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News | Jan. 26, 2021

Payday without delay

By Tonya Johnson DCMA Public Affairs

Editor's Note: This article was originally published in DCMA’s 2021 INSIGHT Magazine, which highlights the agency’s warfighter-support story and its global acquisition professionals who use insight and expertise to enhance that story each day. The online version of the magazine can be found here.

Defense Contract Management Agency acquisition personnel have created a Progress Payment Multi-functional Administration Guidebook to make sure contractors are paid correctly and on-time.

“The Progress Payment Working Group was formed to create standardization across the agency in how we do progress payment administration,” said LeShan Jackson, a contract specialist in the Contracts and Pricing, Policy and Processes Division within the Contracts Directorate at DCMA headquarters, Fort Lee, Virginia. She is also the project manager for the PPWG.

“There is guidance out there that says certain things need to be done, but there was no guidance telling how to do it,” she added. “This is something that has been needed for decades. For example, one contract management office may ask for certain documentation while another office does not. This causes confusion with the contractor because they do not know what is really required.”

According to Patricia McMahon, the director of Contracts and Pricing, Policy and Processes Division, the new guidebook “provides supplemental guidance to the payments manual in a structured, detailed manner that will assist both contracting officers and functional specialists in their daily financial oversight activities.”

The PPWG was created in July 2020 to standardize the agency’s business processes and the team completed its mission two months later. The guidebook is a tool personnel across the agency can use. Various contract management offices from each region already use the book now during the pilot phase and are providing valuable feedback to Jackson and the PPWG.

McMahon noted payment support is one of the reasons why DCMA is assigned contract administration. She said customers sometimes may challenge recommendations from DCMA based on pressure from the contractors, so it was important for the agency to create a document that determines what must be submitted for justification before any payment is made. For the contractor, this guidance will also increase their efficiency and productivity by eliminating the back and forth requests for additional information from the administrative contracting officer, which will result in a quicker payment approval and facilitation of the contractor being paid in a timely manner.

Subgroup Expertise

The PPWG was divided into three subgroups – Progress Payment Administration; Contractor Checklist; and the Technical Guidebook – to develop the guidebook.

The PPA subgroup is responsible for the overall development of supplemental guidance for non-technical functional specialists in the 1102 contracting job series. The subgroup also developed PowerPoint training slides for employees on how to use the guide.

Jackson said the PPA subgroup, which had 13 members, reviewed the DCMA 325 risk matrix. The group also reviewed the Standard Form 1443 line-by-line and discussed what each of those elements represents, including the supporting documentation an ACO would want to request or expect from the contractor, and then how to evaluate it for approval and/or periodic review.

Seth Pokoj, a DCMA Pittsburgh supervisory contract specialist, served as the team lead for the PPA subgroup.

“We have team members who work at the contractor’s residential facilities and others who work at contract management offices,” he said. “As a result, we were able to have a robust discussion that would represent everyone in the contracting community, not just a specific subset of users.

“Proper administration of progress payments is truly a multi-functional effort,” he continued. “Progress payments are an important component of successful acquisitions as they represent an interest-free loan to contractors, which facilitates cash flow and ultimately supports on-time delivery of quality products to the warfighter.”

The Contractor Checklist subgroup had eight employees develop a checklist for the agency to supply all contractors requesting progress payments. The checklist explains the minimum requirements the contractor must submit to facilitate and support DCMA’s analysis. It also identifies information the contractor must provide such as direct labor, direct material, and indirect costs.

DCMA will also request sample invoices from the contractor to ensure payment is based on the terms and conditions of invoice or subcontract. Other documentation may include subcontractor financing amounts and support documents for the utilized indirect rates such as labor overhead.

The guidebook’s checklist also states that as part of the progress payment process, a contractor should include the government approved provisional billing rates letter, and the rate calculations for each indirect category, or agreed final indirect rates letter.

Kearne Anderson, a supervisory contract specialist from DCMA Aircraft Integrated Maintenance Operations San Antonio, served as the team leader for the checklist subgroup. His team wanted to emphasize consistency and uniformity when creating the checklist.

“Our duty to adhere to the agency’s values was a driving force for this working group, and I believe collectively, our efforts will enable the agency to be better stewards of the taxpayer’s resources,” said Anderson. “I also believe that effective stewardship requires measures of continuous improvement, and this initiative is a step in that direction.”

The Technical Guidebook subgroup developed the supplemental guidance for the technical functional specialists, including industrial specialists, engineering and cost price analysts.

The 14 employees in this subgroup provided material to explain how each aspect of a progress payment review should be performed.

Led by Daniel Wayne, a DCMA Orlando supervisory contract specialist, the team had approximately 50 years of progress payment review experience. Wayne’s subgroup had approximately 50 years of progress payment review experience. The employees had experience in audit and pricing, earned value, and engineering, manufacturing, and contracting.

“It took months of research and cross-functional collaboration to prepare the guidebook,” said Wayne. “We forget that the government assumes risk when progress payments are provided to contractors. Progress payments are interest-free loans. Like any bank or financial institution, the ACO has a vested interest in a contractor’s progress and financial condition, among other things, when an effort is financed.”

An Essential Tool

In addition to making sure contractors are paid timely, Jackson said the guide also makes it easier for a new DCMA employee to learn his or her job quicker since there is guidance readily available. The standardization process also makes it easier for DCMA employees who transfer from one location to another since each office will follow the same acquisition oversight guidelines.

“I know an industrial specialist who has been doing this for 30 years, and she told me that she has been asking for this type of information her whole career,” said Jackson. “Creating a multifunctional guidebook of this magnitude is a tremendous effort.”

It is stories from the industrial specialist and other employees around the agency that made Jackson determined to take on the task of producing the book. She also wanted to create a repository of institutional employee knowledge that could be passed down.

“I live by the motto ‘work smarter, not harder,’” she said. “My biggest fear was those DCMA functional specialists with 20 or more years of progress administration experience would retire and walk out of the door without having the opportunity to share their knowledge with DCMA’s next generation. Once that knowledge is gone, it’s gone forever so I wanted to ensure we got all of the information we could to ensure success in DCMA’s mission and strategic goals.”

A Vital Mission

McMahon mentioned the new guidance reminds customers, contractors and the Department of Defense of how vital DCMA is to supporting our nation’s warfighters.

“This type of guidebook depicts DCMA’s role in DoD very clearly,” said McMahon. “There should be no doubt as to what functions DCMA performs that directly benefit the department from a financial standpoint. However, it also is a good reminder internally of how much reliance there is on our analysis activities that continually inform other members of the department and help to ensure critical contractor and program oversight take place on a routine basis.”

Since the guidebook was completed in September, Jackson has been consolidating the feedback from beta testing she has received from the DCMA offices and small and large contractors before the finalized guidance is distributed across the agency and the defense industrial base. The book will be released in 2021 for government use, and the checklist will be available to contractors.

“The feedback has been positive. The guidebook is a comprehensive working document that is more than 100 pages,” Jackson explained. “This guidebook will put all of us in the agency involved in the progress payment administration process, including the ACO, contract administrator, cost/price analyst, industrial specialists, and engineers, on the same page.”

Jackson said the project took a lot of work from the PPWG, but she is excited by how the agency and others will benefit from the comprehensive guidance.

“Standardizing our processes is a huge win for all parties involved,” she said. “The buying office gets better and more efficient support from DCMA. DCMA personnel are better equipped with the proper tools in place to effectively accomplish our mission. The contractors providing the goods or services are being paid in a timelier manner, which increases their cash flow, and lastly, the warfighter is provided with the goods or services needed to protect our nation and its assets.”