Compliance Review and Gap Analysis for Federal Acquisition Regulation, including 'Business Systems' Rule and Unallowable Costs
Compliance Review and Gap Analysis for Cost Accounting Standards
Policies and Procedures Documentation including Manuals, Flowcharts and Narratives
Indirect Rate Preparation and Review
Implementation Services for IT Consulting, including Interfaces and New System Review and Implementation
Implementation of Procurement Services including Strategic Sourcing
Implementation Services for Business Process Enhancement and Outsourcing
Think You Can Avoid the Feds? Think Again… Do you bill the Government based on Progress Payments or a Schedule of Values? The new Business System rule most likely applies to your company.
On May 18th, 2011, the Department of Defense (DoD) issued the Business Systems-Definition and Administration; Interim Rule. After two proposed rules previously issued, this Interim Rule:
Adjusts penalties for "significant deficiencies" (from 5% a deficiency, cap of 20% for multiple deficiencies to 5% a deficiency, cap of 10%).
Provides an exemption for federally designated Small Businesses.
Eliminates the $50 Million dollar threshold for qualification and applies the Business Systems rule to Contractors that are "CAS covered" (Cost Accounting Standards) and when specific contract clauses are included in the contract.
Note that the Interim Rule applies to solicitations issued on or after May 18, 2011. Contracting officers are encouraged, to the extent feasible, to amend existing and new solicitations to include the Contractor Business Systems clause (DFARS 252.242-7005). This means that contracts awarded with this DFARS clause will be subject to penalties for any deficiencies found by the government.
The rule requires government contractors to have an internal control system with over one hundred control objectives for six key business systems: Purchasing, Accounting, Estimating, Earned Value Management System (EVMS), Government Property, and Material Management Accounting Systems (MMAS). If a “significant deficiency” occurs, the government can withhold 5 percent of contract payments, to a maximum of 10 percent for multiple deficiencies across the systems.
Often, contractors don’t realize they’ve signed up for these requirements, because the implementing contract clause is normally included by “reference” (i.e., just the clause number and title are shown).
Will your company be caught non-compliant? Make sure turn to the right partners to help you comply with the new rule.
How Auxis and RB Simmons Can Help
Partnered with industry leader Brian Simmons, Auxis has developed a flexible, practical approach to help companies comply with the new regulations. With a 14 year track record of helping companies improve internal controls, information systems and business processes, as well as, holding a SAS 70 certification, Auxis’s outsourcing capabilities provide a smart alternative for achieving compliance with IT control .
Brian Simmons of RB Simmons is recognized as an Industry Leader in Federal Government Contracting Compliance, specifically for this "Business Systems Rule" (Experience includes numerous Architecture, Engineering, and Construction companies.)
Together they deliver a cost effective strategy, favorable rates and greater value than the competition. Leverage them as a “one stop shop” and allow your organization the ability to assess and implement, without the independence issues of an attestation firm.
Interested in finding out more? Contact John Stunson at 954.236.4000 or at john.stunson@auxis.com.
Many think they won’t qualify for “large company” regulatory requirements.
Are these objections keeping you from moving forward now?
“I don’t qualify, I do hard bid fixed price jobs!” Fixed price contracts receiving progress payments may qualify, as do cost reimbursable, incentive, and time and materials contracts.
“My contracts are too small to be covered!” If your company is CAS covered (Fed Contracts over $50M) or Modified CAS Covered (Fed Negotiated Contracts of only $7.5M) the Business Systems rule applies. If your company Bills from a schedule of values, and / or has any of the six Business Systems clauses, you most likely qualify!
“My internal control system is already strong!” The internal control system must adhere to “special requirements of government contracting.” Auditors have been known to cite deficiencies for even minor mistakes. For example, an Accounting System was deemed inadequate because the accounting manual had too many spelling and grammatical errors!
“I only do Government Commercial or Government Construction Contracts!” The Government specifically states “The Government is at risk when a contractor's business systems contain significant deficiencies, regardless of contract type.” Therefore, Government Commercial and Government Construction contracts are subject to the rule.
“We only do state government jobs, not Federal!” Many state contracts receive Federal funding and incorporate Federal FAR and CAS “flow-down” provisions.
“I won’t get audited!” The Defense Contract Audit Agency (DCAA) has committed to prioritizing business system audits and has taken steps to address staffing challenges.
“I won’t do anything until the regulation is finalized!” The interim rule applies to solicitations issued after May 18th and all applicable contracts awarded after August 16th! Establishing a compliance system can take months, and new qualifying contracts will require compliance within a very short window. Therefore, penalties may apply to companies willing to procrastinate and roll the dice.
