Kenneth Fletcher
NS&D Monitor
4/04/2014

The Department of Energy is proposing a new regulation that would allow it to withhold payments if a contractor’s business systems have “significant deficiencies.” That includes the accounting, estimating, purchasing, earned value management and property management systems. “DOE proposes to implement compliance enforcement mechanisms in the form of a business system clause and related clauses that allow contracting officers to withhold a percentage of payments, under certain conditions, when a contractor’s business system contains significant deficiencies,” states a notice of proposed rulemaking posted in the Federal Register this week.

The rule would apply to large business prime contracts worth more than $50 million, and to large business prime contracts worth over $10 million if “the contracting officer determines it to be in the best interest of the Government,” according to the notice. The change would not impact management and operating contracts. “Contractor business systems and internal controls are the first line of defense against waste, fraud, and abuse. Weak control systems increase the risk of unallowable and unreasonable costs on Government contracts,” states the notice. “To improve the effectiveness of DOE’s oversight of contractor business systems, DOE is considering a rule to clarify the definition and administration of contractor business system.” The proposed rule is open to a 60-day comment period.