Cinda Brockman, CPPM CF November 8, 2012 Case Study: Metrics Analysis versus Conducting an Internal Company-wide Property Management System Analysis

This session will cover a case study involving a major decision that Corporate Property made after analyzing company-wide metrics prior to performing the internal company-wide self- assessment for the property management system. The definition of Significant Findings versus Insignificant Findings will be discussed to explain the determination made by Corporate Property for Significant Findings on five (5) out of ten (10) processes. The end result for the outcomes were determined “Inadequate”. This presentation will cover how the Property Managers came together as a team to accomplish making the five (5) outcomes adequate.

Significant Significant Findings versus Non- Significant Findings Definition of Significant The term “significant” is comparable to the term “material” as used in the context of financial statement audits (Generally Accepted Government Audit Practices). A significant deficiency can be established based on one criterion or several, i.e. a large number of smaller systemic findings that, taken in their totality, are material.

Significant Findings versus Insignificant Findings (continued) Significant deficiencies are not always systemic. A contractor may have sound written procedures, however, do to poor management; the application of those procedures is problematic. For example, the contractor deploys a new IT system, adequate for property management in every respect, but the employees are not trained in its use. Consequently, the system is fraught with data input errors. In this case the data errors are not systemic, i.e., the system is not hardwired to produce flawed data, but the outcome yields a significant deficiency.

Significant Findings Such errors are symptomatic of larger management problems that need to be addressed. If the contractor’s management does not take meaningful corrective action, then the contractor’s system can be deemed inadequate.

Insignificant Finding or an Immaterial Finding An insignificant finding or an immaterial finding may result when the PA finds errors involving low dollar value assets, e.g., common hardware such as nuts, bolts, screws, washers-and there are variances between the record and the actual property count. If those variances are small and of low value, which is a judgment decision, these are generally considered insignificant or immaterial to the actual operations of the contractor’s property management system.

Corporate Property’s Metric Analysis Results Active property in property database where period of performance has ended:  Percent of business units that this statement is true: 100%  Significant or Insignificant Finding? Significant Active property in property database where items are being utilized when contract’s period of performance has ended:  Percent of business units that this statement is true: 100%  Significant or Insignificant Finding? Significant Active property in property database where physical inventory has been performed on items where period of performance has ended:  Percent of business units that this statement is true: 100%  Significant or Insignificant Finding? Significant Active property on contracts that should be transferred or dispositioned:  Percent of business units where this statement is true: 100%  Significant or Insignificant Finding? Significant

Five (5) Processes End Result for Outcomes = Inadequate Records Physical Inventory for FY10 Utilization Relief of Stewardship Contract Property Closeout

Chart Explanations Chart One: Active property in database where period of performance has ended = Number of Days Late (6/18/10(Period of Performance (POP) End date + 60 Days) Active property on contracts that should be transferred or dispositioned = Quantity Line Items Outstanding Chart Two: Active property in property database where items are being utilized when contract’s POP has ended = CRN/Utilization Code Active property in property database where physical inventory has been performed on items where POP has ended = Last Inventory Date Active plus Acquisition Cost of Items Inventoried

As of 5/14/10

The best time to fix the roof is when the sun is shining. JFK

Team Building Activity Group activity to come up with working solutions Appoint a leader who will present the solutions Appoint a scribe to take the notes Prior to upcoming audits, business units need to come up with working solutions and realistic timeframe(s) to make the outcomes = Adequate Leader will present to group

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate” The team effort begins with Business Unit Property, Program Management, Contracts, Procurement, Subcontracts, then Group level followed by Corporate. Records  Use Report created by Corporate Contracts and property system downloads for Property Reports  Property needs to use Property database to verify if active property remains prior to closing any contract whether it is DCMA or Non-DCMA administered.  Once the disposition of property is provided, property need to change the status of the record to first reflect the disposition given, i.e. “shipped, abandon, etc.” and then change the status to “inactive” and then “close” the record.  Property need complete documentation for processing their dispositions and keep in the contract property files for surveillance and final property closeout packages.  If contract ends what should property do? Be proactive in asking Contracts if the contract is being transferred to another contract, period of performance extended or disposition is needed.  If the property is to be dispositioned, property need to remove the property and secure in a locked room prior to requesting disposition and keep in the secured area until final disposition instructions have been completed.  If you have a follow on task order, have the property incorporated into the proposal so you do not have to request property transfer or disposition. The proposal has to be referenced in the contract.

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate Physical Inventory  Revised the Government Property Policies and Processes Manual on how annual inventories would be performed.  Prior to commencement of the Physical Inventory each year, Corporate Property will provide Property Administration with the listing of contracts that meet each year’s contract period of performance end dates criteria.  A Physical Inventory Certification(s) will be required for contracts with accountable property.  Physical inventory plans by location will be required each fiscal year of Property Administration (AIA ILP 4-03) and forwarded to Corporate Property prior to commencement of the inventory.  Property Administration will be evaluated and measured on the implementation and outcomes of the inventory plan.  A physical inventory of all government property based on the prescribed population which includes all property regardless of value.

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate Physical Inventory (continued)  Population: The criterion for the population to be inventoried is as follows: 1. For FY12 Physical Inventory a 100% physical inventory will be required for all contracts with a period of performance end date that expired by the end of FY2011 (January 23, 2011). This will ensure that Property Administration has time to disclose and report excess property to the Government when it is no longer required to fulfill contractual obligations, transfer accountable property to another contract or relieved of accountability through Loss Reports. 2. For FY13 Physical Inventory a 100% physical inventory will be required for all contracts with a period of performance end date that expired by the end of FY2012 (January 20, 2012). 3. For FY14 Physical Inventory a 100% physical inventory will be required for all contracts with a period of performance end date that expired by the end of FY2013 (January 31, 2013).

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate Relief of Stewardship  READ the contract to see who has the authority to disposition property; was it delegated from CO to COTR, etc.  Based on what the contract states request the authority from delegated person and have contracts write the letter(s) and submit accordingly.  Once letter is written, follow up on a weekly basis or bi-weekly basis with contracts to have the issue resolved. Do not wait for 8 months etc. and do nothing!  Once authorization is received, property needs to have all of the applicable documentation in place prior to shipping or transferring the item(s).  Documentation is the key and is the new buzz word for DCMA.

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate Utilization  Property needs to run reports on their own to know when a contract is going to be expired; then remove the property and put in a secure storage area.  Follow on contract – if property is still being utilized then state in the proposal that the property is needed and it will automatically be incorporated but the proposal has to be referenced in the contract.  Ensure in Property Database that the status is clearly identified.  Look at the value of the property that needs to be either transferred or dispositioned. Ensure that the items are truly not in use.

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate Property Closeout  Corporate Property created a Contract Property Closeout List that Property Administration had to complete and submit with their contract property closeout package.  A Shared Service Center Contract Closeout service was created that consolidated the Closeout service in a standard way across the enterprise which included property. (Prior to this service, each business unit did their own thing)  Processes were standardized and streamlined to increase efficiency resulting in faster closeouts, better government compliance, and increased cash flow.  Additional Tactics to Ensure Coordination:  SSC to provide property administration with reports regarding contracts currently being addressed by SSC and subcontracts with property components.  SSC to schedule monthly coordination meetings between property managers and SSC Closeouts to proactively communicate priorities  Develop escalation process in the event that conflicting priorities arise  Results of SSC for Property: Intangible Benefit  Hassle reduction for staff by no longer having to perform closeout functions  Improved external customer service by having on POC for customer requests/questions.  Improved compliance with FAR requirements to avoid disallowance of costs due to lack of proper backup and late billings

Working Solutions for the 5 Outcomes to Change from “Inadequate to Adequate” By the property team working together and with other functional areas of the company to be proactive internally to change 5 outcomes from “Inadequate to Adequate”, the company’s property management system is acceptable by DCMA in accordance with the terms and conditions of DFARS , and approved. No deficiencies were found and the company was assessed as low risk and is placed on a triennial basis with a review scheduled in GFY15.

Summary READ THE CONTRACT! UPDATE AND ENSURE RECORDS ARE CLOSED IN PROPERTY DATABASE! DOCUMENT, DOCUMENT, DOCUMENT! COMMUNICATE WITH ALL FUNCTIONAL DISCIPLINES, INTERNAL AND EXTERNAL! BREATHE IN; BREATHE OUT!