With the finalization of its rule on contractor business systems, the U.S. Department of Defense now is able to withhold a contractor’s pay if it has deficient business systems. A DOD contracting officer can withhold up to five percent of a contractor’s progress payments or interim payments upon a determination that a significant deficiency in contractors’ accounting, estimating, purchasing, earned-value management, material management, or property management systems.
As stated in an article published by Law360, Husch Blackwell Partner Dan Donohue recommends that contractors thoroughly test their systems to ensure compliance with the new regulation before an audit is conducted. “I think it’s prudent, I think it’s exactly what the DOD wants industry to do, and I think only good can come of it,” he says. Husch Blackwell Partner Brian Waagner responds to whether or not this new rule will create more work for the Pentagon — and why. “The government says it won’t have more work because contractors will prepare and do the work for them,” he adds.
Waagner also discussed the new rules on Francis Rose’s “In Depth” show on Federal News Radio. Listen to the interview here.
Read more about contractor pay and performance on Husch Blackwell’s blog, The Contractor’s Perspective.