What is DCMA and Why Does It Matter?
Many people confuse the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA). While there are some overlapping functions, they are essentially two sides of the same coin. DCAA is almost exclusively an agency that audits Department of Defense (DOD) contractors’ finances. DCMA on the other hand can be seen as the operational side of contractor oversight. Knowing what each agency does and how they affect your business is paramount if you want to continue to work with the DOD. Not understanding the contract terms and procedures DCMA is looking at could cost millions in negotiations, lost contracts, and having your production lines shut down.
Why DCMA Exists.
DCMA was created to ensure consistency over the Defense Industrial Base and to create efficiencies of contractor oversight. As any first year Econ major or any capitalist can tell you, scaling a process creates efficiencies that couldn’t be had with small batch processing. It’s the same with contractor oversight. Hundreds of program offices around the world performing activities once every few years is going to be a lot less efficient than an arm of the DOD doing it on a weekly or monthly basis.
Okay. So, What Exactly Does DCMA Do?
What DCMA does EXACTLY is a little out of scope of this article. In one sentence, they ensure contractors are meeting contract terms and the Federal Acquisition Regulation (FAR). Since we’re all aware that the FAR has been known to damage floors when accidentally dropped, we’ll briefly cover what DCMA does with respect to the FAR.
DCMA is broken down into at least 5-6 groups/functions, but we’ll cover the big 4 here. Quality, Engineering, Pricing, and Contracts. Quality and Engineering have a lot of crossover, similarly with Pricing and Contracts.
· Inspection/Acceptance of Product – This is a little self-explanatory, but the important thing to note is that someone will be checking your product to ensure that it meets dimensional requirements. This aspect of dealing with DCMA shouldn’t be an issue for most large companies. It becomes an issue for smaller facilities and commercial companies that aren’t used to the tight and unforgiving tolerances of DOD products.
· Quality Surveillance and System Audits – This is where companies large and small fall victim. ISO standards are hard enough to conform to with large productions lots. Add on the fact that much of production is in small batches, combine that with an auditing style that isn’t just auditing your high-level paper documents, and you have a recipe for disaster.
· Process Reviews – These are what I would call micro quality audits. DCMA is looking at tiny repeatable processes like welding and making sure that your company does it right every single time.
· Non-Conforming Material – This is broad but obvious. DCMA will have a hand in dealing with Engineering Change Proposals (ECPs), Engineering Change Notices (ECNs), and Request for Variances (RFVs). This will cover any reason that you can’t (or didn’t) build to the design, whether it’s your fault or not.
· Process Reviews – See Above
· Non-Conforming Material – See Above
· Engineering Surveillance and System Audits – See above, but note that Engineering and Quality do similar but distinct surveillance.
· Technical Support to Negotiations – This is a favorite for most engineers at DCMA. This is usually only done for Sole Source contracts or contracts with very little competition. An engineer will review your proposal or contract and compare industry standards and past production efforts to give advice to the program office on what the contract should cost. All too often, companies don’t take this process serious enough and it ends up costing them millions. I’ve seen, and helped cut contracts in half at this stage. Any company that is awarded sole source contracts should pay very close attention if an engineer shows up before work on the contract even starts.
· Support to Negotiations – This is the flip side to the above. The engineer is looking at the technical aspect of the contract while the Pricing Analyst is looking over the financials. The Pricing Analyst is comparing your costs to what is acceptable under FAR. I cannot stress enough, pay attention to this stage.
· Pricing Assistance – Similar to the above but requested by the buying command that issued the contract. The Pricing Analyst will be reviewing pricing proposals, rates, and subcontractor pricing.
· Rate Negotiations – It’s all about what’s allowed in FAR and DFAR.
· Payments & the authority to modify the contract. Enough said.
So, the closing point to all of this? DCMA can be an enormous asset or hindrance to your operation. If you play nice and share the sandbox, they can help expedite processes and help you to meet the terms in the contract. If you kick sand and become stubborn, your business can ultimately lose millions in contracts. You both legally have to be in that sandbox, so it’s best to play nice.