ACO Approval of Contractor Business Systems, With Teeth
Client Alert | 1 min read | 01.22.10
DoD has proposed important amendments to the Defense Federal Acquisition Regulations (75 Fed. Reg. 2457, Jan. 15, 2010) that would reinforce the authority of the administrative contracting officer (“ACO”) as the final decision maker about the adequacy of contractor "business systems," permitting the ACO, after considering the contractor's response to recommendations from DCAA, to withhold a percentage of interim payments, progress payments, and performance-based payments upon the ACO's “final determination” that deficiencies exist in one or more of a contractor's “business systems,” which would include accounting systems, estimating systems, purchasing systems, earned value management systems, material management and accounting systems, and property management systems. While the initial withholding for deficiencies in a single business system would be 10%, the ACO could withhold up to a cumulative 50% of payments for deficiencies in more than one business system, and withholdings could total up to 100% of contract payments if the ACO determines that there are one or more system deficiencies that are “highly likely to lead to improper contract payments being made, or represent an unacceptable risk of loss to the Government” until the ACO determines that the contractor has corrected the deficiencies.
Insights
Client Alert | 3 min read | 11.21.25
On November 7, 2025, in Thornton v. National Academy of Sciences, No. 25-cv-2155, 2025 WL 3123732 (D.D.C. Nov. 7, 2025), the District Court for the District of Columbia dismissed a False Claims Act (FCA) retaliation complaint on the basis that the plaintiff’s allegations that he was fired after blowing the whistle on purported illegally discriminatory use of federal funding was not sufficient to support his FCA claim. This case appears to be one of the first filed, and subsequently dismissed, following Deputy Attorney General Todd Blanche’s announcement of the creation of the Civil Rights Fraud Initiative on May 19, 2025, which “strongly encourages” private individuals to file lawsuits under the FCA relating to purportedly discriminatory and illegal use of federal funding for diversity, equity, and inclusion (DEI) initiatives in violation of Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity (Jan. 21, 2025). In this case, the court dismissed the FCA retaliation claim and rejected the argument that an organization could violate the FCA merely by “engaging in discriminatory conduct while conducting a federally funded study.” The analysis in Thornton could be a sign of how forthcoming arguments of retaliation based on reporting allegedly fraudulent DEI activity will be analyzed in the future.
Client Alert | 3 min read | 11.20.25
Client Alert | 3 min read | 11.20.25
Client Alert | 6 min read | 11.19.25
