Proposed Update to DFARS Business Systems Rule Would Impose Significant Burden on Contractors to Self-Assess and Self-Report on System Compliance

On Tuesday, July 15th, DOD issued a proposed rule that would update the DFARS Business Systems Rule to require contractors to self-assess and report on business system compliance.  Contractors with estimating systems, accounting systems, and material management and accounting systems subject to the Business Systems Rule requirements would be required to provide a report on compliance with the relevant system criteria.  These same systems also would be subject to a triennial audit by an independent contractor-selected Certified Public Accountant (“CPA”) to assess the contractor’s compliance with the applicable system criteria.

If adopted, the proposed DOD rule would impose a significant obligation on contractors both to adequately and accurately self-assess and report on business system compliance and to obtain an independent review of system compliance.  Inadequate contractor system reviews or inaccurate reporting of system compliance could have significant consequences for contractors, including payment withholding, negative past performance evaluations, cost disallowances, inability to receive contracts and potential False Claims Act liability.

In anticipation of this DOD update to the business system rule, Dentons has been preparing an updated edition of its Business Systems Compliance Guide.  The updated guide will provide up-to-date information and assistance to contractors seeking to understand and assess the acceptability of their business systems under the DOD Business Systems Rule.

Thomas Lemmer

About Thomas Lemmer

Thomas A. Lemmer routinely counsels and litigates for clients on US federal contract formation, contract administration and dispute resolution. Tom also counsels clients on global procurement issues, with the assistance of Dentons’ offices worldwide, including employment issues, how to do business in a given country, how to do business with the US government and risk assessments.

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