The potential of increase defense funding brings for small and mid-size companies growth opportunities, but also additional compliance risks.
As you build your government contract business, moving toward larger and larger contract values, you will face a significant increase in regulations that require compliance and are subject to audit. The most significant regulations that you will face involve what the DoD refer to as Contractor Business Systems. There are six primary business systems, not all of which your company will be required to meet due to exception thresholds such as contract value and/or small business classification. The business system requirements audits that you should be preparing for are the following:
- Cost Estimating System
- Accounting System
- Contractor Purchasing System
The rules for these systems can be found in DFARS 242.7000. The most significant system that your company needs to pass is the Accounting System audit. If your company fails the Accounting System audit, then obtaining new government contracts will be restricted until your company submits a Corrective Action Plan, implements that plan and pass an follow up audit. This process can take a year or more, which means that your company will be prevented from obtaining additional government work for a year or more.
My suggestion is that while you have the time to make sure your company is in compliance with these regulations, that you have a GAP analysis performed on you policy, procedures and operations to determine where compliance deficiencies exist, from which you can put in place corrective actions plans to correct any deficiencies before you are audited.
TD Government Solutions experts can assist your company in identifying any compliance deficiencies in your business systems, prepare an appropriate corrective action plan, and if need assist in implementation. For more information feel free to contact us.