Alphabet Soup: DCAA vs. DCMA

The DCAA and DCMA

…Where confusion reigns---or is it rains?

Spelling does matter, especially determining who’s in charge of what regulatory process stipulated in your government contract. There are critical distinctions between the agencies relative to their authority and responsibilities.

Both the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA) are organized within the Office of the Secretary of Defense. It’s very important not to confuse or transpose these two entities as they have very different impacts on the contracting environment.

PCO, ACO, OMG

Defense Contract Management Agency (DCMA). As the name implies, this organization manages government contractors within a geographic location. In general, the DCMA oversees the contract on behalf of the Procuring or Program Contracting Officer (PCO) after an award has been made. Nearly all of the contract post-award activities found in FAR 42.302 are either performed by the DCMA or in close coordination with the PCO.

It’s important to recognize that both the PCO and the DCMA contracting officer, called the Administrative Contracting Officer (ACO) are the only ones with official authority (warrant) to contractually act on behalf of the government. The ACO may rely on the expertise of many technical and administrative personnel within the DCMA to manage your contract, but only those with a warrant will have the final say so.

DCAA Authority

Many important aspects of a contract will require the DCAA’s support to the PCO and/or ACO. This includes pre-award accounting system surveys, provisional billing rate proposals, and incurred cost proposals, to name a few. The DCAA is laser-focused on what they do best: audit costs. They are fiercely independent, which is an intentional and critical distinction. However, DCAA’s authority only goes so far as to advise and inform the ACO or PCO. The DCMA as well as some procurement offices may have their own cost analysts that weigh in on DCAA findings.

Sibling Rivalry

It may appear the DCAA has the authority to delay or suspend payments, recommend arbitrary decrements for late proposals, or disallow costs and recommend penalties. However, any authority granted to the DCAA is spelled out in the fine print of your contract with the ultimate responsibility for compliance resting with the ACO/PCO. That’s not to diminish the DCAA’s importance and influence to the government acquisition process. That’s why it’s always a good idea to nurture a trusting relationship with your contracting officers.

Contractor Business Systems and Small Business

Complicating matters is a series of new DoD regulations focused on increasing the scrutiny of a contractor’s business systems with the DCMA and DCAA sharing the responsibilities. Many of these clauses were already applicable, but the new regulations make the practice of withholding payments mandatory for noncompliance.

The good news is many of the clauses do not apply to small businesses, or if they do, the contracting officer can recommend their own remedies for noncompliance. Below is a chart showing the impact to small businesses.

Cats and Dogs

The DCAA may be authorized to review and approve Provisional Billing Rate (PBR) proposals and do conduct audits of Incurred Cost Proposals (ICPs). The DCMA still approves final indirect rates (ICP), and will review cost and pricing data submitted in support of a solicitation.  Forward Pricing Rate Agreements (FPRA) are different from both provisional billing rates and proposal pricing and are required only at the specific request of the contracting officer (See FAR 42.17). It is rare that a small business would require an FPRA.

Contractual Awareness

It is incumbent on the contractor to understand which FAR and DFAR clauses apply to their contract. Too often we find clauses such as 252.242-7005 Contractor Business Systems incorporated into a small business contract where it clearly does not belong. And while it’s a challenge to find out who’s in charge on the government side, the contracting officer is ultimately driving the bus.

To Learn More about the Differences Between the DCAA and DCMA, read our popular blog:

What is the difference in the DCAA and the DCMA?

At ReliAscent, the success of our clients and all small business government contractors is our top priority. If you have any questions about DCAA, DCMA or FAR compliance, or would like to discuss any of our government contract accounting, contract management or outsourced CFO services, please feel free to contact us or visit our website at any time.