Rule would allow payments withhold from contractors with business systems problems

////Rule would allow payments withhold from contractors with business systems problems

Rule would allow payments withhold from contractors with business systems problems

A DoD draft ruling published in the Federal Register this week, would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to add a new contract clause requiring contractors to certify that they have no major business systems defects.  The ruling defines business systems as comprising: accounting, estimating, purchasing, earned value management, and material management systems.  This clause would be added to cost reimbursement, incentive type, time and materials, and labor-hours contracts, as well as fixed-price contracts with progress payments, and some military construction contracts.  If a contractor has business systems deficiencies documented by Defense Contract Audit Agency (DCAA) auditors, and does not provide DoD within 45 days with a plan to correct those systems, contract officers could withhold 10 percent of contract payments.  This withhold could rise to 50 percent if it is determined that a contractor has deficiencies in multiple systems and to 100 percent if defects could lead to improper payments or represent an unacceptable risk of loss to the government.  DoD will take comments on this proposed ruling until March 16, 2010. 

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