8 THE PROPERTY PROFESSIONAL VOLUME 30, ISSUE 4

In several of my NPMA presentations I’ve asked the audience for a show of hands to see how many people have ever been issued a CAR. No, I’m not talking about a shiny new vehicle in the driveway with a bow on top during the holidays, or what happens when you visit the rental car counter at the airport. I’m talking about receiving a Corrective Action Request (CAR) from the Defense Contract Management Agency (DCMA), other Government agencies or even prime contractors for non-compliance with property management contract terms and conditions.

BY BRANDON KRINER, CPPM, CF, BAY AREA CHAPTER

PERFORMING ROOT CAUSE ANALYSIS FOR

CORRECTIVE ACTIONREQUESTS

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C O V E R S T O R Y

Invariably most people in the room sheepishly raise their hands. So, if you have received a CAR, you are certainly not alone…contractors are required to submit a complete corrective action plan (CAP) that addresses the root causes of non-compliances and demonstrates that measures have been taken to prevent issue recurrence. CAPs, however, often ultimately fail to prevent the issues from reoccurring because the underlying root causes have not been properly identified. This article will explore three common tools that can help perform an effective root cause analysis to resolve property management corrective action plans. We will specifically focus on the CAR resolution process outlined in DCMA Instruction 1201 “Corrective Action Process,” however, the CAR process for other agencies or prime contractors may vary.

For those unfamiliar with the DCMA CAR process, DCMA Instruction 1201 outlines four levels of CARs, each progressing in severity. A Level I CAR is issued for non-compliances that are minor in nature and are promptly corrected by the contractor. No formal CAP is required and this CAR carries no potential contractual remedies. A Level II CAR is issued for non-compliances that are not promptly correctable and warrant root cause analysis and preventive action. A root cause analysis is required and no potential contractual remedies are available with this CAR. A Level III CAR is issued for non-compliances that meet the threshold of “significant deficiencies” under DFARS 252.245-7003 Contractor Property Management System Administration, or for failure to respond to a lower level CAR. Possible contractual remedies include cost disallowance, reduction or suspension of payments, revocation of government assumption of risk of loss and/or business system disapproval. Finally, a Level IV CAR is issued when a noncompliance is of a “serious nature” or when a Level III CAR has been ineffective. Contractual remedies are mandatory when issuing a Level IV CAR.i

Level II, III and IV CARs all require corrective action plans…let’s briefly explore the CAP process. The Government Property Administrator (GPA) performs the Property Management System Analysis and submits a Business Systems Analysis Summary (BSAS) to the appropriate Contracting Officer (CO). The CO, in consultation with the GPA, determines whether significant deficiencies exist in the contractor’s property management system. If deficiencies exist, but they are not “significant” per DFARS 252.245-7003, the contractor may be issued a Level I CAR or a Level II CAR if a corrective action plan is required. If significant deficiencies exist, the CO issues an initial determination to the contractor within 10 days after receiving the BSAS from the GPA. The contractor then has 30 days to respond- the GPA and CO review the contractor’s response and determines whether significant deficiencies remain.

Figure 1: DCMA Corrective Action Request Levels

CAR Level Description CAP

Required?Contractual Remedies?

I

Issued for non-compliances that are minor in nature and are promptly corrected by the contractor

No No

II

Issued for non-compliances that are not promptly correctable and warrant root cause analysis and prevention action

Yes No

III

Issued for "Significant Deficiencies" under DFARS 252.245-7003 or failure to respond to a lower level CAR

Yes Possible

IVIssued when non-compliance is of a serious nature or when a Level III CAR has been ineffective

Yes Mandatory

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Each corrective action plan must include the following elements:• A root cause analysis of the non-compliance• A determination of whether other products or processes

are affected by the identified root cause(s)• Corrective actions taken or planned to eliminate the

cause(s) and prevent recurrence of the noncompliance• Target date(s) for implementation of planned action• Validation that corrective actions are effectiveiii

A contractor’s immediate impulse when receiving a CAR is often to leap directly to diagnosing and correcting what appear to be the obvious causes of the issues. However, corrective actions implemented without first performing a root cause analysis may fail to ultimately resolve the issues, leading to more severe CARs in the future. Thus, a root cause

analysis (RCA) is an essential first step for addressing a noncompliance. RCA should be a formal process investigation to identify one or more true underlying causes of a deficiency and prevent recurrence of the issue. RCA works best when someone who has formal training facilitates a team of experts. Within Property Management, a Six Sigma certified individual may lead a team of property management experts in performing the root cause analysis. In all instances the team must remain objective and open to critical analysis…“finger pointing” is unhelpful and may ultimately derail the RCA process.

It is acceptable to begin RCA with one or more hypotheses regarding the root causes of the issue. Root causes fall into one of three basic categories:

If significant deficiencies remain, the CO issues a Level III CAR, disapproves the contractor’s property management system, and may initiate contractual remedies. The contractor then has 45 days to submit a corrective action plan. If the GPA and CO determines that the CAP is acceptable, the CO may elect to reduce contractual remedies on a prospective basis. The contractor then executes the CAP, and the GPA reviews the corrected deficiencies. If the deficiencies are corrected, the CO notifies the contractor of property management system approval, withdraws contractual remedies, and closes the CAR.ii

Figure 2: Business System Significant Deficiency Corrective Action and Resolution Process

Notify contractorof system approval,

discontinue paymentwithhold, close

CAR

ExecutesCAP

NO

BUSINESS SYSTEM SIGNIFICANT DEFICIENTYCORRECTIVE ACTION AND RESOLUTION PROCESS

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Notified ofsystem approval,initiates Level 2

CAR processas required

Notified ofsystem approval,initiates Level 2

CAR processas required

Reviews ContractorInitial Determination

Response andprovides DACO/ACO

with assessment

INITIALDETERMINATION

SYSTEMAUDIT

CONTRACTORRESPONSE

FINALDETERMINATION

CORRECTIVEACTION PLAN

CONTRACTORACTION

DACO/ACOAPPROVAL

Reducespayment withholds

to 2%

REFERENCES:

DFARS 252.245-700

Contractor Property Management

System Administration

DFARS 252.242-7005 Contractor

Business Systems

DCMA Instruction 124 Contract

Property Management

DCMA Instruction 131 Contractor

Business Systems

DCMA Instruction 1201 Corrective

Action Process

YES

Contractorresponds

SubmitsCAP

Contracting O�cerissues initial

determination 10days after

receiving BSAS

Contracting has30 days

to respond

ContractingO�cer

issues initialdeterminationwithin 30 days

Contractor has45 days to submit

CAP afterreceiving finaldetermination

ContractingO�cer

evaluates CAPwithin 15 days

of receipt

Functionalspecialist must

review within90 days orwithholds

reduced by 50%

No time limit forContracting O�cer to

approve previously disapproved system..

rule provides thatit be done “promptly.”

Significantdeficiencies?

Submit BSASto DACO/ACO

Auditcomplete

NO

NO

YES

YES

AcceptableCAP?

Reviewscorrected

deficiencies

Notify DACO/ACO of

corrected deficiencies

Deficienciescorrected?

NO

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• Physical causes – tangible items have failed in some way• Human causes – people did something wrong or did not

do something that was needed to be done• Organizational causes – a system, process, or policy that

people use to make decisions or do their work is faultyiv

Hypotheses about the root causes of a given deficiency must be tested experimentally using quality management tools. While there are many quality management tools that may be used, we will explore three examples of useful root cause analysis tools…the “5 Whys” technique, Ishikawa (fishbone) diagrams, and Pareto charts.

The “5 Whys” tool is simply the practice of asking “why” 5 times (or as many times as practical or logical given the situation) to identify the true underlying root cause of the issue. Without asking “why” multiple times, contributing causes may be identified without identifying the true underlying cause, leading to recurrence of the issue.v For example, suppose a deficiency is identified in which Government property is found in a lab without proper identification or property management system records:

Why was property found in the lab without proper identification or records? Property Management was not notified that the property was received.

Why was Property Management not notified that the property was received? The assets were not brought into the contractor’s facility through the Receiving department.

Why were the assets not brought in through the receiving department? The assets were acquired on a purchase card.

Why were the assets acquired on a purchase card? The traditional procurement process takes 6-8 weeks lead time and program personnel needed the assets for a “quick react” effort.

At this point, even though we have asked “why” only 4 times, we have reached a logical root cause for the identified deficiency…no process exists to identify and record Government Property acquired directly by end users on purchase cards.

We could continue to explore why “quick react” efforts are necessary, or why the traditional procurement process takes 6-8 weeks, but we would find that the answers to those questions lie outside of property management-related issues. If we had not continued to ask “why” after identifying the initial deficiency, corrective actions may have simply stopped at tagging and recording the specific assets that were found by the auditor. However, by continuing to probe deeper into the process we were able to identify a more systemic issue, the lack of a process to identify and record property acquired on purchase cards, and direct corrective actions toward ensuring that the issue doesn’t happen again in the future.

Another tool that can be used in conjunction with the “5 Whys” technique is the Ishikawa Diagram. This tool is named for its creator, Japanese Quality Management expert Kaoru Ishikawa, and is sometimes known as a “fishbone” diagram due to its resemblance to a fishbone. An Ishikawa Diagram lists potential causes on the left which lead to an effect

(usually, the problem to be solved) on the right. Potential causes are grouped into categories to help isolate root causes. While there have been many variations on the names and number of the categories, we will divide them into six:

• People – someone did not do something they were supposed to do, or did something they were not supposed to do

• Methods – there was an inherent flaw in the process that was followed

• Materials – there was an inherent flaw in the tangible materials used in the process

• Machines – there was a flaw in the machinery that was used in a process, such as a mis-calibrated instrument

• Measurements – measurements were taken incorrectly or incorrectly applied, leading to a faulty result

• Environment – some environmental variable such as temperature, humidity, or business culture contributed to an issuevi

Of course, these are general categories and there may be some overlap between them, but they are generally useful for grouping potential causes. Let us examine an Ishikawa Diagram for our example of property found un-tagged and unrecorded in the property system:

The final tool that we will examine is a Pareto chart, named for 19th century Italian economist Vilfredo Pareto, who observed that 80% of the land in Italy was owned by about 20% of the population. This idea is now popularly known as the Pareto principle, or the 80/20 rule, which states that

Figure 3: Ishikawa Diagram

NOTE: Not all of the categories apply to every issue. In this particular example, Machine and Measurement are not relevant. While all of the potential causes listed are proximate causes of the problem, we decide that the ultimate cause is that no process exists to identify government property bought using purchase cards.

GP found

untagged and

unrecorded

in Property

System

CAUSE EFFECT

MACHINE

PERSONNEL

METHOD

MEASUREMENT

MATERIALS

ENVIRONMENT

Program lacked critical assets for

deliverable

No process to identify GP bought

on P Cards

Pressure to acquire program assets

quickly

Lack of accountability for Government

Property

Standard procurement process takes up to

8 weeks

Lack of awareness of Property Management

requirements

Property Management not aware that property had

been acquired

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roughly 80% of the effects come from 20% of the causes.vii A Pareto chart is useful for helping to identify which problem to address first out of a large set of occurrences.viii For example, let’s assume a contractor is performing a wall-to-wall physical inventory. At the end of the initial inventory sweep several hundred assets remain to be located across the company’s sites. The Property Manager prepares a Pareto chart to evaluate which sites should receive the most attention during secondary sweep efforts in order to have the largest possible impact toward completing the physical inventory:

The Pareto chart shows the number of occurrences (in this case, unlocated property items) on the primary (left) vertical axis, the company’s sites on the horizontal axis, and the cumulative percentage on the secondary (right) vertical axis. From analyzing this chart, the Property Manager can quickly determine that 74% of the remaining assets to be inventoried can be completed by concentrating on three sites: Chicago, Phoenix and Nashville. This is not to say that the unlocated items at the other sites are not important; however, an organization with a limited physical inventory team should send resources to the sites where they can have the most impact quickly.

Now that we have successfully identified the root causes of the property management deficiencies outlined in our corrective action request, we must also address in our CAP if other products and processes are affected by the root cause. For example, you may have received a CAR for being unable to locate special tooling, but this may affect more than just the property management process of physical inventory, the lost tooling may impact your company’s ability to complete

deliverable products. Another example may be that failure to perform adequate subcontractor control may also affect the processes of records (if you don’t have accurate records of property accountable to suppliers) and contract closeout (if you fail to account for supplier-held property accountable to a closing contract). It is important to carefully consider whether other products or processes are affected by the root cause, since you may identify additional deficiencies that require self-disclosure during this investigative process.

As we have seen, it is important to develop corrective actions only after the root causes have been identified. Effective corrective actions will directly address the root causes and prevent recurrence of the issues. In our example of untagged

Figure 4: Pareto Chart Example

2018 ASSETS INVENTORIED BY SITE

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property found in a lab, simply tagging the property and creating records would not be sufficient. Since the root cause was identified as the lack of a process to identify and record government property acquired on purchase cards, an effective corrective action would address this issue. It is important that each corrective action have a target date identified for completion and a responsible person assigned to the task so that all parties are clear as to what will be accomplished and who will own the outcome.

The final step in the corrective action process is to validate and demonstrate that the implemented corrective actions have been effective. In order to do this, it is recommended to perform an internal audit or self-assessment of the issue after

sufficient time has elapsed for the corrective actions to take effect. In some cases this may be a few weeks, however, in the case of very complex issues or when significant changes to processes have been implemented up to three to six months may be appropriate.

When properly applied these root cause analysis techniques can help your property organization achieve much in the way of continuous improvement. Learning to address the true underlying causes of business problems allows your organization to move away from a mode of constant firefighting toward process optimization. More importantly, effectively resolving customer issues will lead to greater customer satisfaction and provide benefits to you and your company. You may not be able to completely avoid corrective action requests, but you can resolve them effectively and focus on the next set of business challenges.

REFERENCESi Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction 1201- Corrective Action Process. Retrieved from http://www.dcma.mil/Portals/31/Documents/Policy/DCMA-INST-1201.pdf, pp. 14-16.ii Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction 1201- Corrective Action Process. Retrieved from http://www.dcma.mil/Portals/31/Documents/Policy/DCMA-INST-1201.pdf, pp. 20-21.iii Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction 1201- Corrective Action Process. Retrieved from http://www.dcma.mil/Portals/31/Documents/Policy/DCMA-INST-1201.pdf, p. 17.iv Stempien, Jeffrey. (2018) Basic Elements of Root Cause Analysis. Retrieved from https://amsconsulting.com/articles/basic-elements-of-root-cause-analysis-jeff-stempien/v Barsalou, Matthew A. (2015) Root Cause Analysis: A Step-By-Step Guide to Using the Right Tool at the Right Time. Boca Raton, FL: CRC Press, p.33.vi Barsalou, Matthew A. (2015) Root Cause Analysis: A Step-By-Step Guide to Using the Right Tool at the Right Time. Boca Raton, FL: CRC Press, pp. 17-18.vii Pareto Principle. Retrieved April 19, 2018 from Wikipedia https://en.wikipedia.org/wiki/Pareto_principleviii Barsalou, Matthew A. (2015) Root Cause Analysis: A Step-By-Step Guide to Using the Right Tool at the Right Time. Boca Raton, FL: CRC Press, p.23.

ABOUT THE AUTHOR:

Brandon Kriner, CPPM, CF is a Director at Sunflower Systems where he works closely with clients to realize the greatest value from their assets. Previously he was the Director of Property Management for Northrop Grumman Aerospace Systems and the Senior Manager of Enterprise Asset Management at Harris Corporation’s Government Communications Systems Division. Brandon is the NPMA Executive Vice President, the chair of ASTM Subcommittee E53.20 on U.S. Government Property Management, and participates in the NDIA Government Property Systems Committee. Brandon lives in the Sacramento, California area with his wife and children.