Winning a government contract is just the beginning. Maintaining compliance throughout the contract lifecycle is crucial for successful performance, positive past performance ratings, and avoiding potential penalties like fines, suspension, or even debarment. This guide provides an overview of key compliance areas in government contracting.
1. Understanding FAR and DFARS Basics
The Federal Acquisition Regulation (FAR) is the primary rulebook governing procurement by most U.S. federal agencies. The Defense Federal Acquisition Regulation Supplement (DFARS) adds requirements specific to the Department of Defense (DoD).
Key aspects include:
Contract Clauses: Specific clauses from the FAR/DFARS are incorporated into your contract, dictating obligations related to labor laws, cost accounting, reporting, data rights, cybersecurity, and more. Understand which clauses apply to your contract.
Cost Principles: Rules governing which costs are allowable, allocable, and reasonable to charge to a government contract (especially important for cost-reimbursement contracts).
Representations and Certifications: Maintaining the accuracy of the reps and certs submitted via SAM.gov throughout performance is vital.
State and local contracts have their own sets of procurement laws and regulations that must be followed.
2. Cybersecurity Compliance (CMMC, NIST)
Cybersecurity is a major focus, particularly for DoD contracts and those involving Controlled Unclassified Information (CUI).
NIST SP 800-171: Outlines security requirements for protecting CUI in non-federal systems. Compliance is often mandatory for handling CUI under DFARS clause 252.204-7012.
Cybersecurity Maturity Model Certification (CMMC): A newer framework (currently rolling out) requiring varying levels of cybersecurity maturity depending on the contract. Contractors may need third-party assessments to achieve certification at certain levels.
Even if not handling CUI, basic cybersecurity hygiene (FAR 52.204-21) is often required. Understanding your specific contract requirements is essential.
3. Reporting Requirements
Government contracts often come with specific reporting obligations. Common examples include:
Progress/Status Reports: Regular updates on project milestones, challenges, and performance.
Financial Reports: Tracking and reporting costs incurred (especially for cost-type contracts).
Subcontracting Reports: Reporting payments made to subcontractors, particularly small or diverse businesses (e.g., via eSRS - Electronic Subcontracting Reporting System).
Government Property Reports: Accounting for any government-furnished property used during performance.
Data Reporting: Specific data deliverables outlined in the contract.
Timely and accurate reporting is critical for maintaining good standing.
4. Record Keeping and Audits
Maintaining thorough and accurate records is non-negotiable. Government agencies, like the Defense Contract Audit Agency (DCAA) for DoD contracts, have the right to audit contractor records.
Financial Records: Keep detailed records of all costs charged to government contracts, ensuring they align with cost principles.
Timekeeping: Accurate records of labor hours charged to specific contracts are essential.
Contract Documentation: Maintain copies of the contract, modifications, correspondence, deliverables, and reports.
Compliance Documentation: Records demonstrating compliance with specific requirements (e.g., cybersecurity assessments, safety plans).
Poor record keeping can lead to disallowed costs, negative audit findings, and payment disputes.
5. Ethics and Business Conduct
Maintaining high ethical standards is paramount. Key areas include:
Truthful Cost or Pricing Data: Providing accurate and complete cost data when required (TINA - Truth in Negotiations Act).
Conflicts of Interest: Avoiding situations where personal interests could conflict with contract performance (Organizational Conflicts of Interest - OCI, and personal).
Gifts and Gratuities: Strict rules limit providing anything of value to government employees.
Mandatory Disclosure Rule: Requirements to disclose credible evidence of certain violations of criminal law, the civil False Claims Act, or significant overpayments.
Establishing a strong code of ethics and providing employee training is highly recommended.
6. Managing Subcontractor Compliance
As a prime contractor, you are often responsible for ensuring your subcontractors also comply with applicable contract clauses flowed down to them.
Flow-Down Clauses: Identify which FAR/DFARS or other clauses must be included in your subcontract agreements.
Due Diligence: Perform appropriate vetting of subcontractors' capabilities and compliance posture.
Oversight: Monitor subcontractor performance and compliance throughout the contract period.
Reporting: Ensure subcontractors provide necessary data for your reporting obligations (e.g., small business subcontracting reports).
Conclusion
Contract compliance is an ongoing effort that requires proactive management, clear processes, and a commitment from leadership. Understanding the specific requirements of your contract, maintaining excellent records, fostering an ethical culture, and staying informed about regulatory changes are key to long-term success in the government marketplace.