The Defense Contract Audit Agency has identified six additional small offices for closure as it continues a reorganization that has already eliminated 40 offices across the country. The new closures are proceeding as ongoing and separate restructuring efforts, DCAA told Federal News Network, with the agency citing lease cost reduction and operational efficiency as the primary drivers. DCAA declined to identify which offices are affected or specify the number of employees involved, indicating only that the closures are designed to reduce costs and ensure taxpayer funds are used as efficiently as possible.

Background: The Initial Reorganization

DCAA announced a broad reorganization plan in 2024, targeting completion by September 30, 2025. That phase eliminated 40 suboffices, most of them small locations with fewer than ten employees, and restructured the agency around a central headquarters, 23 regional hubs distributed across the country, and maintained on-site audit presence at major defense contractor facilities. The reorganization simultaneously eliminated the agency previous regional structure and its Corporate Audit Directorates, replacing them with a newly established Centralized Audit Function housed at headquarters and three primary Directorates organized by mission domain: Land, Sea, and Air. DCAA Director Jennifer Desautel described the restructuring as a necessary step toward meeting the agency goal of terminating at least 30 percent of its leases over the next three years.

The initial restructuring affected approximately 160 employees, according to DCAA. The combination of office consolidation, lease terminations, and structural simplification was framed as a way to reduce overhead costs while maintaining the agency capacity to audit the defense contractor base, which spans thousands of contractor locations performing work under hundreds of billions of dollars in defense contracts annually. The shift from a regionally organized structure to a hub-and-directorate model was intended to align auditor expertise with the program domains generating the largest volumes of audit work, rather than organizing purely by geography.

Six Additional Closures

The six offices identified for closure in fiscal 2026 represent a continuation of the same lease reduction strategy that drove the earlier phase. DCAA characterized them as an ongoing and separate effort rather than an extension of the original reorganization plan, suggesting the agency views the restructuring as a rolling process rather than a discrete project with a defined end date. The absence of public disclosure about which specific offices are affected or how many employees work in those locations makes it difficult for defense contractors in affected regions to assess how closures will affect their audit relationships and communication channels with assigned auditors.

Established audit relationships carry significant institutional value. DCAA auditors who have worked with a specific contractor over multiple audit cycles develop familiarity with the contractor accounting system, disclosed practices, cost estimating methodologies, and prior audit findings that inform current-year audits. When audit accounts are reassigned to new auditors following office closures, that institutional knowledge must be rebuilt from documentation, a process that takes time and can affect the pace of incurred cost audits, forward pricing rate reviews, and other ongoing audit activities for contractors mid-cycle when a transition occurs.

Structural Implications

The shift from a regional-and-CAD structure to a hub-and-directorate model changes how DCAA assigns and manages audit work across the defense contractor base. Under the previous structure, regional offices covered geographic footprints and CADs focused on large multi-division contractors whose audit work spanned multiple plant locations. The new Centralized Audit Function at headquarters manages standardization, policy, and the most complex multi-location audits, while the three directorates align audit assignments with the Land, Sea, and Air program areas that collectively generate the majority of DCAA audit volume. Organizing by domain rather than geography allows DCAA to concentrate expertise in the cost accounting and technical characteristics that differ across defense program types.

Some observers have raised questions about whether the reorganization is a precursor to a more fundamental shift in how defense contract audit functions are organized across DoD, including potential consolidation with the Defense Contract Management Agency, which performs contract administration and oversight functions that overlap with portions of the DCAA mission. DCAA has not confirmed any plans along those lines, but the combination of significant structural change, lease reductions, and office closures has prompted contractor associations and industry analysts to monitor the agency trajectory closely for signals about longer-term plans.

Impact on Audit Throughput

DCAA audits affect contractors across a range of high-stakes financial processes: incurred cost audits that determine final prices on cost-type contracts, forward pricing rate audits that establish billing rates for future contracts, and accounting system adequacy assessments that determine whether a contractor can receive cost-type awards at all. Disruptions to staffing and office continuity can affect the pace at which these audits are completed, producing delays with downstream consequences for contractors trying to close out cost-type contracts, settle final overhead rates, or obtain billing rate agreements needed to invoice current awards.

The agency has carried persistent backlogs in incurred cost audits for years, a problem documented in multiple Government Accountability Office reports and Inspector General findings that predates the current reorganization. Contractors with cost-type contracts often wait years for incurred cost audits to complete, creating uncertainty about final contract prices and delaying the closeout of awards that cannot be officially closed until audit findings are resolved. Whether consolidation into hubs will improve audit throughput by concentrating auditor resources or create new bottlenecks during the transition period as accounts are reassigned and relocated staff adjust to new organizational structures and portfolios remains to be seen as the six additional office closures take effect in fiscal 2026.

Contractors

This article covers a federal agency reorganization and does not involve a specific prime contractor. Defense contractors holding cost-type contracts or performing work under contracts subject to DCAA audit jurisdiction should monitor announcements at dcaa.mil for information about office closures, account reassignments, and changes to audit team contacts as the restructuring continues. Contractors with pending incurred cost submissions or ongoing forward pricing rate negotiations should confirm their assigned audit office and point of contact have not changed.

Sources

DCAA to Close Additional Offices Amid Agency Reorganization — Federal News Network
DCAA Announces Reorganization — DCAA.mil