Time Saving Electronic
Payments Benefit Defense Contractors
J. Frank and David K. Guinasso
Defense Contract Management Command (DCMC) has a system that permits
contractors to electronically send progress payment requests to
the government. That same system reviews, validates and pays the
requests, often without human intervention.
soon will benefit from the rapidly expanding Electronic Data Interchange
Progress Payment Program. The program, which DCMC is working on
with other Department of Defense agencies, improves the payment
process by streamlining invoice submission, reducing manual handling
and cutting processing time.
Itís a Time
out in 1995, the program has been working successfully for the last
three years. DCMC and the Defense Finance and Accounting Service
are now aggressively developing enhancements to make it attractive
to virtually every progress payment contractor. "EDI will significantly
improve the whole payment process," said Maj. Gen. Timothy
P. Malishenko, DCMC commander. "With EDI, invoice submission
to payment receipt can take as little as four days, and has taken
only two in some instances."
to maximize reduction in payment processing time, DoD and industry
need to ensure that payment-related documents are designed so that
they can be processed automatically without any manual intervention,"
added Ken Sweitzer, deputy director for Contract Pay and Disbursing,
Electronic Data Interchange Works
The EDI process
begins when transaction data travels from the contractor through
the Value Added Network to the Defense Information Systems Agency
Regional Services Activity in Columbus, Ohio. The system then determines
whether the transaction can go directly to the Mechanization of
Contract Administration Services system for processing and payment,
or whether it needs prior review by the DCMC contracting administrative
If prior review
is necessary, the transaction data is conveyed via the Standard
Electronic Processing System to the contract administration office,
where the contracting officer reviews and approves it, all online.
The approval is then transmitted back to Columbus, where the data
is released to the Mechanization of Contract Administration system
services for processing and payment. The system includes safeguards
and notifications in the event that a transaction is rejected during
Response Is Good
had an excellent experience using the progress payment program,"
said Jan Wilhelm, director of Business Operations for Northrop Grummanís
Worthington, Ohio, office. "The federal employees we work with
are very responsive, and weíve had very few problems. Soon more
of our invoice payments can go through EDI."
DCMC and its
partners quickly realized that EDI was an improvement over manual
processing. The most obvious benefit is the speed with which transaction
data can travel from the contractor to the government, avoiding
Only Fast, Itís Also Accurate and Paperless
another benefit because the contractor prepares a request and inputs
it as a transaction, which avoids input errors at the payment office.
Secondly, the Standard Electronic Processing System program performs
several validations, and will reject the payment request early in
the process if there are problems. This provides earlier notification
to the contractor so the transaction can be corrected. EDI also
eliminates paper, and, importantly to contractors, improves cash
DCMC and the
Fleet Management Support Office in Mechanicsburg, Pa., continue
to improve the EDI process. Although DCMC initially deployed EDI
progress payments in a DOS version, the Fleet Management Support
Office subsequently developed an enhanced version. The new version
not only operates in a Windows environment, but also can process
payments on complex contracts, which couldnít be handled in the
DOS version. Just about any progress payment request can now be
transmitted via EDI. Carrying the improvements even further, DCMC
will soon deploy a streamlined approval process, reducing processing
time even further.
about 75 different contractor locations are submitting EDI progress
payments. They account for 40 percent of progress payment requests
and 53 percent of progress payment dollars.
Invoicing System Allows Contractors to Sign On to a Secure Web Page
DCMC is working
aggressively to increase the use of EDI, and is supporting the Defense
Finance and Accounting Service and the Defense Contract Audit Agency
in the use of other EDI invoicing methods for public vouchers and
commercial invoices. DFAS recently unveiled the Web Invoicing System,
which is a World Wide Web based application for invoicing. WInS
allows contractors to sign on to a secure web page, enter the invoice
data and send it off, via an EDI transaction, to DFAS Columbus.
cannot yet handle progress payments, DCMC is working with DFAS to
change that. DCMC expects to have progress payment functionality
in WinS relatively soon. A Web-based progress payment method will
offer quick and inexpensive entry for contractors into EDI invoicing.
It particularly offers advantages to contractors that submit a small
number of progress payments each month, since minimal up front investment
Data Interchange for Invoicing Will Be the Norm
The use of
EDI is expanding, and DCMC expects that it very soon will be the
normal way of submitting an invoice because EDI transactions are
so much faster, more accurate and easier to process than paper.
They have fewer errors, and those errors that do occur are caught
sooner. DCMC contends EDI is a business process that efficient contractors
will find hard to resist.
interested in the EDI progress payment process can contact Kevin
Carroll or Esy Dunn at the Defense Contract Management Command Economic
Commerce Program Office, (617) 753-3092 or (617) 753-3360. Their
homepage is http://www.dcmde.dla.mil/ediec.htm.
Frank and David K. Guinasso are Contract Specialists at the Defense
Contract Management Command at Fort Belvoir, VA. You may reach Tim
Frank at firstname.lastname@example.org
or (703) 767-3431. You may reach Dave Guinasso at email@example.com
or (703) 767-2354.