Double Take: The DoD OIG Recommends Attempting to Recoup $43 Million in Purportedly Expressly Unallowable Costs Not Previously Disallowed

On January 14, 2020, the Department of Defense (DoD) Office of Inspector General (OIG) released a report examining whether Defense Contract Management Agency (DCMA) contracting officer (CO) rejections of recommendations by the Defense Contract Audit Agency (DCAA) to assess penalties on $43 million in unallowable costs identified in 18 DCAA audit reports complied with the Federal Acquisition Regulation (FAR), DoD Instructions, and agency policy. The OIG did not take issue with the fact of the COs’ disagreements, nor did it take a position on the merits of the COs’ determinations. But the OIG did conclude that the COs did not adequately document their reasons for rejecting DCAA’s penalty recommendations. Accordingly, the OIG recommended that DCMA reevaluate the COs’ decisions not to assess penalties on the $43 million, take actions to reclaim any expressly unallowable costs not previously disallowed, and collect from the contractors any penalties due to the Government. DCMA stated that it would review the audit reports and attempt to recoup costs and/or penalties and interest that DCMA COs previously decided not to pursue, as appropriate.