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Potential Impact of DCAA Internal Issues on the Small Government Contractor

Prior to her reassignment from Director of the Defense Contract Audit Agency to “an executive position” on the Defense Department Comptroller Robert Hale’s staff, April Stephenson implemented a number of improvements to address issues cited in recent GAO reports of DCAA shortcomings. 

These included:

  • Halting practices that based employee performance evaluations on the number of audits produced and the time they were produced in and,
  • Discontinuing the agency’s practice of allowing contractors to continue using flawed accounting systems.  This particular focus, now part of DCAA policy, has a direct impact on all firms doing business with the government.  A firm cannot underestimate the importance of establishing and maintaining an Adequate Accounting and Supporting Systems.

Stephenson’s 21-month tenure as DCAA director has been dominated by the fallout from two Government Accountability Office reports that found auditors cut corners, changed audit findings to be favorable to contractors without good cause, and rushed audits to completion to meet cost and management pressures.

Now I ask you. What do think will happen to address these charges?  That’s right! Increased efforts will be made by the DCAA to “not appear favorable to contractors”.

In a statement Oct. 26, Sen. Joseph Lieberman, I-Conn., the committee chairman, said, “I hope that the DoD comptroller as well as the incoming DCAA director will continue to bring outside auditing expertise into the agency, strengthen quality control, improve training at all levels of DCAA, and prioritize audits based on the risk of contractor over-billings as well as waste, fraud and abuse.”

Question: How is the small business to be prepared for potential actions by DCAA and other government auditors in response to these finding?

Answer: Continued focus on the Cost, Pricing, and related aspects of the business. 

The most cost effective and expedient method of doing this is to ensure a proper understanding of the Concepts of Cost and Pricing for Government Contracting.  Therefore, adequate training, and availability of relevant and practical tools are critical to the initial and ongoing viability of our VOSB, SDVOSB, WOSB, Hubzone, SDB, 8(a), and the overall 7(j) firm population.  This Can’t Be Left To Chance!

Not just any training, but a focused effort to impart critical and applicable knowledge and tools in those areas that are typically avoided as being “too difficult”.  Cost and Pricing is chief in that category.  Most CPA’s don’t understand this aspect.

It is important for a firms management to ensure that they and their staff are trained in understanding the foundational concepts of Cost and Pricing for Government Contracting.

Now the good news. If you are reading this, Now You Know. You are well on your way and ahead of the majority of small businesses.  You are also a part of an online community of small contractors that understands the importance of these issues to the success and profitability of your business.  You have placed yourself in the position to have access to specialized training and tools developed specifically for this purpose. 

I encourage you to continue to be proactive on your cost and pricing issues.  Remember, understanding cost and pricing for government contracting is a Process.  It takes time and repetition, repetition, and repetition.  Continue to review as much of the information made available to you on our website, online community, newsletter, and workshops, as well as other dependable and trusted sources.  Continue to browse and search the information available throughout our site on a regular basis.  It is there for you just for this purpose.

Paul Sr.



Disclaimer: Information provided is based on our experience, training, and judgment in interpreting the practical application and intent of official guidance and regulations.  It does not represent the official position of any government agency or their representative.