As the largest procurer of goods and services in the world, the United States Federal Government opts to outsource its needs rather than satisfy them internally. Why? Because of the unique and technical specifications, they require in order to accomplish their missions. With the government turning to federal contractors to satisfy their needs, they require anyone who does business with them to abide by their strict guidelines and regulations. If you have ever seen the movie War Dogs, this is why guidelines exist and compliance matters.
What Does it Mean to Be Federally Compliant?
The government is very particular about who they do business with and how they purchase goods and services. To abide by their own rules, the government must make sure that competition is fair and open, competitive, receive what they paid for, and follows all laws. There are two main regulations for federal procurements. The first is the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFAR). These regulations apply to the majority of federal agencies, but in addition to these requirements, individual organizations may have their own guidelines that need to be followed as well.
FAR rules are the principal rules regarding government procurement in the United States and have been codified in Chapter 1 of Title 48 of the Code of Federal Regulations (CFR), 48 1. Who enforces FAR? The Defense Contract Audit Agency (DCAA) along with the Defense Contract Management Agency (DCMA). More acronyms to add to your ever-growing dictionary. These agencies were put in place to assure the government that businesses that want to do business with them are compliant with FAR policies. The DCAA performs contract audits for the Department of Defense (DoD) among other agencies while the DCMA provides contract administration functions, product acceptance and inspection, and cost/price negotiation support. In short, there are multiple gatekeepers to ensure that a contractor is who they say they are and there is open and fair competition in the federal contracting marketplace.
Additional Rules Commonly Required to Abide By Outside of FAR
- Size standards - this varies by industry and determines whether or not you are a small business
- Sourcing rules that prevent contractors from manufacturing their own materials
- Legal requirements such as the Buy American and the Trade Agreements Act
- Limitations on how often subcontracting work can occur and who you can subcontract with
- Thresholds on work or materials for the contract at hand
- Internal documentation for your record-keeping on business activities
Every contractor is responsible for maintaining compliance with all government rules and regulations that apply. In the event a contractor finds themselves non-compliant, they run the risk of paying the government the full extent of any damage incurred. IE extremely costly penalties. Maintaining federal compliance on all federal government contracting policies is essential in order to be a successful federal contractor.
What Compliance Looks Like Across Your Organization
Your SAM registration and just abiding by the FAR and its supplements is a great start. However, it does not reach the full extent of your compliance. Throughout your organization, you most likely have internal programs you use and an array of personnel. If your systems and people are not compliant with the agencies you do business with, you could face some of the following ramifications:
- Civil or criminal penalties
- Voided or terminated contracts
- Never being able to win a government contract again
The reason the government has such strict guidelines is that many of the goods and services they acquire help keep millions of Americans safe. In the event Americans' lives become jeopardized because of the items they acquired, that falls on the contractor who provided the defunct service.
Elements of Compliance
- Accounting and internal software meet the guidelines set in place by the agencies you do business with. If you do business with the DoD, they trust that their information will not be shared with the wrong internal members, let alone external ones. Some agencies prefer to pay for time and materials (T&M) to account for the exact hours and materials spent on a specific project. If your system cannot account for that, it could result in non-compliance.
- Security clearances are an extremely important piece of ensuring compliance within an agency. The government has LOTS of sensitive and classified data. If there are individuals who can access that data without proper clearance, that can become a monumental problem. Ensure your team has the right levels of compliance, facility clearance, and secure logins.
- The compliance matrix. Does your team have the right personnel? If not, are teaming partners required to satisfy that need or will you need to onboard someone? Are there organizational conflicts of interest? This can occur when you have been working with one agency on a contract and that same office puts out new information that pertains to your existing contract. This can lead to insider knowledge and could result in a severe conflict of interest.
- The Cybersecurity Maturity Model Certification (CMMC). This requirement by the DoD ensures that any contractors doing business with them meets certain cybersecurity practices and processes.
- The Centers for Medicare & Medicaid Services Innovation Center (CMMI) has guidelines to ensure that healthcare payments and service delivery models are abided by and have the proper layers of security.
It is not enough to just be compliant at a specific point in time. As rules and regulations change, it could impact your level of compliance. As you grow your contracting business, your compliance must scale as you do. One way is with the power of REXOTA Solutions. As a professional services company, they are well-versed in maximizing your business's potential with the government.
To dig deeper into the world of federal compliance, this free eBook can help!