by June 12, 2009.

GAO Establishes Stimulus Fraud Hotline

Monday, March 30th, 2009

Be careful how you spend the stimulus dollars because the public may be watching.  At least that is the theory behind “FraudNet” the new stimulus fraud hotline developed by the General Accountability Office, (GAO).  GAO is urging citizens, to include contractors and federal employees, to use the FraudNet system to report suspected fraud, waste, or abuse related to the stimulus spending.

FraudNet allows the public to report potential cases of fraud,waste, or abuse (1) by telephone at 1-800-424-5454, (2) by email at fraudnet@gao.gov, (3) by fax (202) 512-3086 or (4) by mail to;

GAO FraudNet
441 G Street, N.W., M/S 4T21
Washington, DC 20548.

The FraudNet website can be found at the following link, FraudNet

DCAA Director Warns of BIG Changes

Tuesday, March 10th, 2009

DCAA Director April Stephenson recently spoke to contractors regarding several memorandums issued in late 2008; Audit Guidance on Limited Scope Audit Reports on Internal Controls and Denial of Access to Records Due to Contractor Delays.  Ms. Stephenson started out her presentation by announcing “Welcome to a New Day”, which was the continuing theme for the discussion. What does this “New Day” mean for contractors?

1. DCAA taking a harder black and white approach in interpreting the rules and regulations
2. Contractors adhering to tight time contracts yet no time adherence requirements on DCAA
3. More audit findings of “Inadequate” and possible suspension of payments more likely to occur.
4. Greater delays in finalizing indirect rates for non-major contractors.
5. Increased data requested by auditors.
6. Significantly increased testing during Internal Control Audits for major contractors.
7. DCAA will not perform Internal Control Audits for non-major contractors, only 1408 Accounting System Audits.

Follow these links for highlights from the meeting and to view Ms. Stephenson’s full slide presentation.

If you are already feeling the impacts of these changes we would love to hear from you – please post your comment or contact Donna Dominguez directly at (301) 231-6200, DDominguez@AronsonCompany.com.  Look for updates on this topic in future Aronson & Company blog postings.  We are leading our clients to total harmony, total solutions, and total success in the government marketplace.

Protests up 17% from Last Year

Thursday, January 29th, 2009

Contractors filed 1,652 protests with the General Accountability Office (GAO) in fiscal year 2008, up 17% from last year.  This was the most protests filed since fiscal year 1997.  The reason for the substantial increase appears to be fourfold.  (1) Task Orders over $10 million can now be protested.  Contractors took advantage of this new rule 49 times.  (2) GAO is now the forum for protests of Transportation Security Administration procurements.  8 TSA bidders filed protests with GAO.  (3) Government employees now have the ability to protest the outcome of private-public competitions.  30 protests were filed pertaining to public private competitions but it was not clear how many of these were filed by Government employees.(4)  The weakened economy has encouraged some contractors to more aggressively protect their Government business.

A majority of these protests were not actually decided by GAO because (1) some protests were dropped by the protester after review of the procurement files, (2) some were rejected  by GAO on procedural grounds, (3) some were diverted to various alternative dispute resolution programs, and (4) others were resolved directly with the agency.  Of the 291 protests decided by GAO, only 60 or 20.6% were sustained.  This is actually a smaller success rate than fiscal year 2007 when GAO sustained 27.6% of the 335 decisions it rendered.  However, this statistic is misleading because in many instances, the agency granted some form of relief to the protester.  42% of the protests were successful if you include relief granted directly by the agency.

Different versions all stimulate more federal opportunities (Updated!)

Wednesday, January 28th, 2009

The Senate unveiled it’s version of the economic stimulus bill with tax cuts and spending proposals totaling $355 billion dollars – allotting billions of dollars to federal agencies.  This follows the House’s modifications and preparation for a vote this week. After Congress provides the legislation for signature to  President Obama (mid-February is the target date), the public will be able to track how the government spends federal funds in the package at www.recovery.gov. (more…)