How to Respond to a Corrective Action Request from DCMA
Most government contractors dread receiving a Corrective Action Request from the DCMA.
That’s understandable. After all, higher-level Corrective Action Requests (CARs) carry not only contractual but also financial consequences, with payment withholding for up to 5%.
A Government Property Management system is one of the 6 required business systems for government contractors. A shortcoming in the system can have significant contractual and financial implications for a government contractor.
According to DFARS 252.242-7005 (FEB 2012):
(d) Significant deficiencies
“…a shortcoming in the system that materially affects the ability of
officials of the Department of Defense to rely upon information
produced by the system that is needed for management purposes.”
(e) …the CO will withhold 5% of amounts due from progress payments and performance-based payments (for the current contract), and direct the contractor to withhold 5% from its billings on interim cost
vouchers on CR, labor-hour, and T&M (for ALL contracts) until the
CO has determined that the contractor has corrected all significant
So, how do you respond to a CAR once you have received one?
Well, to some extent this depends on what level CAR you have received.
Based on this chart, we know that you are not required to respond if you have received a Level I CAR. However, if you have received a Level II CAR or above, you are required to:
- Determine the root cause of the non-compliance
- Take Corrective Action or create a Corrective Action Plan to prevent reoccurrence and fix non-compliance
- Determine if other processes are affected by the root cause
- Determine if other products or services are affected by the root cause
- Take action to correct quality assurance
- Specify the dates for implementing planned actions
Let’s break these requirements down into a few general steps:
- Understand the Corrective Action Request
- Perform a Root Cause Analysis
- Create a Corrective Action Plan
1) Understand the Corrective Action Request
While this isn’t an official requirement, it can be helpful to clarify what non-compliance led to the Corrective Action Request.
Be sure to read through the CAR thoroughly, and review any additional documents. Take notes on anything that may help you to fix the non-compliance later.
It may be necessary to review the CAR with the CAR issuer in order to fully understand the non-compliance. This will not only help you to learn more about the CAR, but is also a great opportunity to show your willingness to fix the issue. Doing so will go a long way to repairing any loss of trust between you and the issuer.
Now that you know what you’re dealing with, it’s time to get to the root of the issue. You’ll need to perform a Root Cause Analysis to truly understand the problem in your government property management system.
2) Perform a Root Cause Analysis
A Root Cause Analysis (RCA) is helpful for pinpointing a problem and its cause. A RCA is required for non-compliances that are Level II and higher.
The DCMA Manual on Corrective Action Plan Processes states that an “effective RCA will identify the basic cause or causes that when corrected will prevent reoccurrence of the finding.”
You need to define what’s wrong in a very detailed manner. You can’t correct something and prevent further problems unless you know exactly what the problem is.
This is the time to be as thorough as possible. Depending on what’s wrong, the cause may not be clear when you first start investigating. It’s important you find out the problem, its scope, its history, and what business processes it may have affected.
Ask workers if they noticed the problem, and if so, when they first noticed it.
You may also need to inspect equipment and work spaces.
Once you have a detailed understanding of the problem that caused non-compliance, you can easily perform a Root Cause Analysis.
3) Create a Corrective Action Plan
With what you have learned in the previous steps, you can create a Corrective Action Plan. A Corrective Action Plan is:
“…a detailed plan identifying management controls, tactics, techniques, procedures, training, resources, and working environment changes likely to preclude future non-compliance.”
Essentially, anything your business will do to prevent non-compliance is included in the Corrective Action Plan.
According to a presentation from the DCMA by Dave Ryan, this includes:
- The Root Cause of non-compliance
- A description of all actions taken to eliminate the Root Cause
- A description of all corrective actions to prevent reoccurrence
- A determination of whether other processes are affected by the identified root causes
- The target date(s) for implementation of the planned actions
The DCMA Manual on Corrective Action Plan Processes contains full details on exactly how to document your CAP, including required tools and methodologies, as well as time frames for completing the CAP.
A Corrective Action Plan is important to the issuer because it shows that you have found the cause of non-compliance (from your Root Cause Analysis) and have specific plans to fix the cause and prevent it from happening again. A Corrective Action Plan also, ideally, provides a clear path to compliance for your organization.
After responding to a CAR
After responding to a Corrective Action Request with your Corrective Action Plan, the issuer of the CAR will determine if your response is acceptable. This can be seen in the flowchart below or in this DCMA document.
They will then verify that you performed the actions from the CAP. Once they have been verified, the Corrective Action Process is finally complete.
Now that you know how to go through the Corrective Action process, we hope CARs won’t fill you with the same dread they might have before.
If you respond well to a Corrective Action Request from DCMA, it’s possible to minimize damage for all parties. A Corrective Action Plan, in conjunction with a Root Cause Analysis will help prevent future non-compliance. In addition, a good CAP can ultimately lead to greater efficiencies that will save your business time and money.
While it’s likely you will come out on the other side of a CAR with stronger internal processes and a good relationship with your DCMA auditor, our best advice is still to try to avoid the CAR altogether. You can take a proactive approach to government property management by conducting a contractor self-assessment and ensuring you have a robust property system in place.