APUS Program Management Contract Price & Auditing Responses

Peer replies must be 120 words minimum, add to the discussion and include at least 1 direct question.

Note: Please bear in mind that they all hold a “theoretical” position within the organization of a Contract Manager as they made their recommendations.

Original discussion question: What is contract audit?

STUDENT 1 (Amy):

Since our learning objective this week is to “Explain the use and application of a contract audit.”, I figured I’d start by reviewing the site for the Defense Contract Audit Agency (DCAA). The DCAA has the task of conducting audits for the Department of Defense. This first topic is interesting because the DoD is always looking to get the biggest bang for their buck. They seek to obtain quality products and services at a reasonable (but fair) price in order to support the mission at hand. Contract audits assist with that goal. Defense contracting is worth billions of dollars annually. With that in mind, the DoD has the DCAA to conduct contract audits to ensure those billions of taxpayer’s dollars are not being wasted. The Contract Management Body of Knowledge (CMBOK) is a helpful tool for the DCAA during the audit process and provides guidance on the auditing process for contracts.

The next point of interest that stood out to me are the various ways audit results can be utilized. I have seen audits be used as a tool for contract negotiations. One of the practical applications of a contract audit and audit report from the DCAA is to use the results as leverage to meet a negotiation objective. For instance, if a contract is not meeting set timelines or have cost overruns, an audit report would reflect this. That audit information can be an effective tool during future contract negotiations. Defense contract negotiation strategies can be molded and tactfully adjusted depending on the audit reports received. Oddly enough, even the DCAA has been audited. An audit was conducted to determine how effective the DCAA was in fiscal year 2018 and how it contributed to acquisition reform. It was reported that billions of defense dollars were saved due to the actions and audits performed by the DCAA.

References:

DCAA Site: https://www.dcaa.mil/Home/CAM/?title=DCAA%20policies%2C%20procedures%2C%20guidance%20and%20auditing%20techniques

Audit conducted on the DCAA: https://www.dcaa.mil/Portals/88/DCAAFY2018ReporttoCongress-final.pdf?ver=2019-10-10-151649-753

STUDENT 2 (Jena):

When I began reading this week the first thing that I realized is complexity is not an easily identified word. Not on person has accurately defined complexity they either use too broad of a definition or a definition that is confined to a specific subject. When organizations think of the word complexity they use the term to best navigate specific functions related to their complexity. The two concepts which I thought were the most important complexity concepts in the chapter were communicating effectively with all stakeholder groups & creating a culture of project and program management with engaged project sponsors.

  1. Communicate effectively with all stakeholder groups
  • One of the most interesting complexity concept was the need for communicating effectively with all project managers. Communication is the key factor that can cause failure or success for a project manager. It allows for better compression and validation that the stakeholders are getting what they want. As stated by (PMI’s Pulse of the Profession In-Depth Report: Navigating Complexity, 2013, p. 7), “I think you are taking a huge risk if the stakeholders are only involved in the last stage, or validations, and then you find that they are not happy because this was not what they expected.” Stakeholder’s expectations and requirements are better met when Project Managers effectively communicate amongst each other.
  • One of your key roles in being a Program Manager is to keep the stakeholders happy. According to (PMI’s Pulse of the Profession In-Depth Report: Navigating Complexity, 2013, p. 20), “high performers report effective communications to all stakeholders, more than any other factor, as having the greatest impact on highly complex projects.” By keeping communication open the Project Manager is able to better prevent problems and resolve any issues in a timely manner should there be any. Thus, leading to more successful project, risking less money and potentially better audits for the project as a whole.
  1. Create a culture of project and program management with engaged project sponsors
  • Another interesting concept pertaining to the complexity concepts is the understanding of creating a culture of project and program management with engaged project sponsors. As stated by (PMI’s Pulse of the Profession In-Depth Report: Navigating Complexity, 2013, p. 11), “Organizations with mature project management practices in place average a significantly higher percentage of projects meeting original goals and business intent.” This is interesting to me because as a program manager you really have to consider a good foundational team for future succession. Your team of projected sponsor should uphold the same values of staying in budge, timeliness and goal intent.
  • Being a program manager I would want to work with other engaged project sponsor who actively enjoy higher project success rates. By working with other motivated and engaged project sponsors will lead to better outcome during audits and better change and project succession.

References

PMI’s Pulse of the Profession In-Depth Report. (2013, September). PDF.

STUDENT 3 (Derek):

In order to answer the question of What is a contract audit, it is important to understand under which circumstance, contract type, and the threshold would a contract audit even be required.

Agencies such as the DCMA or DCAA are tasked to perform contract administration, contract management, and contract audit functions as they are defined in FAR Part 42 Contract Administration and Audit Services. The actions of the administration, management, and auditing all revolve around cost data and how these are allocated and billed against federal contracts or as they are also referred to as cost objectives.

Cognizant federal agencies or Administrative Contracting Officers are responsible for determining that the cost of a contract is fair and reasonable during pre-award. In a post-award, these same individuals are responsible for deciding which costs are allocable, and allowable in accordance with FAR Part 31 – Contract Cost Principles and Procedures as well as the Cost Accounting Standards of Chapter 99.

FAR part 31 also puts into perspective the circumstance, contract type, and the threshold for which cost audits are required. It defines the difference between price data and cost data. It is the contracts that require the use of certified cost data and cost analysis that will require contract audits. Cost data is required for contracts that are above the SAP threshold or any contract that applies to contract by negotiation or involves the requirement of having a subcontractor plan.

The easiest way to understand the difference between cost and price is to look at an everyday purchase, such as a vehicle. The price of a vehicle is simply the bottom line, printed at the bold sticker price. But the cost analysis of this same vehicle price entails an itemized list of features, administrative costs, taxes, and fees. This sort of analysis becomes important when it comes time to defend and justify the need for paying the price for this vehicle.

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