New changes to the Defense Federal Acquisition Regulation Supplement rules for contractor business systems 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.

Brian Waagner, a partner at Husch Blackwell, wrote about the changes and what they mean for contractors in a post on Contractor Perspective.

Waagner joined In Depth with Francis Rose to discuss the DFARS revisions and, in particular, six changes contractors need to know about.

1. New requirements on contractor business systems only apply to new contracts — those awarded after May 2011, when the interim rules were first published.
2. The rules only apply to contracts that are also subject to DoD’s cost accounting standards.
3. DoD’s final rules state contractor business systems are indicative of contractor responsibility and can be used to discern eligibility for contract awards.
4. The 5 percent withholding is not the only remedy available to DoD.
5. DCAA’s assessments of contractor business systems aren’t necessarily final.
6. Contractors are allowed to challenge assessments of their business systems.

This story is part of Federal News Radio’s daily DoD Report. For more defense news, click here.

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