A Complete Government Contract Compliance Checklist: A Guideline for Success

In the government contracting sector, compliance is not just a requirement but a competitive advantage. Adhering to the complex web of regulations, standards, and requirements is essential for securing and maintaining lucrative contracts. Government contractors must be vigilant, ensuring every aspect of their operations aligns with regulatory expectations. 

This comprehensive checklist will help government contractors stay compliant and thrive in this challenging environment.

Why Compliance Matters in Government Contracting

Compliance in government contracting:

• Wins Contracts: Demonstrating reliability and adherence to standards through compliance increases the likelihood of winning contracts. Government agencies prefer contractors who consistently meet compliance requirements, as this reduces the risk of project delays or failures.
• Avoids Penalties: Non-compliance can lead to significant financial penalties, loss of contracts, and reputational damage. Ensuring compliance helps avoid these costly repercussions and keeps the company in good standing with regulatory bodies.
• Ensures Smooth Operations: Adhering to compliance requirements ensures smoother project execution and financial management. It allows for clear, organized operations that can efficiently meet contract specifications and timelines.
• Builds Trust: Consistent compliance builds trust with federal agencies and enhances the contractor’s reputation. This trust is critical for long-term relationships and continued business opportunities with government entities.

How to Ensure Government Contract Compliance

Government contract compliance involves adhering to a variety of regulations, including the Federal Acquisition Regulation (FAR), Cost Accounting Standards (CAS), and specific requirements outlined in contracts and grants. Here are the ten activities that ensure comprehensive compliance:

1. Understand the Federal Acquisition Regulation (FAR): Understanding the FAR is fundamental for any government contractor. This regulation outlines the procurement process and requirements for government contracts. Key steps include:

• FAR Compliance: Familiarize yourself with the FAR, which outlines the procurement process and requirements for government contracts.
• Contract Clauses: Review specific contract clauses applicable to your contract type to ensure full compliance with all stipulated requirements.

2. Adhere to Cost Accounting Standards (CAS): CAS compliance ensures that your cost accounting practices meet federal standards. Necessary actions include:

• CAS Coverage: Determine if your contract is subject to CAS and ensure compliance with its requirements.
• Cost Allocation: Properly allocate direct and indirect costs according to CAS guidelines to maintain transparency and accuracy.

3. Maintain an Adequate Accounting System: An adequate accounting system is crucial for managing government contracts efficiently. Key points include:

• DCAA Compliance: Ensure your accounting system complies with the Defense Contract Audit Agency (DCAA) requirements.
• Internal Controls: Implement robust internal controls to manage and monitor financial transactions to ensure accuracy and compliance.

4. Prepare and Submit Incurred Cost Proposals: Regularly preparing and submitting incurred cost proposals is required for compliance. Steps include:

• Annual Submissions: Prepare and submit incurred cost proposals annually to the DCAA.
• Cost Documentation: Maintain detailed documentation to support all costs claimed for transparency and accuracy.

5. Ensure Timekeeping Accuracy: Accurate timekeeping is critical for compliance and financial management. Actions to take include:

• Timekeeping System: Use a compliant timekeeping system to accurately record employee hours.
• Regular Audits: Conduct regular audits to ensure timekeeping accuracy and compliance, addressing any discrepancies promptly.

6. Comply with Labor Standards: Labor standards compliance is required for government contracts involving labor-intensive projects. Key actions include:

• Service Contract Act (SCA): Ensure compliance with the SCA, which sets wage and labor standards for service contracts.
• Davis-Bacon Act: For construction contracts, comply with the Davis-Bacon Act, which establishes prevailing wage rates to ensure fair compensation.

7. Monitor Subcontractor Compliance: Monitor subcontractor compliance for overall project success. Steps include:

• Flow-Down Clauses: Include necessary compliance clauses in subcontract agreements.
• Oversight: Regularly monitor subcontractors to ensure their compliance with applicable regulations, maintaining project integrity.

8. Follow Procurement Integrity Rules: Adhering to procurement integrity rules ensures ethical operations. Key actions include:

• Ethics Training: Provide ethics training to employees to ensure compliance with procurement integrity rules.
• Conflict of Interest: Establish procedures to identify and mitigate potential conflicts of interest, ensuring ethical conduct.

9. Implement a Cybersecurity Plan: Cybersecurity is increasingly important in government contracting. Key steps include:

• NIST Compliance: Ensure compliance with the National Institute of Standards and Technology (NIST) cybersecurity framework.
• CMMC Certification: For certain contracts, obtain the necessary Cybersecurity Maturity Model Certification (CMMC) level to protect sensitive information.

10. Stay Updated on Regulatory Changes: Keep abreast of regulatory changes for ongoing compliance. Actions include:

• Continuous Education: Regularly update your knowledge and understanding of regulatory changes to stay compliant.
• Professional Resources: Utilize professional resources and associations to stay informed about compliance updates, ensuring your practices remain current.

Mastering Government Contract Compliance

Maintaining contract compliance over time is a continuous, active process. Sustainable success as a government contractor means always considering the following questions:

• Compliance:
  • Have you reviewed and understood all applicable FAR clauses?
  • Is your accounting system compliant with current DCAA requirements?
• Completeness:
  • Are all sections of your incurred cost proposal fully completed?
  • Have you documented all costs accurately?
• Consistency:
  • Is your cost data consistent with your narrative explanations?
  • Are there discrepancies between direct and indirect cost allocations?
• Justification:
  • Have you provided rationales for all costs?
  • Is your timekeeping system accurately recording employee hours?
• Transparency:
  • Have you clarified any ambiguities in your compliance documentation?
  • Are you maintaining open communication with subcontractors regarding compliance?

Using Contract Compliance to Gain Competitive Advantage

Ensuring compliance in government contracting is a complex but mission critical task. By following these guidelines, government contractors can navigate the regulatory regimes more effectively, mitigate risks, and position themselves for long-term success. Staying diligent and proactive in compliance efforts not only protects your business but also enhances its reputation and trustworthiness in the eyes of federal agencies. This competitive advantage can be the deciding factor in securing future contracts and sustaining growth in the government contracting sector.

For further assistance or questions about maintaining compliance in government contracting, please contact us. Our team of experts is here to help ensure your proposals and processes are both compliant and competitive.

Resources

• https://www.acquisition.gov/browse/index/far
• https://www.acquisition.gov/far/part-30
• https://www.dcaa.mil/
• https://www.nist.gov/cyberframework