Breakout Session # Jeffery A White, C.P.M., President/CEO J.A. White & Associates , Inc.

2. Managing Subcontractor Compliance Breakout Session # Jeffery A White, C.P.M., President/CEO J.A. White & Associates, Inc. Date – December 5, 2005 Time – 2:10 p.m. NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

3. We’re drowning in information and starving for knowledge. -Rutherford D. Rodgers NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

4. Topics • Defining Risk • Risk Management Tools • Risk Management Solutions NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

5. Defining Risk • Contractor operations expose Government to risk • Financial • Quality • Delivery NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

6. Contractual Relationships NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

7. Risk Management Tools • Prime Contract • Terms and Conditions • Statement of Work • Subcontracts • Numerous Laws and Regulations • Flowdown Clauses • Truth in Negotiations (FAR Part 15) • Cost Accounting Standards (FAR Appendix A) • Right to Audit Clauses (FAR Part 14 and 15) NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

8. Risk Management Tools • Selection of Subcontract Type – FAR Part 16 • Small Business Subcontracting Plans (FAR Part 19) • Consent to Subcontract (FAR Part 44) • Advance Notice (FAR Part 44) NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

9. Risk Management Tools • Sarbanes-Oxley Act • Make or Buy Program (FAR Part 15) • Competition in Subcontracting (FAR 52.244-5) • Proposal Analyses (FAR Part 15) • Contractor Purchasing System Review (FAR Part 44) NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

10. Risk Management Tools • Subcontracting for Commercial Items (FAR 52.244-6) NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

11. CPSR – The Customer’s Review • Measures How Efficiently and Effectively a Contractor Spends Government funds and; • Evaluates Compliance With Government Subcontracting Policies, Regulations, and Laws. NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

12. CPSR – The Customer’s Review • Subcontractor’s Government business volume exceeds $25 million (excluding competitive FFP, competitive FFP/EPA contracts/subcontracts, and commercial item acquisitions) • Whenever an Administrative Contracting Officer or Procuring Contracting Officer specifies NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

13. CPSR Risk Assessment: Basis for Selection • CPSR Approval History • Identified by PCO or ACO • Increased Sales to Government • Growth • Pre-Award Surveys • Major Programs/High Visibility • Other Audits • Self Assessment Activities NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

14. CPSR: Identification of Risk Factors • Signs of a Weak Purchasing System Identified During Self Assessments: • Inadequate Procurement Lead Time • Violation of Public Laws • No or Poorly Written or Implemented Policies • No or Weak File Documentation • Lack of Upper Management Commitment to Compliance with Procurement Regulations NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

15. Opportunities for Success or Failure • 98% of firms will not pass their initial CPSR! • Our proven process has allowed 100% of our clients to pass their initial CPSR! NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

16. Source Selection Implications Past Performance Implications Losing A Competitive Proposal Loss of Revenue Negative Impact on Competitive Acquisitions Impact of an Unsuccessful CPSR on Contractors:Losing The Competitive Marketing Advantage! NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

17. Defense Contract Audit Agency or Inspector General’s (and Other Audit Agencies) Alerted Other Audits Will Follow Possible Negative Press Government Oversight Implications Impact of an Unsuccessful CPSR on Contractors:Long-Term External Compliance Oversight Impact NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

18. Increase Administrative Contracting Officer Surveillance Delay in Placing Orders Increase Administrative Expenses Delayed Billings & Collections ACO will not waive ACO Consent to Subcontract Impact of an Unsuccessful CPSR on Contractors:Procedural Burdens with Project Management Impact NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

19. Implement Corrective Actions Change Processes Change Culture Implement Training Program Prepare for Follow-Up Audit Corrective Action Plan with Specific Tasks, Milestones, and Preparation for a Follow- Up Review Impact of an Unsuccessful CPSR on Contractors:Costly Internal Compliance Impact NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

20. Contractor Risk Assessment: Self-Governance • CPSR Training Guide Allows for Self-Governance • Encourages Contractor Participation in CPSR • Encourages the Use of Contractor Self-Assessments as Part of CPSR Process NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

21. Why Self Governance? • Pro-Active Compliance • Legal • Ethics • Cost Avoidance • Pro-Active Process Improvement • Changing Customer Oversight Environment • Commercial Focus • Customer Relations • Competitive Edge NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

22. Self Governance Process Market Concept Develop Audit Plan Conduct Self Assessments Develop MOU Re-visit Audit Plan Baseline CPSR Implementation NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

23. Self Governance Process • Develop Audit Plan • Audit Frequency • Audit Duration • Audit Personnel • Audit Protocol • Tools/Reports Formats • Corrective Action Process NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

24. Self Governance Process • Conduct Self Assessments • Could Lead to: • Training Initiatives • Process Improvements • Process Re-engineering • Standardization • Identification of Staffing Needs NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

25. Self Governance Process • Self Assessment Methods • Peer Reviews • Management Reviews • Dedicated Audit Teams • External Resources NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

26. Self Governance Process • Internal and External Marketing • Champions Include: • Executives • CPSR Team Leaders • ACO • Management Councils • DCMA • DCAA NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

27. Self Governance Process • Baseline CPSR • Joint Contractor/Government Review • Review Validates Self Assessment Efforts • Ensures Apples-to-Apples Interpretations and Processes NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

28. Self Governance Process • Re-visit/Adjust Audit Plan • Q&A Issues • Sampling Process • Regulatory Updates • Review New Processes NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

29. Self Governance Process • Develop MOU • Incorporate Audit Plan • Frequency of Reporting to ACO • Follow-up Joint Reviews NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

30. Self Governance Process • Benefits of Implementation • Real-Time Corrections • Real-Time Training • Pro-Active Customer Oversight • Pro-Active Compliance • Competitive Advantages NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck

31. Presented by: Jeffery A. White, C.P.M. President J.A. White & Associates, Inc. 1341 Garner Lane, Suite 104 Columbia, SC 29210 803.407.1399 x101 803.407.0256 (fax) Jawhite@jawhite.com www.jawhite.com NCMA 24th Annual Government Contract Management Conference Improving the Procurement Process: Getting the Bang for the Buck