In the world of government contracting, the stakes are high, with the federal government spending around $600 billion each year on goods and services. Compliance plays a valuable role in securing these contracts.
Government contract compliance is necessary to ensure that taxpayer dollars are put to good use. A single mistake or a relaxed approach towards compliance could have further consequences than just losing lucrative contracts.
It could mean suspension or debarment from future government contracts, fines and penalties, and damaging the reputation of the company.
Government Contractor Compliance Requirements and Significance
The path to compliance is strewn with many regulatory hurdles. The following are the main requirements:
The Federal Acquisition Regulation (FAR)
The Federal Acquisition Regulation (FAR) is the primary source of procurement rules for the federal government. The over 2,000-page resource is just the beginning, as it references and incorporates agency-specific regulations. It covers ethical standards, competitive practices, and contract administration, among other topics.
Compliance with FAR demonstrates that a company is committed to serving its clients and the public with integrity, transparency, and accountability.
Code of Ethics Requirements
In addition to FAR, federal contractors are also subject to specific code of ethics requirements. These are:
The Federal Anti-Bribery Statute, 18 USC §201
Under this statute, it is a criminal offense for a government contractor to promise, offer, or give anything of value to a public official in exchange for favorable treatment. This includes gifts, gratuities, favors, and other forms of compensation. The regulation aims to promote fairness, transparency, and ethical behavior in conducting business with the federal government.
The Anti-Kickback Act
The act makes it illegal for contractors to provide, attempt to provide, or offer any form of kickback to another contractor, subcontractor, or employee. The provisions are in place to ensure that business decisions within the federal contracting environment are based solely on the merit of the products and services being provided rather than on illegal personal gains.
Procurement Integrity
Government contractors are expected to maintain integrity when it comes to confidential information. They are prohibited from obtaining or seeking non-public information regarding a government contract before its award. This ensures that the procurement process is fair, impartial, and transparent.
Conflict of Interest
In federal contracting, companies must disclose any potential conflicts of interest that may arise during the procurement process. This, too, ensures fairness in the procurement process.
Other Requirements
Contractors also encounter other requirements, including the following:
Federal Procurement Ethics Training
Government contractors are required to complete federal procurement ethics training. This ensures a clear understanding of the ethical standards and regulations they must comply with when conducting business with the federal government.
Contingent Fees
They are also obligated to certify that they have not entered into any agreements where a third party’s compensation is contingent on the winning of the contract.
When contractors engage with third parties whose payment relies on contract approval, there’s a tendency to cut corners to mitigate losses. Prohibiting contingent fees upholds the fairness, transparency, and integrity fundamental to federal contracting.
Certifications
Certifications may also be needed. These can include the Certificate of Independent Pricing (FAR §52.203-2), which certifies that the bid was developed independently.
The Certification of Final Indirect Costs (FAR §52.242-4) may also be required. It certifies that the indirect costs submitted are accurate, complete, and current. These certifications help prevent fraudulent activities and ensure the procurement process remains fair and transparent.
Special Audits
Government contractors may also be subjected to special audits. The audits help to verify the accuracy of the contractor’s financial statements and review compliance with applicable laws and regulations. They can also be used to evaluate the effectiveness of their internal controls over financial reporting.
The Defense Contract Audit Agency (DCAA) or similar government bodies usually handle such audits. Factors such as high-risk contracts or irregularities in regular audits can trigger a special audit.
A significant change in the contractor’s business operations or ownership can also prompt a special audit. These audits provide additional assurance for the government and taxpayers that their funds are being used appropriately.
Work With Seasoned CPAs for Government Contract Compliance
The intricacies of federal procurement can be overwhelming for both first-time and experienced contractors. From understanding the various regulations applicable to their specific business and industry to navigating the bidding process, many potential roadblocks can hinder success.
That is why it is imperative to enlist the help of professionals. The seasoned CPAs at Diener & Associates have extensive experience in the intricacies and nuances of government contract compliance.
We possess the skill set to guide companies of all sizes through government contracting to include bidding, meeting regulatory requirements, contract administration, and maintaining compliance over time. Contact Diener & Associates today to learn more and to succeed in the world of federal procurement.