The Pentagon is trying to lessen requirements for smaller contractors to undergo government audits, an official told a congressional panel charged with helping defense companies do business with the Defense Department.
Andre Gudger, director of the Pentagon’s Office of Small Business Programs, told a House Armed Services Committee (HASC) subcommittee yesterday that military officials conducting roundtables with industry “certainly have heard” concerns about smaller contractors being required to undergo extensive Pentagon audits, as their larger counterparts are.
“We’re looking at reducing the number of small-business audits as it currently stands,” Gudger told Rep. Rick Larsen (D-Wash.), ranking member of the HASC’s Panel on Business Challenges within the Defense Industry.
Larsen said the auditing requirement has emerged as a major issue the special HASC panel has heard from business in recent meetings around the country. Some small companies have been frustrated because they have had to reassign employees to deal with the financial reporting, he said.
Gudger said his office–which reports to the undersecretary of defense for acquisition, technology, and logistics–is working with the Defense Contract Management Agency more now than in the past to address the issue.
“Most of it’s driven by contract type,” the Pentagon official said at yesterday’s hearing, titled The Defense Industrial Base: The Role of the Department of Defense.”
For example, a cost-reimbursable contract requires an audit, he pointed out, while other contract types do not.
“I’ve worked with the Defense Procurement and Acquisition Policy office…and we’re encouraging contracting officers and the acquisition workforce to be very cognizant of the type of contracts that they award,” Gudger said.
His office also is looking at the contracts that do require audits and prioritize them to determine if the number can be reduced, he said.
Gudger sought to assure the HASC panel his office is “working those issues” and “making progress.”
Rep. Bill Shuster (R-Pa.), chairman of the HASC panel, told reporters last Friday that he has been hearing significant concern from small-and-mid-sized defense firms about the auditing requirements.
“These small businesses…and medium-sized businesses are being treating like a Boeing or a Lockheed when they’re audited, sometimes it shuts the business down because they’ve got to focus solely on going through the paperwork and the auditing process,” Shuster said at the time.
Larsen said last Friday that some smaller firms “may not have the full capacity…to carry dollars on their books that they can’t then put to work until they complete their full audit from…the Defense Contracting Auditing Agency.”
The seven-member panel, which was formed in September and will work for six months, likely will propose legislation to be included in the fiscal year 2013 defense authorization bill next year. Larsen said the auditing matter is “going to be something that is going to be worthy to look at.”