One of the Department of Defense’s (DoD) most important offices, the Defense Contract Management Agency (DCMA) oversees the purchase of billions of dollars in goods and services for the American military. From combat boots to sophisticated aircraft, DCMA manages hundreds of thousands of contracts that have a collective value of $1.65 trillion. DCMA was created to help end decades of waste in Pentagon procurement, but yearly investigations by government watchdog agencies continue to turn up serious problems in DoD’s military spending.
Prior to 1960, the Department of Defense (DoD) had no centralized office to handle military contracting. Instead, each branch of the armed services—Army, Navy, and Air Force—handled their own contracts, as did other offices within DoD, when it came to purchasing everything from weapons to supplies for the American military. The lack of any centralized contracting authority caused the armed services to duplicate efforts, which was the last thing the country needed as it began to spend heavily on military forces in the 1950s. Because of the Cold War with the Soviet Union, government and military planners had embarked on an unprecedented buildup of conventional and nuclear forces in preparation for hostilities with the Soviets. President Dwight Eisenhower, whose administration oversaw the beginnings of this immense military establishment and arms industry, dubbed it the “military industrial complex.”http://coursesa.matrix.msu.edu/%7Ehst306/documents/indust.html
After the election of John F. Kennedy in 1960, Robert McNamara took over as Secretary of Defense. McNamara, a systems expert who was running Ford Motor Company when Kennedy appointed him, implemented numerous changes in the way DoD operated, including military contracting. McNamara ordered a study to examine the entire DoD contracting process. Known as “Project 60,” the findings led to a decision by McNamara to move many of DoD’s disparate contract administration responsibilities to the Defense Logistics Agency (DLA). However, the military services continued to retain oversight of major weapons programs.
Over the next three decades, Pentagon spending ballooned on everything from tools to tanks, producing headlines in the media about DoD overspending. By the 1980s stories of defense waste became commonplace, highlighted by accounts of $600 toilet seats and $9,000 wrenches. Investigations into Pentagon waste led to a federal bribery investigation involving Defense Department contracts. In the wake of these controversies, DoD conducted another review of its defense contracts administration in 1989. Defense Management Review Decision 916 recommended the establishment of the Defense Contract Management Command (DCMC) within DLA to perform contract administration for the Pentagon. DCMC was created in 1990.
Establishment of DCMC did not signal the end of contracting controversies. In fact, from the very beginning of the command in 1990 until the present day, the Government Accountability Office (GAO) has kept Pentagon weapons acquisitions on GAO’s list of troubled programs. In yet another effort to improve the contracting process, DoD decided in 2000 to rename DCMC as the Defense Contract Management Agency and make it independent from DLA. But problems still plague this important part of DoD operations (see Controversies).
History of Defense Logistics Agency
Adjusting the Bottom Line (Time)
Inquiry is Delayed in Pentagon Fraud (by Philip Shenon, New York Times)
The Defense Contract Management Agency (DCMA) is an independent agency within DoD that supervises and administers billions of dollars in contracts for the department.
The agency oversees the delivery of goods and services to the military from thousands of companies. According to the DCMA, the agency is responsible for 334,000 active contracts at a face value of around $1.65 trillion that provide the military with such things as aircraft, space launch vehicles and spacecraft, medical supplies, electronic equipment, military vehicles, munitions, petroleum, chemicals, and lumber.
The DCMA maintains sections that handle international contracts, finance/business, human resources, and special programs. The agency operations are spread out across the country and the world, with a total of 900 locations throughout the United States and in 26 foreign countries. Its consultants sometimes are based at the manufacturing facilities of private companies in order to monitor work being performed under contract.
The agency is involved in all stages of contract administration. Before a contract is awarded to a company, the agency advises the contractor on drafting the solicitation and bid documents. After the contract is awarded, the DCMA serves as a go-between with contractors and DoD agencies that are supposed to receive the goods or services. The DCMA is charged with monitoring the contractor’s work and keeping the DoD agency apprised of progress and any potential setbacks.
The DCMA FY 2013 Budget Estimates (pdf) reports that “the agency's civilian and military personnel, [which] are located in over 730 locations, manag[e] over 19,593 contractors and more than 334,398 active contracts. These contracts have a total face value of $3.234 billion of which $1.568 billion has been obligated. Of this amount, $237 billion is current work in process in contractors' facilities.”
DCMA itself plans to add 9,300 employees by 2015, a 43% increase from 2008 levels. A total of 1,221 employees were hired in 2011, alone, financed by the Acquisition Workforce Development Fund (pdf).
From the Web Site of the Defense Contract Management Agency
Command Staff Directory – Central Region
Command Staff Directory – Eastern Region
Command Staff Directory – Western Region
Magazine - Communicator (pdf)
In functioning as a go-between agency, DCMA’s key stakeholders are other DoD offices and the thousands of private companies that receive Pentagon contracts. According to USAspending.gov, DCMA spent $2.7 billion on more than 50,000 contractor transactions between FY 2002 and FY 2012.
Of all contractors who received DCMA funding, the top five were:
1. L-3 Communications Holdings Inc. $789,881,003
2. United Technologies Corporation $508,672,028
3. Rolls-Royce Group Plc $405,567,036
4. The Boeing Company $197,892,161
5. Northrop Grumman Corporation $134,508,874
The top five products or services sold to DCMA were:
1. Misc. Aircraft Accessories Comps $1,747,091,975
2. Misc. Ship & Marine Equipment $353,013,421
3. Misc. Aircraft Accessories and Components $231,717,037
4. Aircraft, Fixed Wing $161,871,930
5. Information Training $90,322,923
http://www.wangfed.com/sassii.html
DCMA Allows Weapons Contractors to Overcharge
The DCMA was created to ensure that Pentagon procurement efforts are conducted efficiently and on time. But that has not always been the case. On numerous occasions, the GAO has criticized the Department of Defense for allowing defense contractors to run up costs on big-ticket weapons systems. The March 2008 report by GAO auditors found programs for new ships, aircraft, and satellites were billions of dollars over budget and years behind schedule.
Among the major programs reviewed was Lockheed Martin’s F-35 Joint Strike Fighter, a stealthy tactical fighter intended for the Air Force and Navy. Cost projections put the price tag at almost $100 million per plane, up 40% since 2001. Lockheed Martin defended itself by claiming the F-35 program had been a model for “affordability and cost containment.”
Another project singled out was the Navy’s $5.2 billion Littoral Combat Ship, which experienced so many cost overruns that the service expected the price of its first two ships to exceed their combined budget of $472 million by more than 100%. The Navy canceled construction of the planned third and fourth ships by Lockheed Martin and General Dynamics, the prime contractors on the project.
In another case, the initial contract target price of Boeing’s program to modernize avionics in the C-130 cargo plane was expected to skyrocket 323%, to $2 billion.
The March 2008 report followed a 2005 report in which GAO officials found that eight of the 25 most troublesome federal programs or offices were located in DoD, including inventory management and weapons systems procurement.
In 2003, a study by DoD’s inspector general found that the Pentagon could not account for more than a trillion dollars in monies spent.
GAO Blasts Weapons Budget: Cost Overruns Hit $295 Billion (by Dana Hedgpeth, Washington Post)
GAO Report: Defense Acquisitions (pdf)
GAO Report Points to Pentagon Waste: Defense Department Home to 8 of 25 Federal Programs Labeled 'High-Risk' (by Christopher Lee, Washington Post)
Military Waste Under Fire: $1 trillion missing—Bush plan targets Pentagon accounting (by Tom Abate, San Francisco Chronicle)
DCMA Whistleblower Reinstated
In November 2007, the DCMA was told to reinstate a longtime engineer who had been suspended following his complaints about over-billing by the Pentagon’s top contractor, Lockheed Martin.
The US Merit Systems Protection Board ruled that Ken Pedeleose, a 13-year DCMA employee, had been improperly suspended from his job after calling attention to overcharges on Lockheed Martin military contracts and for advising a fellow employee who found safety problems with a military aircraft used by the Air Force.
The DCMA suspended Pedeleose for 30 days on charges of insubordination and failure to cooperate in an internal investigation. Pedeleose appealed the suspension, claiming that the suspension was a reprisal by his boss, Air Force Col. Nicole Plourde, commander of the DCMA office at Lockheed Martin’s manufacturing facility in Marietta, Georgia. Pedeleose said he was punished after helping call attention to safety violations on the C-130J transport plane.
The federal mediation board agreed with Pedeleose that the DCMA had abused its authority.
Lockheed Martin whistleblower wins appeal (by Eric Rosenberg, Muckety)
DCMA Offers New Rule After Being Told to Make Changes
The Defense Contract Management Agency (DCMA) issued new regulations in 2011 intended to help reduce waste, fraud and abuse in federal contracting.
The new rules were supposed to ensure that contractors’ business systems, such as accounting and estimating programs, were compliant with government requirements.
To prod contractors into meeting requirements, the DCMA included in the rule a 10% cap on monies that the agency could withhold from a business for not making the necessary changes with its business systems.
The regulation followed calls in 2010 for the DCMA to work with another Pentagon operation, the Defense Contract Audit Agency (DCAA), on streamlining operations and reducing overhead.
Defense contractors complained that the DCMA and DCAA often provided contradictory guidance, which only confused companies and increased their costs of doing business.
The Government Accountability Office echoed this point in a report that called for the DCMA to develop a system that better reflected the actual status of a business system.
Pentagon Issues New Rule for Contractor Business Systems (by Marjorie Censer, Washington Post)
Industry To Pentagon: Fix Relationship Between Oversight Agencies (by Katherine McIntire Peters, Government Executive)
GAO: DCMA Hampered By Contingency Contracting, DCAA (by Jack Moore, Federal News Radio)
Defense Contract Management Agency: Amid Ongoing Efforts to Rebuild Capacity, Several Factors Present Challenges in Meeting Its Missions (Government Accountability Office) (pdf)
Report: Defense Contract Management Agency: Amid Ongoing Efforts to Rebuild Capacity, Several Factors Present Challenges in Meeting Its Missions (Government Accountability Office)
Keith D. Ernst
Keith Ernst served as the acting director of the Defense Contract Management Agency from January 2006 through April 2008. A graduate of the University of Minnesota with a bachelor’s degree in engineering, Ernst began his government service as an officer and pilot in the Marine Corps.
Following military service, he worked in private industry for eight years in technical sales and management positions. He began his civilian government career at the Defense Contract Administration Services Management Area (DCASMA), Twin Cities (now known as DCMA) in 1983. Following initial assignment as an industrial engineer, he subsequently held positions as a general engineer, systems engineering and program support branch chief, and technical assistance and assessment team supervisor.
In 1997, Ernst joined DCMA Seattle as the technical assistance group chief and in 1999 was promoted to the position as deputy commander of DCMA San Francisco. From 2001 to 2002, Ernst held the position of director of contract operations directorate for DCMA West. In this position he was responsible for operations oversight and support of 28 contract management offices located throughout the western half of the United States.
Ernst then served as the director of DCMA East (DCMAE), managing more than 203,439 contracts valued at $394.9 billion. DCMAE included 5,600 personnel and 23 major field command offices working with approximately 12,000 contractors. That agency had primary contract management responsibility for aeronautical systems and naval sea systems customers.
In October 2005, Ernst was assigned to the Office of Deputy Director for DoD before becoming acting director of the DCMA. He retired effective April 30, 2008.
- Table of Contents
- Overview
- History
- What it Does
- Where Does the Money Go
- Controversies
- Suggested Reforms
- Comments
- Leave a comment
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