Survey shows growing distrust between industry and federal auditors

Nearly three out of four federal contractors believe the government is too slow and inefficient in resolving contract disputes, with most pinning blame on the Defense Contract Audit Agency, according to an industry survey released on Monday.

For the 16th consecutive year, Grant Thornton LLP, a business advisory firm, surveyed more than 100 government contractors for their views on a host of business, policy and regulatory issues affecting the federal marketplace. The results showed a widening distrust between industry firms and government officials, particularly federal auditors.

For example, 56 percent of survey participants blamed DCAA for not addressing procurement disputes promptly and efficiently while only 18 percent faulted the contracting officer. The remaining 26 percent believed the government resolved acquisition disputes efficiently.

The most frequent source of dispute -- as has been the case for the past three years -- appears to be the executive compensation charged by contractors. Survey officials claimed the analytical techniques DCAA used to assure reasonable compensation were flawed.

"These findings were not unexpected, given the changes in DCAA policy adopted in the aftermath of Government Accountability Office reports issued in July 2008 and September 2009 that severely criticized the quality of the DCAA's work," said Kerry Hall, Grant Thornton's government contractor practice leader. "The GAO reports and the DCAA changes that followed likely contributed to the survey findings, namely that the process of resolving contract issues is increasingly inefficient."

Roughly 14 percent of industry officials surveyed said their relationship with government auditors, and DCAA specifically, had worsened in the past year, while 12 percent reported an improvement and the remainder said there was no change. Only 2 percent reported a decline in the quality of the business relationship with their contracting officer.

The survey also provided a glimpse into how the state of the overall economy might be influencing the profits of government contractors. It showed that in the past year, 50 percent of contractors did not make a profit, underwent reductions or experienced profits of between 1 percent and 5 percent. Only 6 percent of respondents said their profits went up by 15 percent or more while 10 percent experienced a loss or had flat profits.

The 2009 Recovery Act, meanwhile, might have run its course in spurring contractor growth. Seventy-two percent of respondents anticipate no significant growth from the stimulus program in the next 18 months; the remaining 28 percent expect only modest growth.

"While government contracting is usually a growth business, it appears that the business risks are growing more quickly than revenue, and deteriorating profits are one result," the survey summary suggested.

Despite the modest profits, government-related business appeared to be somewhat immune from the larger economic headwinds. About 55 percent of contractors reported that their revenue from federal business had increased during the past year, while only 22 reported reduced revenue from government procurements.

The federal insourcing initiative also might be taking its toll on the workforce of government contractors. Nearly half of all private sector firms interviewed said the government had successfully recruited some of their employees into federal service to perform functions the agencies had insourced.

The survey also showed that:

  • A total of 22 bid protests were filed during the past year by companies surveyed, half of them sustained by the Government Accountability Office, or the U.S. Court of Federal Claims. The 50 percent sustainment rate is well above historical averages
  • In spite of the government's stated preference for using fixed-price contracts, they accounted for only 20 percent of revenue from surveyed companies. The remaining 80 percent was distributed equally between cost-reimbursable and time-and-materials contracts
  • On average, survey respondents reported a 36 percent success rate on proposals submitted in a competitive environment for new work. Comparatively, the win rate was 35 percent when special business units, such as joint ventures, competed for new work.
Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.


When you download a report, your information may be shared with the underwriters of that document.