The Defense Department is looking for ideas on how to streamline data and audit requirements for business systems as it seeks to lower compliance costs and make it easier for commercial firms to do business with the department.

In an open letter to DoD stakeholders, Michael Duffey, the department’s top acquisition official, and Michael Powers, acting Pentagon comptroller, asked industry to recommend “common sense contract accounting changes.”

The officials said the department is particularly interested in creating a framework that aligns its data and audit requirements with Generally Accepted Accounting Principles, more commonly known as GAAP, and internal controls companies already maintain under the Sarbanes-Oxley Act of 2002.

The effort is part of a wide-ranging overhaul of the department’s acquisition system as the Pentagon looks to speed up procurement, increase competition and eliminate what it considers overburdensome and unnecessary regulations and processes. 

“[DoD] appreciates your direct feedback on pragmatic ways to streamline data and audit requirements as it pertains to business systems. Your suggestions will provide vital insights to the department that are needed to provide greater understanding of how commercial suppliers manage complex requirements which are critical to our nation’s defense,” the officials wrote.

The push comes as the federal government works to conform cost accounting standards to GAAP to make the accounting more similar to the commercial sector. The Office of Management and Budget and the Cost Accounting Standards Board have already fully rescinded two and gutted most of the other two cost accounting standards. 

The board is currently working to eliminate a fifth standard as well as increase the CAS thresholds.

“This rulemaking demonstrates real progress, taking the first steps to streamline the process where CAS applies. We invite you to continue to provide feedback to advance reform via the public comment process with the CASB,” Duffey and Powers said.

Rich Brady, chief executive officer of the Society of Defense Financial Management, said the changes are long overdue, arguing that the current cost accounting framework is a “vestige of an industrial, rules-based era of accounting that is increasingly outdated in today’s technology-driven economy.”

“There is significant overlap between CAS and Generally Accepted Accounting Principles (GAAP), while private companies increasingly operate highly automated, audited financial systems that provide transparency, consistency, and robust data for analytics and decision-making. Many large multinational companies also report under Extensible Business Reporting Language (XBRL), further demonstrating that modern, principles-based accounting frameworks can provide the transparency and consistency necessary for effective oversight,” Brady told Federal News Network.

“Legacy CAS requirements can create significant barriers to entry for small and mid-sized businesses that may otherwise be capable of providing innovative products and services to the government. Ultimately, the compliance costs imposed by CAS are passed on to the government through higher contract costs and administrative overhead,” Brady told Federal News Network.

Brady said the government should ultimately move away from CAS requirements and rely more heavily on modern technology, automation and data analytics to provide oversight and ensure compliance.

DoD stakeholders have until Aug. 15 to submit their ideas.

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