Written by: Gracie Gutierrez
Introduction
In the realm of government contracting, compliance policies are essential as they reflect a contractor’s dedication to adhering to federal, state, and local regulations. These policies not only promote consistent behavior among staff but also mitigate the risk of non-compliance. Well-structured compliance frameworks can significantly reduce the likelihood of violations in government procurement processes and establish clear standards for various operational aspects, including timekeeping, travel, delegation of authority, accounting, estimating, billing, and labor management. Furthermore, they can guide the development of future policies in response to new governmental mandates.
Understanding Federal Acquisition Regulations and Cost Accounting Standards
Every government agency operates under a specific set of compliance standards. Most contractors primarily reference two key federal regulations: the Federal Acquisition Regulation (FAR) and the Cost Accounting Standards (CAS). The FAR outlines the rules governing government procurement, serving as the foundational framework for agencies when acquiring goods and services. In contrast, the CAS aims to ensure uniformity in contractors’ cost accounting practices, covering aspects such as cost measurement, assignment to accounting periods, and allocation to cost objectives.
The Importance of DFARS Compliance
For contractors engaged with the Department of Defense (DoD), adherence to the Defense Federal Acquisition Regulation Supplement (DFARS) is crucial. This supplement adds additional requirements to the FAR specifically for the Defense Industrial Base (DIB). DFARS clause 252.242.7005 outlines what constitutes “acceptable contractor business systems,” including the accounting system clause 252.242.7006, which contractors must comply with if specified in their contracts.
Role of Federal Government Auditing Agencies
The Defense Contract Audit Agency (DCAA) plays a pivotal role in auditing DoD contracts, ensuring that organizations comply with established regulations. The DCAA, along with other federal auditing bodies, utilizes FAR and CAS standards to verify that businesses operate within approved financial and accounting parameters. Additionally, the Defense Contract Management Agency (DCMA) monitors contractor practices to ensure compliance from contract award through to closeout.
Broader Compliance Considerations
Beyond the DoD, contractors may face scrutiny from the Inspector General (IG), who audits government agency actions to ensure adherence to established policies and regulations. Various audit agencies exist within other federal departments, including the U.S. Department of Housing and Urban Development (HUD), the U.S. Environmental Protection Agency (EPA), the U.S. Department of Labor, and NASA.
Common Types of Government Audits
1. Incurred Cost Audit: Evaluates accounting practices to ensure costs are allowable, allocable, and reasonable.
2. Pre-Award Survey: Assesses the contractor’s accounting system and procedures, including cost management and billing.
3. Defective Pricing Audit: Verifies that cost and pricing data are accurate and up-to-date.
4. Forward Pricing Audit: Reviews contract pricing rates to establish a fair basis for cost proposal negotiations.
5. Compensation and Benefits Audit: Examines the contractor’s compensation system and internal controls.
6. Contractor Purchasing System Review (CPSR): Analyzes the contractor’s purchasing system and related controls.
7. Timekeeping and Labor Audit: Ensures accurate recording of time worked on projects.
Safeguarding Sensitive Data in the Federal Supply Chain
The Department of Defense is actively working to enhance cybersecurity among government contractors through initiatives like the Cybersecurity Maturity Model Certification (CMMC) and regulations related to the International Traffic in Arms Regulations (ITAR). Each of these frameworks has specific compliance requirements that are being implemented across the industry.
– CMMC: This model combines various cybersecurity standards and best practices, developed with support from the DoD.
– NIST SP 800-171: Contractors handling non-classified sensitive data must meet baseline security requirements as outlined in FAR clause 52.204-21.
– FedRAMP Moderate Baseline: Costpoint GovCon Cloud Moderate (GCCM) has achieved FedRAMP Moderate Ready status, demonstrating its commitment to cybersecurity compliance.
– ITAR: This regulation governs the export of defense and space-related articles and services to protect U.S. national security and foreign policy interests.
In conclusion, understanding and adhering to government contracting compliance is vital for contractors aiming to succeed in this highly regulated environment. By implementing robust compliance policies and staying informed about evolving regulations, contractors can navigate the complexities of government procurement with confidence.