Government Property Management Systems: From Obscurity to Center Stage

Those of us in the government contract compliance community are familiar with a contractor’s Government Property Management System.  It’s one of the six systems covered by DoD’s Contractor Business Systems regime (DFARS 252.242-7005) that requires withholding of money from contractors if one or more of these systems are “disapproved.”  Of these six systems, the Accounting, Purchasing, and Estimating systems get the most notoriety (perhaps rightfully so due to their complexity and subjective system acceptance criteria).  Although these three systems will unlikely yield their spots on center stage, DoD is increasing its attention and emphasis on contractor Government Property Management systems.  Why, and why now?

In rich irony, the U.S. Department of Defense (DoD) can’t pass its own audit – despite preparing for 29 years (since Congress passed the CFO Act in 1990).  Among many other things (2,300 notices of findings and recommendations in the FY2018 audit), DoD can’t account for its assets in the possession of contractors.  In this regard, the DoD Inspector General noted that –

“The DoD lacked policies, procedures, controls, and supporting documentation for the acquisition, disposal, tracking, and inventory processes of Government property in the possession of contractors, which prevented the DoD from substantiating the existence and completeness of this property. As a result the financial statements may be incomplete or inaccurate and could be materially misstated”

-DoD Inspector General, Financial Improvement and Audit Remediation (FIAR) Report June 2019

How can this be?  We know that the Defense Contract Management Agency (DCMA) performs more government property management system reviews than any of the other business system reviews combined. 

This data indicates that contractors have strong accountability for the government’s property in their possession.  Yet DoD still cannot get a handle on its property.  Something doesn’t add up. 

It appears to us that DoD intends to resolve its problem by taking a harder, closer look at contractor government property management systems.  Is it possible that DCMA missed significant deficiencies so large that contractors failed to account for so much property that it materially affects DoD’s balance sheet? We doubt it, but DoD will double check for good measure…

On December 16, 2019, the Under Secretary of Defense for Acquisition and Sustainment, Ellen Lord, issued a memorandum entitled, “Strengthening Oversight of Government Furnished Property as Part of Property Management Systems Analyses.” The memorandum cites the FIAR challenges with government property and tasks DCMA’s Director to do the following: