As DOD faces a Sept. 30 deadline to be ready for its first-ever independent financial review, ACC zeroes in on contractors’ government-furnished property to improve accountability.
by Chief Warrant Officer 3 Heath M. Stone
For years, the government has authorized contractors to use or acquire its property when the contracting officer deems that doing so is in the government’s best interest. Supporting a government program as an on-site contractor requires office space. Offices, in turn, require desks, chairs, bookcases, conference tables, phones, copying machines, whiteboards—the list goes on, and much of that equipment typically belongs to the government. After all, it is in the government’s best interest to furnish the necessary equipment so that contractors can provide effective support.
But who keeps track of the government-furnished property (GFP), which is worth millions of dollars across DOD? Before 2011, contractors were paid to maintain stewardship of government property using a government-approved commercial accountability system. This left the audit trail documentation for GFP solely in the hands of the contractor. In May 2011, DOD Instruction (DODI) 5000.64, “Accountability and Management of DoD Equipment and Other Accountable Property,” laid out the requirement for the government to maintain fiduciary accounts for property provided to contractors “regardless of value,” so that the government could reconcile property in contractors’ hands with its own current records. The increased visibility of GFP at many levels, from the requiring activity to Congress, is part and parcel of a climate of greater fiscal accountability throughout DOD. In the National Defense Authorization Act for Fiscal Year 2010, Congress set a deadline of FY17 for DOD to have fully auditable financial statements. A first-ever DOD-wide independent audit is expected to follow in FY18.
Property book officers (PBOs) no longer remove from property book records items that the contracting officer designates to be provided as GFP. It has been a logistical challenge for them to re-establish accountability for property that was separate from the records before DODI 5000.64. In short, the services and DOD have had to take a more active role in contract property administration, as spelled out in the Federal Acquisition Regulation (FAR).
Proper accountability of GFP is critical to deter fraud, waste and abuse. A recent U.S. Central Command investigation into inaccurate contractor property records for more than $1.3 million in GFP underscored the need for government management controls to prevent or detect impropriety. Unfortunately, the processes and procedures to follow in accounting for GFP are less than crystal clear.
A WORK IN PROGRESS
Property administration, as a FAR requirement, will be an Army mission whenever GFP is provided to a contractor. The required contracting support brigade mission essential task list (METL) for contingency contracting administration services supporting industrial and/or contract property management is a new mission.
The Defense Contract Management Agency (DCMA) previously performed these tasks for the Logistics Civil Augmentation Program (LOGCAP) and other contracts, but it has handed the contract administration function back to the Army, limiting DCMA’s role to providing supplemental personnel at the Army’s request. This has called for providing a number of incentives to obtain civilian property administrators with the skillsets necessary for these contingency operations.
For the sake of this article, quartermasters are uniformed property administrators consisting of property book technicians: warrant officers, Military Occupation Specialty (MOS) 920A; and unit supply sergeants, MOS 92Y. Because of the inherent knowledge required, they are best-positioned to perform the new property administration requirements and help the Army prepare for the 2017 congressional audit deadline by identifying, streamlining and executing property administration in garrison and contingency environments.
Every cost-reimbursable, time-and-materials, labor-hour, fixed-price and purchase-order contract that authorizes the acquisition of government property or provides GFP requires a property management system analysis (PMSA). This analysis, to be completed only by the contracting officer or personnel certified at Level II under the Defense Acquisition Workforce Improvement Act, requires extensive logistical knowledge that quartermaster Soldiers inherently possess. PMSAs ensure that the contractor takes corrective actions to decrease the government’s risk in how the contractor is managing, maintaining and disposing of GFP.
CLEARER GUIDANCE NEEDED
Employing quartermaster Soldiers to perform property administration functions provides the Army a great return on the investment in their logistics and acquisition training and knowledge. Currently, however, no policy exists to certify uniformed property administrators. The Defense Acquisition University needs to update its guidance on the acquisition, technology and logistics workforce position category description to enable career development and certification for uniformed industrial property management specialists and property administrators.
Multiple laws and regulations mandate that industrial and contract property administrators be career-coded as acquisition positions to be certified, and they must be certified to perform all required tasks. The certification provides the authority for the individuals to complete the contract property management tasks without adding work for the contracting officer. Certifying uniformed property administrators will ensure that the Army has the required number of qualified uniformed property administration personnel ready to deploy in support of contingency operations without having to provide expensive incentives for civilian property administrators.
Some quartermasters are opposed to property administration assignments, as the job removes them from “typical” logistics functions and requires more analysis and administrative tasks. Property administration requires more of our quartermasters, asking them to broaden their apertures, anticipate problems and correct them by working with key stakeholders throughout the contract’s life cycle.
The U.S. Army Human Resources Command and the U.S. Army Quartermaster School are collaborating to competitively select the right people with the right skills and the right career timelines. In the near future, quartermasters seeking these assignments may encounter eligibility criteria and requirements for career timing; these are being considered for inclusion in DA Pamphlet 600-3, “Commissioned Officer Professional Development and Career Management,” and DA Pamphlet 600-25, “U.S. Army Noncommissioned Officer Professional Development Guide.”
This new property administration METL requires an evaluation of the training at the Quartermaster School to determine what adjustments are necessary to ensure that all quartermaster Soldiers understand how to account for contractor property. Property administration requires PBOs to catalog and add property designated to become GFP to the fiduciary account. At the inception of a contract, the assumption is that all GFP is already on a fiduciary record before being provided to the contractor. If it is not, the property will need to be cataloged and added to the record.
These transactions will increase PBOs’ workload during contract inception and during changes throughout the period of performance. However, the most significant increase in workload will occur during contract termination, when potentially thousands of new lines of property are adjusted from contractor-acquired property (CAP) to GFP.
During contract execution, there is no authority to add CAP to the fiduciary records. However, CAP becomes GFP when a new contract is awarded even if the contract goes to the same contractor. A good practice is to have the contractor submit a CAP list to the PBOs for cataloging well before the contract transition, as the cataloging process through the Army Enterprise Systems Integration Program could take weeks or months to complete. In addition, the PBO does not typically add property to a property book record that does not meet accountability requirements in Army Regulation (AR) 735-5, “Property Accountability Policies,” and AR 710-2, “Supply Policy Below the National Level.”
However, DODI 5000.64 requires a fiduciary record for property provided to contractors regardless of value. This conflict between DOD and Army regulations has created some resistance in the PBO community. However, the DOD guidance is clear: Property provided to the contractor requires the establishment of fiduciary records, regardless of accountability requirements for different property criteria in AR 735-5 and AR 710-2.
ELIMINATING ‘SUBMIT AND FORGET’
Some Army commands have made individual strides to meet property administration and accountability requirements. However, standardization cannot be expected or accomplished until AR and pamphlet changes are incorporated. Each command’s records vary, along with the accountability documentation and philosophies for fiduciary accounts. Most commands are using hand receipt procedures derived from best practices for contractor fiduciary records, including fiduciary account submission checklists and contractor fiduciary account in-and-out briefs containing derived property administration procedures, duties and responsibilities of key stakeholders.
One of the key processes the PBO community needs the Army to standardize is how to make changes to the fiduciary record. Since the property administrator is responsible for submitting documentation for fiduciary account changes (decreases and increases) to the PBO, what do the change documents need to contain? The data elements required by AR or FAR? How should the change documents be formatted? Should they be AR-required forms, which may not be contractual if requested from the contractor, or the entire GFP list received from the contractor? Many property administrators submit the changes to the PBO in the form of the entire government property list.
In some cases, contract property is not brought to record or adjusted because property administrators take a “submit and forget” approach in establishing and adjusting fiduciary accounts. In this case, the PBO is expected to review potentially thousands of lines of property to identify changes and update the fiduciary record; there is no automated system for doing so. On the other hand, if the property administrators are expected to submit to the PBO only the changes from the contractor list, they will need to review the many lines of property to identify any changes and submit only the updates to the PBO to adjust the fiduciary record.. Property administrators do not have an automated system either, and must use a manual, spreadsheet-driven, labor-intensive process that they lack the resources to efficiently perform. Without a standardized system, either manual process is highly vulnerable to inaccuracies caused by human error.
Proper accountability of GFP is critical to deter fraud, waste and abuse. It ensures that management controls exist to preclude or detect impropriety and assists investigations into inaccurate contractor property records. To support this effort, the U.S. Army Contracting Command (ACC) has recommended changes to AR 735-5, Paragraph 2-5, which would result in including 15 more pages of information necessary to standardize GFP accountability Armywide. It has submitted those recommendations to HQDA G-4 for implementation in regulations now undergoing revision.
This recommendation covers details and information on the standardization of submitted changes to the fiduciary records and provides further account and audit documentation guidance. Disseminating, publishing and standardizing these processes are necessary to support current and future Army audit readiness. Both the PBO and property administrator communities agree that cohesive and comprehensive changes to Army regulations will go a long way in synchronizing the property accountability efforts of our logistics, acquisition and contractor stakeholders.
For more information, contact the author at firstname.lastname@example.org or DSN 314-637-7427.
This article is scheduled to be published in the April – June issue of Army AL&T Magazine.
CHIEF WARRANT OFFICER 3 HEATH M. STONE is an industrial property management specialist assigned to the 414th Contracting Support Brigade in Vicenza, Italy. He holds two associate degrees, one in supply chain management and the other in management and supervision, from Coastline Community College. His professional designations include demonstrated senior logistician from the International Society of Logistics and certified logistics associate from the Manufacturing Skill Standards Council. The ACC recognized his commendable property administration performance by naming him the 2015 Non-Acquisition Officer of the Year. He is a graduate of the U.S. Army Air Assault School, Primary Leader Development Course, Basic Non-Commissioned Officer Course, Warrant Officer Candidate School, Warrant Officer Basic Course and Warrant Officer Advanced Course. He received the Bronze Star Medal, Meritorious Service Medal (3 bronze oak leaf clusters), Army Commendation Medal (3 bronze oak leaf clusters), Army Achievement Medal (3 bronze oak leaf clusters), and Army Good conduct medals and a Combat Action Badge.
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