Congress recently passed legislation (Section 893 0f the National Defense Authorization Act of 2011) requiring the Secretary of Defense to develop a program ensuring that “contractor business systems” provide timely, reliable information for the management of Department of Defense programs. “Contractor business systems” include accounting systems, estimating systems, earned value management systems, material management and accounting systems, and property management systems.
The program required by this legislation will set requirements for contractor business systems, establish a process for reviewing contractor business systems, and provide for disapproval of any contractor business system that has a significant deficiency. If a contractor business system is disapproved, DoD will work with the contractor to develop a corrective action plan. Until the system is approved, DoD may withhold up to 10 percent of progress and other payments on cost type contracts with contractors that are covered by the Cost Accounting Standards.