RISK ASSESSMENT CASE STUDY
The Role of a Consulting Firm in Corporate Compliance

By Jeffery A. White, C.P.M.
J.A. White & Associates, President/CEO



Introduction

Every aspect of business carries some degree of risk. One key responsibility of a supply management professional is managing these risks to avoid situations that might jeopardize a firm’s operations. Risks can be anticipated and controlled in areas such as financial, legal, and performance. In today’s climate, it is difficult to not read about the financial scandals that have plagued many corporations.



The Opportunity

As competition among U.S. Government defense contractors becomes increasingly fierce, each contractor must adopt strategies that can set itself apart from the pack. What better way of doing this then to obtain your top customer's approval of your supply management and subcontracting processes and practices?



Case Study

A multi-national, U.S. based high-technology firm employed a number of procurement professionals in its supply management and subcontracting function. As a major U.S. Government defense contractor, the firm is obligated to operate a supply management and subcontracting function that complies with all aspects of the Federal Acquisition Regulations (FAR). The ultimate measure of its compliance with the FAR is the process of obtaining a supply management and subcontracting function that is compliant with the requirements of the Contractor's Purchasing System Review (CPSR). While conducting a CPSR, the CPSR analysts focus on identifying possible signs of a weak-subcontracting system. Some signs include:

  • Noncompliance with Public Laws, Regulations and Prime Contract requirements.
  • Failing Establishment of good business practices and subcontracting policy and procedures.


Assessment

The firm's Director of Subcontracts was contacted by a U.S. Government auditing agency and informed that his organization would be subjected to a two week CPSR within the next nine months. Because of the time span since the last CPSR, several potential problems surfaced. Some key issues were:



FAILURE is not an option!

There are many negative consequences that are possible as a result of failing a CPSR. The primary, and arguably the most important from an organization's "bottom-line" prospective, is the negative customer perception of the organization.

The U.S. Government's remedy for a prime contractor's failure to pass a CPSR is the withholding or withdrawal of that firm's subcontracting system. This would result in a prime contractor's inability to issue a subcontract without first seeking the written approval, (Advanced Notification and Consent), of a U.S. Government Contracting Officer. This additional approval can cause:

  • Increased cycle time and overhead expenses.
  • Prime contract performance and increased government oversight.
  • Disqualification on competitive request for proposals
  • Loss of Revenue and delayed billings/collections.

In the defense prime contractor's opinion, failure was not an option!

The Solution

The firm quickly realized that its internal audit staff does not use the same set of metrics as the U.S. Government CPSR analysts. After careful examination of its internal resources, the firm made a strategic decision to seek the assistance of a management-consulting firm that specializes in corporate compliance and risk management.

Some key elements of choosing a qualified consulting firm:

  • Industry experience and a successful track record.
  • Project management tools and processes.
  • The ability to rapidly and objectively analyze, review, measure, and recommend the best course of action needed to achieve project objectives.

The firm engaged the services of J.A. White & Associates, Inc. several months prior to the audit and developed a plan of action. Some of those elements were:

  • Conduct a Risk Assessment to determine the firm's strengths and weaknesses.
  • Develop a defined Statement of Work and Project Schedule.
  • Engage in the development of new processes, policies and procedures, desktop guides, and job aids.
  • Develop and conduct training.


The Benefits

As a result of J.A. White & Associates, Inc.'s processes, the firm was able to not only obtain a CPSR-Compliant subcontracting system, but also obtain other benefits such as:

  • Increased spending with socially and economically disadvantaged businesses.
  • Increase the amount of competition in subcontracting.
  • Realize cost savings and reductions in cycle times in the processing of Government "Red Tape" due to unnecessary process based on out dated regulations.


For additional information regarding the implementation of a risk management and corporate compliance program for your firm, you may contact:

Jeffery A. White, C.P.M., President and CEO
J.A. White & Associates, Inc. | 1341 Garner Lane, Suite 104 | Columbia, SC 29210
jawhite@jawhite.com | www.jawhite.com | 803-407-1399 (office)