5 Things You Need to Know About the DFARS Business System Rule

As noted in a post last year, contractor business systems rules have changed in the DFARS and are now in effect.  Under the new rules, the government can withhold 5 percent of a contractor’s payment if any of the company’s business systems are found to be “deficient” by the Defense Contract Audit Agency (DCAA).

In particular, there are five changes contractors need to know about.

1. The new requirements only apply to new contracts — awarded after May 2011, when the interim rules were first published.

2. The rules only apply to contracts that are also subject to cost accounting standards (CAS).

3. The rules allow for determining eligibility to award a contract in the first place based on “contractor responsibility” for managing the business systems.

4. The 5 percent is the “big gun”, but is not the only remedy available to DoD.

5. DCAA’s assessments of contractor business systems aren’t necessarily final.  Because the DCAA assessment is not final, contractors are allowed to challenge assessments of their business systems.

I will continue to follow this and hopefully expand a little on each of these topics in future posts – be on the look out and let me know your thoughts.

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