Property Management System Analysis Breakout Session # B04 Andrew C. Obermeyer, Director, DCMA Business Operations Center Henry Pielaet, Supervisor, DCMA Business Operations Center, Property Group

December 14, 2015 2:15 pm – 3:30 pm

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Specialized Business Capabilities Business Operations Center

CPSR Group

Plant Clearance Group

Terminations Group

Property Group

Functions: • Evaluate contractor’s purchasing systems and provide expert recommendations whether to approve or withhold/withdraw approval of the system. • Arrange timely and cost effective reutilization, sale, and disposal of excess government property in the possession of contractors. • Settle contracts terminated for the convenience of the Government. • Evaluate the adequacy of contractor’s property management system (PMS) to ensure Government Property in the hands of contractors is appropriately managed. 2

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What is Our Property Mission? The Property Group ensures that Government Property in the possession of contractors is effectively and efficiently managed as required by FAR 52.245-1– Government Property.

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How Do We Perform the Mission? By performing Property Management System Analyses (PMSAs) A PMSA is a systematic, objective review and evaluation of a contractor's PMS including the procedures and the implementation of applicable property management processes to determine whether the contractor is complying with contractual terms and conditions relating to property management. 4

Two Types of PMSAs • Standard PMSAs require entrance and exit conferences, involve plant visits, formal examinations with detailed workpapers generated and formalized conclusions drawn as to the condition of the contractor's system. The depth and detail of review and analysis are far greater for a standard system analysis than for a limited system analysis. • Limited PMSAs or “desk audits” permit less formal testing methods and techniques including contractor responses to a series of questions covering each applicable element of a contractor’s PMS, and interviews of contractor personnel among other methods as appropriate, depending on the risk level, amount and value of property, etc.

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How Does Property Schedule PMSAs? • New contractors: • Identified during contract receipt and review • •

Initial PMSA scheduled within one year Within six months if there is sensitive property

• Established contractors: • Type and frequency of PMSAs determined IAW risk level of contractor’s PMS • When sensitive property is involved, PAs perform annual on-site reviews of records, storage, utilization, and physical inventories processes, regardless of the contractor’s risk rating 6

Risk Assessments • Performed immediately after each PMSA and validated annually • Based on PMSA results and other sources of reliance, PAs: • Identify unfavorable future events • Assess the likelihood or probability of unfavorable future events • Estimate the consequence or impact of those events 7

Risk Assessments • PAs assign each PMS a risk rating of high, moderate or low. • High Risk – Requires a Standard PMSA at least annually • Moderate Risk - A Standard or Limited PMSA as frequently as conditions warrant, but at least once every 2 years • Low Risk - Standard or Limited PMSA as frequently as conditions warrant, but at least once every 3 years

• PMSA schedules are maintained in the Contract Property Administration System (CPAS) eTool. 8

PMSA Performance • PAs review all applicable elements and processes of the contractor’s PMS as identified at FAR 52.245-1(f)(1) (i through x) including: Written procedures Contractor self-assessment Acquisition Receiving Discrepancies incident to shipment Identification Records Receipt and issue system Physical inventory Subcontractor awards and flowdown Subcontractor reviews 9

Reports Relief of stewardship Utilization Declaration of excess Consumption Movement Storage Storage – commingling Maintenance Disposal Closeout 9

PMSA Performance • Subject to the judgment and determination of the PA, sampling is used as an efficient and economical method for analyzing a system. • One of three different types of sampling may be used: • Statistical - A number of items are selected from the population for analysis so that the sample is representative of the entire population from which it was selected. The sampling plan used will discover defects of 10% or more, if they exist, 90% of the time. • Judgment – A number of items are selected from the population for analysis without meeting the random selection and sample size criteria of statistical sampling. • Purposeful - Known, suspected, or reported conditions of a critical or substantial nature are used to select items, for review to determine the possible adverse systemic impact.

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After the PMSA • Findings are reported to the Contracting Officer (CO) who either approves or disapproves the PMS in accordance with DCMA-INST 131. – The CO records the status of the PMS in the Contract Business Analysis Repository (CBAR) eTool. – The CO may implement a payment withhold on an individual contract if the contract contains DFARS 252.242-7005, Contractor Business Systems and DFARS 252.245-7003 Contractor Property Management System Administration. • If there are any deficiencies, PA indicates whether they materially affect the ability of DoD officials to rely upon information produced by the system. • PA issues Level II CARs for deficiencies determined by the CO to be non-significant. • PA evaluates the adequacy of all corrective action plans, monitors the performance of corrective actions and 11 actions have been implemented determines if corrective and adequately address the deficiency.

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Standard PMSA Timeline • P-30 Notify contractor in writing of PMSA • P-30 Request data and documentation from contractor • P-30 PMSA Planning • PMSA – Entrance Brief, Daily Out brief, Exit Conference • Exit Conference+30 Management review, Report to CO • Exit Conference+40 CO approval if no deficiencies, or initial determination • Exit Conference+70 Ktr response to initial determination • Ktr Response+30 Final determination • Ktr Response+45 Corrective Action Plan if 12 requested, due to CO

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Subcontractor PMSAs – Prime contractor is responsible for performing periodic reviews to determine the adequacy of the subcontractor's property management system. – DCMA may perform a PMSA for a subcontractor only when the exceptions listed at FAR 42.202(e)(2) apply • The Government otherwise would incur undue cost; • Successful completion of the prime contract is threatened; or • If a contracting officer for a major system acquisition designates certain high risk or critical subsystems or components for special surveillance in addition to requesting supporting contract administration. – The prime contractor must also consent to accept the findings. – Prime contractor consent is not required for DCMA to perform a PMSA at an alternate site of the prime 13 contractor.

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Who Performs the Property Mission? DCMA-AQB Andrew C. Obermeyer Director Business Operations Center Ft. Lee, VA

Michael Karolak Performance Improvement Manager (St. Petersburg, FL) Vacant Management Analyst (Ft. Lee, VA)

DCMA-AQBY Director – Teresa Lardaro (Ft. Lee, VA) Deputy – David Ryan (Philadelphia, PA)

Kitty Olson Management Assistant (Arlington Heights, IL) Susan Scott Management Assistant (Boston, MA)

DCMA-AQBYF Team Lead – Cindy Bradbury (Orlando, FL) DCMA-AQBYA Team Lead – Nancy Olbrych (Hartford, CT)

DCMA-AQBYG Team Lead – Duke Montgomery (Arlington Heights, IL)

DCMA-AQBYL Team Lead – Derek Urban (Phoenix, AZ)

DCMA-AQBYB Team Lead - Jack Kesler (Boston, MA)

DCMA-AQBYH Team Lead – Randy Scott (Crestview, FL)

DCMA-AQBYM Team Lead – Leonardo Salazar (Carson, CA)

DCMA-AQBYC Team Lead – Jack Pocorobba (Philadelphia, PA)

DCMA-AQBYI Team Lead – Carmen Strange (Dallas, TX)

DCMA-AQBYN Team Lead – Bridgette Harris (Los Angeles, CA)

DCMA-AQBYD Team Lead – Gerard Rothhaar (Pittsburgh, PA)

DCMA-AQBYJ Team Lead – Philip Heisler (San Antonio, TX)

DCMA-AQBYO Team Lead – Edwin Hoenig (Ft. Lee, VA)

DCMA-AQBYE Team Lead – Henry Pielaet, Jr. (Chantilly, VA)

DCMA-AQBYK Team Lead – Deena Day (Lakewood, CO)

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DCMA-AQBYP Team Lead – Steve Abramowitz (Orlando, FL)

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Property Workload Trend Indicator

FY # of Government Property (GP) Systems GP Value GP Line Items Onboard/Authorized Audits Performed Audit Target Complete %

2010

2011

2012

2013

2014

2015

3,492 $ 167.3 B 30.5 M 208 1075 1113 97%

2,882 $ 147.3 B 30.5 M 205 1094 1179 93%

1,850 $ 147.7 B 41.0 M 183/185 917 984 93%

2,130 $ 139.8 B 43.7 M 182/197 1026 1121 92%

2,131 $ 129.7 B 65.6 M 174/201 1090 1145 95%

2,415 $128.9 B 78.9 M 172/230 1025 1066 96%

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Property Systems by Status

Total Systems

Approved

Approved w/Def

Totals: Percentage:

Disapproved

2415

1628

81

18

126

135

427

100%

67.4%

3.4%

0.7%

5.2%

5.6%

17.7%

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New Pending CO Not Evaluated Contractor

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Property Loss Administration Workload FY 10 11 12 13 14 15

Number of Loss Cases 2,429 2,722 3,479 5,935 4,640 3,775

Acquisition Value $429,811,107 $2,259,898,741 $1,698,645,547 $688,848,155 $7,245,306,357 $1,809,881,019

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Administration of Government Property Loss • Government typically self-insures against loss • Exceptions: • The risk is covered by insurance or the contractor is otherwise reimbursed. • The loss is the result of willful misconduct or lack of good faith on the part of the contractor's managerial personnel. • The CO has revoked the Government's assumption of risk for loss of Government property due to a determination that the contractor's property management practices are inadequate, and/or present an undue risk to the Government, and the contractor failed to take timely corrective action. 18 18 18

PA’s Role in Property Loss Administration Within 90 days of receipt of a loss report from contractor in the Property Loss eTool, PA shall: • Ensure FAR/DFARS definitions for loss of Government property are met • Determine whether contract imposes risk of loss on Government or contractor • Evaluate facts and circumstances • Determine if loss was caused by deficiencies 19 in contractor’s PMS 19 19

PA’s Role in Property Loss Administration Based on the findings and conclusions resulting from the actions described on the previous slide, the PA shall either • Relieve the contractor of responsibility and liability where the Government bears the risk of loss under the contract, or • Recommend the Contracting Officer – Hold the contractor responsible and liable for the item’s acquisition cost (in full or in part) – Authorize the contractor to repair or replace the property or – Determine a 20 form on consideration appropriate for the circumstances.

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Property Management Challenges • Audit Quality – Use of appropriate auditing techniques – Improved audit reports • Data Integrity – Accuracy of CPAS has improved but requires constant attention – Contract Receipt and Review • Ensure assignment is taken of all contracts with GP • Ensure contracts contain required property related clauses – Aging Workforce – Disruption of mission performance due to • CRF positions 21 21 • OCONUS obligated positions

PMSAs

Questions?

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Contact Information • Andrew C. Obermeyer, Director, DCMA Business Operations Center 804-734-0494 [email protected] • Henry Pielaet, Supervisor DCMA Business Operations Center, Property Group 571-521-1838 [email protected] 23 23