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NEWS | June 4, 2019

DCAA/DCMA Team Earns Salute to Saving Award

By DCAA Staff Writer

Defense Contract Audit Agency (DCAA)/Defense Contract Management Agency (DCMA) Lockheed Martin Grand Prairie Missiles & Fire Control Forward Pricing Rates Proposal Team’s contributions earned the Undersecretary of Defense(Comptroller) Salute to Savings Award for their work on overhead cost rates during a period of unprecedented growth. The DCAA team members were

Rick Hicks

Leida Rivera-Cruz

Heidi Gross

Ann Cooper

Diana Yalmaz

Fanuza Shelton

Mariana Landreneaux

Noemi Cordova

Nathaniel Whayland

Ahmed Alam

Rani Chambless

Brian Kostyniak

Michelle Harvey

Adam Weir

Reuben Thigpen

Cheryl Belvedre

Kammie Anderson

Camille Washington

Jane Latu

Chad Nealy

 

The team audited proposed overhead cost and rates during a period of unprecedented sales growth for a large government defense contractor. The proposal covered five years and was valued at $8.7 billion in overhead cost to be allocated over $26.8 billion of direct contract cost. The team determined the proposal only reflected historical sales growth and did not account for current significant sales growth. Basing the proposed overhead rates on a significantly understated estimate of sales base would result in increased future government costs. In their audit report, the team recommended questioned indirect (overhead) costs of $329 million and recommended a base increase of $3.2 billion over the five year period resulting in significant overhead rate reductions over the five year period.

The negotiation support provided by the team caused the DCMA DACO to pull out of the Forward Pricing Rate Agreement (FPRA) and issue a Forward Pricing Rate Recommendation.  The DACO then had 30 days to negotiate a new FPRA, but was able to do so in only 18 days despite the significant difference between the government position and the contractor’s position. The DACO relied on the audit team to help him defend the significant rate reductions reported.  The contractor also acknowledged they should have incorporated the base growth into its proposal. 

The audit team received a letter from the Buying Command which expressed appreciation for DCAA and DCMA’s efforts and further noted the FPRA will result in projected savings of approximately $70 million on its defense program.  Additionally, the DACO indicated that through the combined efforts of DCMA and DCAA, he was able to reduce indirect rates which translated to approximately $800 million in cost savings to the Government.