Business Week Magazine reports this week that the Pentagon is proposing a rule in the Federal Register that will prevent or withold payment to defense contractors where poor contract management and oversight can be identified.
The proposed rule would give the Pentagon the right “to withhold a percentage of payments under certain conditions, when a contractor’s business system contains deficiencies.”
The rule would cover most defense contracts, as well as other contracts that reimburse companies for costs or pay incentive fees for hitting cost and schedule targets, or those that base payments on time, materials or labor hours.
This is seen as a move by US Defense Secretary Robert Gates to tighten up contract oversight practices to reduce contract overspending.
This clearly means that government contractors are going to have to have much greater control over their contract management processes and how they manage Federal Acquisition FAR and DFAR clauses and obligations. Government contractors should urgently consider the deployment of contract management systems that will help them to streamline their contract processes and provide greater oversight in to contract obligations. Solutions like Dolphin Contract Manager, provide full contract lifecycle management funcitonality as well as FAR and DFAR clause and Obligation Management.