REQUESTS CORRECTIVE ACTION PERFORMING ROOT CAUSE ANALYSIS FOR

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1 PERFORMING ROOT CAUSE ANALYSIS FOR CORRECTIVE ACTION REQUESTS I BY BRANDON KRINER, CPPM, CF, BAY AREA CHAPTER n 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. 8 THE PROPERTY PROFESSIONAL VOLUME 30, ISSUE 4

2 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 noncompliances 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 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 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 or failure to respond to a lower level CAR Yes Possible IV Issued when non-compliance is of a serious nature or when a Level III CAR has been ineffective Yes Mandatory 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. 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 , 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. 9

3 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 BUSINESS SYSTEM SIGNIFICANT DEFICIENTY CORRECTIVE ACTION AND RESOLUTION PROCESS SYSTEM AUDIT INITIAL DETERMINATION CONTRACTOR RESPONSE FINAL DETERMINATION CORRECTIVE ACTION PLAN CONTRACTOR ACTION DACO/ACO APPROVAL CONTRACTING OFFICER GOVERNMENT AUDITOR Audit complete Submit BSAS to DACO/ACO Significant deficiencies? YES Issue initial Determination Reviews Contractor Initial Determination Response and provides DACO/ACO with assessment Significant deficiencies remain? YES Issue Level 3 disapprove system, withhold payments 5% Acceptable CAP? YES Reduces payment withholds to 2% Reviews corrected deficiencies Deficiencies corrected? Notify contractor of system approval, discontinue payment withhold, close CAR CONTRACTOR Notified of system approval, initiates Level 2 CAR process as required Contractor responds Notified of system approval, initiates Level 2 CAR process as required Submits CAP Executes CAP Notify DACO/ ACO of corrected deficiencies REFERENCES: DFARS Contractor Property Management System Administration DFARS Contractor Business Systems DCMA Instruction 124 Contract Property Management DCMA Instruction 131 Contractor Business Systems DCMA Instruction 1201 Corrective Action Process Contracting Officer issues initial determination 10 days after receiving BSAS Contracting has 30 days to respond Contracting Officer issues initial determination within 30 days Contractor has 45 days to submit CAP after receiving final determination Contracting Officer evaluates CAP within 15 days of receipt Functional specialist must review within 90 days or withholds reduced by 50% No time limit for Contracting Officer to approve previously disapproved system.. rule provides that it be done promptly. 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 effective iii 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: 10 THE PROPERTY PROFESSIONAL VOLUME 30, ISSUE 4

4 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 faulty iv 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 issue vi 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: Figure 3: Ishikawa Diagram MACHINE PERSONNEL METHOD CAUSE Standard procurement process takes up to 8 weeks Lack of awareness of Property Management requirements Property Management not aware that property had been acquired No process to identify GP bought on P Cards MEASUREMENT MATERIALS Program lacked critical assets for deliverable Pressure to acquire program assets quickly Lack of accountability for Government Property ENVIRONMENT TE: 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. 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 EFFECT GP found untagged and unrecorded in Property System 11

5 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: Figure 4: Pareto Chart Example 2018 ASSETS INVENTORIED BY SITE % % 80% 70% 60% 50% 45 40% % 20% 10% 0% CHICAGO PHOENIX NASHVILLE FT. WORTH ANAHEIM ORLANDO NEW ORLEANS LAS VEGAS MYRTLE BEACH 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 12 THE PROPERTY PROFESSIONAL VOLUME 30, ISSUE 4

6 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. REFERENCES i Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction Corrective Action Process. Retrieved from pdf, pp ii Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction Corrective Action Process. Retrieved from pdf, pp iii Defense Contract Management Agency Defense Contract Management Agency (2015) Instruction Corrective Action Process. Retrieved from pdf, p. 17. iv Stempien, Jeffrey. (2018) Basic Elements of Root Cause Analysis. Retrieved from 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 vii Pareto Principle. Retrieved April 19, 2018 from Wikipedia en.wikipedia.org/wiki/pareto_principle viii 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. 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 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. 13