A Personal Perspective:

Considerations for Planning a Contractor Self-Assessment program

Intermediate level

Len Salazar
DCMA-AQBYM
Manager, Southern
California

Simple Agenda
DCMA-AQBYM Team Construct and Responsibilities
Basic Assumptions
Government perspective
Building a CSA program (Lens Advice)
Q&A (This is the target)
Misc. Topicsyour choice
Note #1: This session is about you; ask questions that are meaningful
to your specific situation

DCMA-AQBYM Team Construct and Responsibilities

One of 13 DCMA Property Specific Geographical teams covering
Domestic and International contracting
o Approx. $130 Billion of Contract Government Property
o Approx. 4,000 contractors
o Approx. 20,000 contracts
My team provides oversight to 300(+) contractors with $16 Billion of
Contract Government Property (Material, Special Tooling &
Equipment)
Programs include; Aircraft (such as, Global Hawk, Predator, B2, C17,
& C130 Modification), Communications, Satellites, Spares, Robotics,
Sustainment, Study and Research
o All military services, NASA, and other federal agencies
3

DCMA-AQBYM Team Construct and Responsibilities

Team of auditors responsible for Southern California and Hawaii
o Authority to audit found within clause 52.245-1 (as well as its
predecessor clauses; -2, -5); as frequent as necessary
o Assess contracts and contractors; Pre-award, Post-award,
disposal, and closeout
o Evaluate compliance to Government property control
requirements (Property Management System Analysis)
Heavily involved with a wide range of contractors (Large, Medium,
Small)
o Problem resolution, compliance prediction, & facilitate
communication
4

Basic Assumptions
You have:
o awareness of basic and intermediate contract property concepts
Definitions, title provisions, liability, contract types, clauses,
process management, basic statistics, etc
o an understanding of the role of a property management system
o established procedures detailing how specific property control
activities will be performed
o management support to establish, continue, or modify a current
internal audit process
Within this discussion
o Use what you find applicable to your specific situation, file away
the restjust in case!

Government perspective

The FAR
The Contractor shall establish and maintain procedures necessary to assess its
property management system effectiveness, and shall perform periodic internal
reviews and audits.
Significant findings and/or results of such reviews and audits pertaining to
Government property shall be made available to the Property Administrator.
o CSA is a contractual requirement
o No specific process guide is provided
o GN: Build a CSA process that works for your specific situation
o GN: Focus on what is being said and what is NOT being said

DCMA

DCMA SOP: FAR 52-245-1(f)(3) requires contractors to perform self

assessments to evaluate their property management system
effectiveness. The clause requires the contractor to disclose
significant findings to the Property Administrator (PA). If the self
assessment provides a confidence level of the effective
management and/or control of Government property comparable to
that afforded by a property management system analysis performed
in accordance with DCMA requirements, the PA should integrate the
contractors self-assessment results within the overall audit.
o Role of the GPA is to assess the CSA process
o In order for DCMA PAs to use the results of CSA, a condition
existsIf
o The if statement has caused much gnashing of teeth
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Building a CSA program

(Lens working level advice)

Conceptual CSA
GN: Each contractor has the contractual flexibility to establish a CSA
program consistent with their corporate environment
A decision needs to be made:
o First decision point: Do you want DCMA to leverage the results of
your CSA evaluation? Its a cost factor.
Leverage
o Incorporating the CSA evaluation in full or part into the DCMA
property control system evaluation .
o Lens add-onresulting in a reduction of Government oversight.
If the answer is no..
GN: Bare bones CSA
If the answer is yes
GN: Understand and incorporate.
10

Types of CSA Programs (If yes)

Second decision: What type of CSA program
Formal Procedures
o Follows Government established processes and procedures
DCMA PMSA model, DAU model
Former CSO model (modified), ISO Standards (modified)

o Commonality
Based on specific agreed to procedures guiding each step of the process using

statistical based evaluation methodologies

Informal Procedures
o Observations
o Walk-throughs and interviews
o Questionnaires

11

Clues to type of CSA

Formal (GN)
o Currently have an internal audit organization or staff
o Have a predominance of Government contracts vice commercial
o Large investment in Government property (dollars and lines)
o Management support
o Types of contracts that require oversight
R&D, Production, etc

Informal (GN)
o The Mad Hatter effect
o Limited government contracts
o Low investment of Government property (dollars and lines)
o Low value overhaul, repair, modification contracts
12

Example discussion of type

Large business (Formal CSA)

o 1 mil lines of GP (mixed) valued at $1 bil
o 100s of contracts
o Both a major prime contractor to the Government and subcontractor to other major prime
contractors
o Multi-national presence
o Large independent internal audit organization

Medium business (Formal or Informal CSA)

o 19k lines of mixed GP valued at $56 mil
o Subcontractor to large businesses
o Mixed prime contracts with multiple Government agencies
o One full time auditor; not independent

Small business (Informal CSA)

o 5 lines of GFP (machinery) valued at $465k
o 3 active contracts; making piece parts
o All-in-one facility
o Mad hatter
13

First step of a working level CSA

CSA procedure that details the: who, what, when, where,
and how (GN). Considerations:
1. Specific property management and control system
2. Contract types, kinds, and special provisions
3. Types and amount of GP
4. Customers (Government & Prime)
5. Evaluation techniques and methodologies (GN)
6. Frequency
7. Reporting to the customer/Government
8. Corrective action process
9. Risk assessments
10. Government and Contractor owned property
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Informal CSA Process Suggestions

Understand your contract requirements in terms of
controlling the property in your possession
o Tip: read the specific property related clauses

Ensure your control procedures address, in proper

detail, these requirements
Establish a series of audit objectives for each control
process:
o e.g. Ensure physical inventories are completed

Establish a series of audit questions based on the audit

objectives
o e.g. Were items of GP inventoried within a 1 year period
15

Informal CSA Process Suggestions

Develop an cyclical schedule to walk the floor to:
o Interview employees to determine if they are following
established procedures
o Observe how employees handle GP
o Provide questionnaires to determine knowledge of control
processes

Collect sample documentation

Determination of compliance
Issue corrective action memorandum
Validate corrective actions
Report findings and document closure of CSA
16

Formal CSA Process Suggestions

Suggestions for an audit based CSA program
Understand your contract requirements in terms of controlling the
property in your possession
o Tip: read the specific property related clauses (GN)
Ensure your control procedures address, in proper, detail these
requirements
Establish a series of audit objectives for each control process:
o e.g. Ensure physical inventories are completed
Establish a series of audit questions based on the audit objectives
o e.g. Were items of GP inventoried within a 1 year period

17

Formal CSA Process Suggestions

Pre-identify what confidence levels and sampling plan
will be used: e.g. DoD Double Sampling Plan, AQL 6.x
Identify within a specific process the point of evaluation
o e.g. processing form AB1: Receiving Discrepancy

Population pull
o All AB1 forms processed within x time period

Sample pull
o Randomly select a representation of the AB1 forms

Document results of your evaluation

Determine if the samples pulled meet the requirements
of the applicable control procedure
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Formal CSA Process Suggestions

Determine acceptability of the assessment
o In compliance with control procedures
o Not in compliance with control procedures

Issue a request to correct identified concerns

o (GN) Recommend a root cause analysis be performed in
additional to correcting noted issues

At the proper time, verify that corrections have been

made
Finalize assessment and report to Government/customer

19

Implementation Suggestion
Plan for a three year phase-in period if starting from
scratch
o Year 1: Develop the CSA process; coordinate with your assigned
DCMA PA.
Use new process to assess low risk processes
Provide results to DCMA

o Year 2: Update CSA process based on lessons learned in year 1.

Use to assess moderate risk processes
Provide results to DCMA

o Year 3: Update CSA process based on lessons learned in year 2.

Use to assess high risk processes
Provide results to DCMA

20

Suggested Goal
Once you have demonstrate a competent CSA program,
your goal should be to reduce Government oversight by
sharing in the audit process
o CSA only audits with DCMA sampling documentation
o Joint Audits; sharing the audit responsibilities with DCMA

Create an environment where DCMA-only audits are kept

to a minimum

21

Q&A
Goal of a CSA program
Decisions to leverage CSA
Informal vice Formal CSA
CSA Procedure
Evaluation techniques and methodologies
Root Cause Analysis
Phase in period
Joint audits
General Q&A (CSA or anything else)

22

DCMA-PMSA Reviews, Concepts, Strategy

Len Salazar
DCMA-AQBYM
Manager, Southern
California

Simple Agenda
DCMA Property Concepts
DCMA Southern California Strategies
What to expect during a PMSA
Q&A

Note #1: This session is about you; ask questions that are meaningful
to your specific situation

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Current Regulations
Federal Acquisition Regulation (FAR)
o Part 45-Governments Policy
o Clause 52.245-1 (June 2007, August 2010, April 2012)

Defense Federal Acquisition Regulation Supplement

(DFARS)
o Part 245DoD Policy
o DFARS clauses:
252.211-7007 (Reporting of GFE to the DoD UID Registry)*
252.245-7001 (Tagging, Labeling and Marking of GFP)
252.245-7002 (Reporting Loss of Government Property)
252.245-7003 (Contractor Property Management System Admin.)
252.245-7004 (Reporting, Reutilization, and Disposal)

o Procedure, Guidance and Information

Contract Property
Assets
Personal Property

1
Equipment

Special Tooling

For Repair

Special Test Equip.

Material

For Use

1. Equipment (for use or repair)

2. Special Tooling
3. Special Test Equipment
4. Material

4 types of contract property

DCMA Southern California

DCMA Southern California is responsible to provide
oversight of contractors property control systems within
our area of responsibility.
Area of responsibility; greater areas of:
o Los Angeles
o Parts of Ventura
o San Bernardino
o Riverside
o Orange
o San Diego and all of Hawaii
o Imperial

If you are not within this AOR

27

Before, During, & After a PMSA

On-going risk assessments
o Formal and informal (situational)

Identify CAGEs requiring oversight

o Annual, biennial, triennial

Creating an audit schedule

Contract analysis
Planning the audit
Communication and notifications

28

Before, During, & After a PMSA

Collecting data and information
Procedure reviews
Population pulls
Sample pulls
Categorizing data points for analysis
Analyzing data
Identifying non-compliances to procedures and
contracts
Communicating with assigned C.O.
Requesting & evaluating corrective action plans
29

Before, During, & After a PMSA

Monitoring & validating corrections
Revised Risk determinations
Closure of the PMSA

30

DCMA Southern California Strategies

DCMA Southern California conducts two basic types of
PMSAs; adjusting techniques basic on specific
contractor conditions
o Standard approach (on-site)
Moderate and High risk systems

o Limited approach (distance or on-site)

Moderate and Low risk systems

Considerations
o Facility and property outcome risks (2)
o Past performance (audit results)
o Contract base
o CSA maturity
31

FY14 Property Management System Analysis (PMSA)

Presented By:

TEMPLATE
For Large/Medium sized
Contractors

GPA
Date (of presentation)

AGENDA
Purpose & Background of the PMSA
Scope of evaluation
Techniques and methods
Communication
Expectations
Request for Information
Q&A

33

Purpose & Background

To provide CMO and Contractor leadership with an
overview of the FY14 PMSA process
Contractors are required to establish and maintain a
system to manage Government property in their
possession
o A property management and control system consists of
procedures detailing how the company will perform specific
contract related activities and compliance to those procedures

Property management and control systems falls under

the Business System Rule
o Contracting Officer determination of adequacy required

34

Purpose & Background (Cont)

Within the property management and control system is a
requirement for contractors to perform self assessments
DCMA has the option to leverage/use the results of these
self assessments to reduced Government oversight and
repetitive audit costs
o Contractor has established a contract self assessment process,
however, the process cannot yet be leveraged by DCMA due to
.. Therefore, DCMA will perform an independent evaluation.
OR
o Contractor has established a contract self assessment process,
and will be incorporated into the FY 14 PMSA
35

Purpose & Background (Cont)

The DCMA Property Group will use standard DCMA and
DAU auditing practices to evaluate contractors property
control system

36

Objectives
To verify and validate that contractor has a property
management system to control, protect, preserve, and
maintain all Government property as required by the
Government property clause
o Location 1: $ and lines
o Location 2: $ and lines
o Etc

37

Scope of Evaluations
Each PMSA will evaluate the following contract required
outcomes and their associated procedures by the identified
quarter:
Quarter

Outcome

Initial/Reanalysis

Site Review

1st

Records

--

--

2nd

Reports

--

--

2nd

Storage

--

--

2nd

Subcontract Control

--

--

3rd

Records

--

--

3rd

Contract Closeout

--

--

4th

Physical Inventory

--

--

4th

Sensitive Property

--

-38

Techniques and Methods

The PMSA will use the established DoD Double Sampling
Plan using the following confidence levels based on the
actual outcome reviewed:
o 90%, 95%, 98%

Specific populations will be determined for each outcome

and based on the number of applicable transactions, a
specific number of samples will be drawn and reviewed
Sample items will be measured against the audit
questions after review of support documentation to
determine compliance and accuracy to contract
requirements
39

Techniques and Methods (Cont)

Results of the evaluation will be provided to the
applicable Contracting Officer for final determination of
adequacy or inadequacy
o Significant defects (Requires a Property Panel Review prior to
submission to the CO and awareness coordination with CMO)
CAR level 3

o Non-significant defects (Reviewed by Property Group

Supervisor)
CAR level 2

o Issues corrected within the PMSA (Property Administrator)

CAR level 1

40

Communication
To ensure transparency of the PMSA:
o Continuous communication will be offered to CMO leadership
and Contractor representatives, to:
Identify audit barriers (e.g. non-responsiveness)
Inform on the potential of system defects
Offer contractor an opportunity for clarification of concerns
Report the identification of system defects

o Standard methods of communication will be used

Formal Entrance briefing
Audit Planning Meeting
Disclosure Document
Exit Briefing

41

Audit Process & Communication

Formal Entrance Briefing- (Corporate / CMO) High level
overview of functional elements to be reviewed during audit
cycle.
Planning meeting Detailed review and disclosure of
functional elements, scope, audit criteria.
Disclosure Document- provided to contractor prior to the
final PA determination for each site. Rebuttals to findings
must be received within 5 business days.
Exit Briefing will be conducted at the end of each site
review. Results will be provided to the DACO at the end of
each quarter.

42

Annual Schedule in Brief

FY Quarter

Month

Qtr 1

November

Entrance Briefing/Planning Meeting

December

Final determinations to DACO

January

Planning Meeting

March

Final determinations to DACO

April

Planning Meeting

June

Final determinations to DACO

July

Planning Meeting

Sep

Final determinations to DACO

Qtr 2
Qtr 3
Qtr 4

Communication Process

43

Expectations
Data and information
o Within seven working days from initial request

Types:
o Database information (e.g. populations, samples, reports)
o Procedures
o Support documentation
Where applicable original source documentation will be requested

Notification of on-going contractor issued corrective

actions in areas being evaluated
o For possible audit scope adjustments or schedule changes

44

1st Quarter Audit Records (Part 1)

High Level Records Review
o Determine a baseline of all applicable contracts under the DCMA
Delegation.
o Cursory review to determine that all required data elements are
contained within Records*.
o No visual review of items will be conducted. Record review only.

Records reanalysis will be conducted during the 3rd Qtr.

o Criteria to be disclosed during 3rd Qtr Planning Meeting

*Required report data elements can be found in FAR 52.245-1 (f) (iii)
Records of GP
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Request for Information

Current copy of applicable procedure to be provided
for Qtr 1 FY14:
Two separate database reports for all Government
property (GFP and CAP) regardless of location (prime,
alternate location, subcontractor, etc) under the
cognizance of DCMA (does not include special
programs)
1. Database report of: Tagged Assets (Equipment, ST, STE)
2. Database report of : Material on hand (does not include material issued to the
floor: WIP)
o It is understood that multiple databases may be used resulting in more than
one report

46

Entrance Brief Q & A

Purpose and Objectives of the PMSA
Scope of evaluation
Techniques and methods
Communication
Expectations
1st Quarter Audit Records (Part 1)
o Request for Information

47

NPMA Session Q & A

DCMA Property Concepts

DCMA Southern California Strategies
Anything else

48