DCAA’s March 28, 2012 memorandum summarizes DCAA’s approach to the new DFARS Contractor Business Systems rules. As we discussed in our earlier entries, the DFARS regulations and clauses call for a determination of the adequacy of a contractor’s business systems—accounting, estimating, purchasing, material management—and allow a contracting officer to withhold five percent of contract payments

An interim rule published by the Department of Defense authorizes DoD contracting officers to withhold payment from contractors whose business systems they deem deficient. Issued on May 18, 2011, the rule implements Section 893 of the Ike Skelton National Defense Authorization Act of 2011, which we discuss here. It authorizes COs to withhold up to ten percent of progress payments if the CO determines that the contractor’s business systems contain significant deficiencies. The new rule applies to solicitations issued on or after May 18, 2011. COs are encouraged to amend existing solicitations with the new requirements “to the extent feasible.”