A Personal Perspective:

Considerations for Planning a Contractor

Self-Assessment program
Intermediate level

Len Salazar

Simple Agenda

Basic Assumptions
FAR
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

Published
Instructions

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 selfassessment 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.

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

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
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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

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
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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

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Collect sample documentation

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

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
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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
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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
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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
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Q&A

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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)

PMSA Reviews, Concepts, Strategy

Len Salazar

Simple Agenda

Property Concepts
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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Before, During, & After a

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

Identify CAGEs requiring oversight

o Annual, biennial, triennial

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Creating an audit schedule

Contract analysis
Planning the audit
Communication and notifications

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
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Before, During, & After a

PMSA
Monitoring & validating corrections
Revised Risk determinations
Closure of the PMSA

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 Two basic types of PMSAs

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
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Property Management System

Analysis (PMSA)

TEMPLATE
For Large/Medium sized
Contractors

Presented By:

GPA
Date (of presentation)

AGENDA

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Purpose & Background of the PMSA

Scope of evaluation
Techniques and methods
Communication
Expectations
Request for Information
Q&A

Purpose & Background

To provide leadership with an overview of the
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
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Purpose & Background

(Cont)
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 PMSA

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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

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

Quarter

Outcome

Initial/Reanalys
is

Site Review

1st

Records

--

--

2nd

Reports

--

--

2nd

Storage

--

--

2nd

Subcontract Control

--

--

3rd

Records

--

--

3rd

Contract Closeout

--

--

4th

Physical Inventory

--

--

4th

Sensitive Property

--

--

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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
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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
CAR level 3

o Non-significant defects
CAR level 2

o Issues corrected within the PMSA (Property

Administrator)
CAR level 1

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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
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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 CO at the
end of each quarter.

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Annual Schedule in Brief

FY Quarter
Qtr 1

Qtr 2
Qtr 3
Qtr 4

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Month

Communication Process

November

Entrance Briefing/Planning
Meeting

December

Final determinations to CO

January

Planning Meeting

March

Final determinations to CO

April

Planning Meeting

June

Final determinations to CO

July

Planning Meeting

Sep

Final determinations to CO

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
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1st Quarter Audit Records (Part 1)

High Level Records Review
o Determine a baseline of all applicable contracts under the
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 3 rd

Qtr.
o Criteria to be disclosed during 3rd Qtr Planning Meeting

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

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

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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

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NPMA Session Q & A

DCMA Property Concepts
DCMA Southern California Strategies
Anything else?

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