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How strategic controls fuel growth in government contracting

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02 minute read 12 Mar 2025
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Forensic & Integrity Services

Contractors must implement compliant and robust controls to succeed in the competitive government contracting landscape.

Over the past several years, the government contracting regulatory environment has changed substantially. Not only are contractors subject to government-specific business system requirements, but they also are being held to increasingly higher standards of compliance. Meanwhile, internal and external stakeholders continue to seek cost savings. While the government does not mandate the use of specific software systems or applications, contractors are expected to have fundamental processes and controls in place to meet specific contract business system requirements.

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As organizations develop and enhance their government market strategy, specific attention should be given to control requirements such as those mandated by the U.S. Department of Defense (DoD). Developing, maintaining and assessing controls for these and other contract requirements go beyond an exercise of compliance. Effective controls and systems are often prerequisites for contract eligibility. In these situations, the successful pursuit of an award is contingent upon the ability to demonstrate system and control requirements. After the contract is awarded, government-approved systems and controls provide an added benefit of decreased scrutiny as government auditors are able to rely on an organization’s controls. Finally, once implemented, effective systems and controls provide organizations with greater efficiencies in government operations — eliminating redundancies and managing risks through a clear delineation and assignment of requirements to organizational functions, processes and roles.

 

The DoD implements the rules related to contractor business systems through Defense Federal Acquisition Regulation Supplement (DFARS) contract clause 252.242-7005. This includes contract withholds for contractors found to have significant deficiencies within one or more of their applicable business systems. Per the clause, defense contractors may be subject to one or more of the following six systems:

In addition to the DFARS business system requirements, contractors are expected to have internal controls in place to address the unique requirements of government contracting. These controls should govern the entire lifecycle of a government contract, from making a bid/no-bid decision to contract closeout. While a standard commercial financial control framework will address many of the financial aspects of accounting for government contracts, it will not address the risks and controls that stem from the additional statutory and regulatory requirements related to the pricing, administration and accounting of government contracts.

It is important to have approved business systems in order to increase award eligibility, process efficiencies and trust from the government customer. Disapproved business systems could subject the business to payment withholds and ineligibility to submit bids, which may impact cash flow and lead to a damaged reputation.

Efrain Gutierrez, John Gault and Blake McKelvy also contributed to this article.

Summary 

In recent years, the government contracting regulatory environment has undergone significant changes, imposing higher compliance standards on contractors. Adapting to these changes is crucial for success in the competitive US government marketplace.

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Authors

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Forensic & Integrity Services

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