Background - Practices (Details)

Government Contracts Compliance

Government contracts compliance is a constantly evolving challenge. New regulations, laws, and ethical norms couple with emerging business challenges to keep executives, compliance professionals, and lawyers on their toes. Compliance can be especially challenging for small and middle market businesses who may not have dedicated resources and instead need to manage these risks as additional duties. For more than 40 years, Crowell & Moring government contracts lawyers have advised contractors of all sizes concerning compliance—from proactive counseling to reactive investigations and disclosures, we cover the waterfront.

To help illustrate possible compliance risks, challenges, and opportunities, we are pleased to present an interactive chart of common government compliance issues, organized by department in a hypothetical government contractor. This chart is intended to offer an overview of compliance challenges government contractors face. This is not intended to be legal advice and is hypothetical only. For specific questions or further information please contact:

David Robbins
Peter Eyre
Stephanie Crawford

Or contact our entire Government Contracts Compliance Team at GovConCompliance@crowell.com.

Click Below to View Common Compliance Challenges by Department.
  • Contract Management
    • Representations/Certifications Compliance
      • Company must make certifications and representations on a wide variety of topics for state, local, commercial, and federal work and update certifications periodically. This warrants active consideration as these are core elements of contracting and false entries can lead to contract loss and civil and criminal penalties.
    • Flow Down Requirements
      • US Federal government has strict requirements for procuring goods and services. These requirements also apply to subcontractors supplying goods and services to the Company. Certain provisions of the prime contract must be “flowed down” or included as contractual obligations in the subcontracts.
    • Supervising of Subcontractors
      • Obtaining certification of compliance or other representations from subcontractors is helpful, but does not exhaust the Company’s obligations. It may be advisable for the Company to inspect or take other steps to confirm the accuracy of subcontractor’s representations. Ultimately, because the Company is in privity of contract with the Government, the Government will hold Company responsible for any defects and expects the Company to employ certain good faith efforts to supervise subcontractor efforts.
    • Proprietary Data Protection/FOIA Responses
      • Important for company to preserve proprietary data with proper legends on proposals and other contract deliverables. Otherwise the company may lose its protections. Technology developed during the course of a government contract also has specific rules associated with who gets what intellectual property. Additionally, Freedom of Information Act requests can cause company proprietary information to be lost if not responded to in a timely manner.
    • GSA Schedule Contract Obligations
      • General Services Administration schedule contract and other government-wide acquisition vehicles offer broad sales opportunities, but come with special additional compliance obligations. They include pricing, discounting, labor categories, and disclosures, among others, and require constant monitoring.
    • OCI/PCI
      • The work that the Company performs may preclude the Company from bidding on/performing other work. These organizational Conflicts of Interest (OCIs) arise when there is unequal access to information, or the contractor is performing acquisition advisory and assistance services for the government. Personal Conflicts of Interest (PCI) are caused by divided loyalties or items that can raise the perception of divided loyalty in individual employees. PCIs are commonly addressed by screening certain employees for their outside business and personal activities.
    • Procurement Integrity
      • Perception of fairness in the award of government contracts is important to the US Government. Criminal law can punish the use of government source selection sensitive information or competitor proprietary information in certain circumstances.
    • Anti-Kickback Act
      • Because perception of propriety is of the utmost importance in government contracting, even subcontracts must be awarded without the potential for perception of improper influence. Nothing of value may be offered, or accepted, with the intent to influence the award of a government contract or subcontract.
  • Operations
    • Business Systems
      • Business Systems adequacy is required for federal cost-based projects; also necessary to support claims and Truth in Negotiations Act requirements. These systems have specific requirements that are unique to government contracting, and require specific attention.
    • Audit Rights/Recordkeeping
      • Specific audit rights exist for many of the Company’s financial, functional, and contractual processes. Specific record retention rules apply.
    • Classified Work
      • If the Company performs classified work, it may require a company Facility Clearance and manage Personnel Clearances for certain individuals. Specific jobs are required to support such an effort and there are certain additional oversight and reporting obligations.
    • Counterfeit Parts/Supply Chain Issues
      • Processes and procedures must be in place to source from qualified and appropriate suppliers, and receiving departments must also confirm that the parts received comply with contractual requirements. Supplier representation is rarely, if ever, sufficient.
    • Earned Value Management System
      • Earned Value Management System is a schedule management business system required over a certain dollar threshold that measures work completed against work planned.
    • Government Property Issues
      • There are specific identification, tracking, reporting, and return requirements for government provided property and equipment used to support the Company’s contracts.
    • Human Trafficking
      • The US Government has a Zero Tolerance Policy for trafficking in persons. There are specific policy and reporting requirements or Company employees, as well as subcontractor employees, at home and abroad.
    • Gifts/Gratuities
      • While it may be acceptable in the commercial marketplace to offer clients and prospective clients things of value – including but not limited to meals and gifts – these items can create criminal liability in government procurement. Policies, procedures, and monitoring are important to avoid liability and possible loss of ability to compete for or perform certain contracts.
  • Finance
    • Cost Accounting Standards
      • These rules guide the Company concerning the allocation of overhead costs to the Company’s contracts.
    • Certified Cost or Pricing Data
      • Certain contracts over a specific dollar threshold may require the contractor to submit its cost buildup information to enable the government to determine if it is offered a fair and reasonable price. This is called cost or pricing data.
    • Cost Allowability
      • Cost allowability deals with what charges may be passed on to the government in certain types of contracts.
    • Cost Estimating
      • Certain business system requirements exist for generating and proposing consistent and appropriate rates for Company labor.
    • Incurred Cost Submissions
      • Among the many obligations associated with cost type contracts is the submission of incurred cost submissions that are accurate and timely.
  • Legal
    • Export Control
      • The Company must comply with restriction on export of products and information. Export is broadly defined, and include among other things traveling outside the US with controlled information stored on a laptop even if the laptop is never turned on.
    • Small Business
      • If the Company is a Small Business, certain reporting and other compliance requirements exist, including those that limit the money that executives may remove from the business. If the Company is a large business, then it may be required to submit small business subcontracting plans and exercise good faith effort to meet their proposed subcontracting goals.
    • Mandatory Disclosure
      • Candor with the US Government is often required. Disclosure is required for certain violations of criminal law, the civil False Claims Act, and for significant overpayments. Failure to disclose can lead to exclusion from government contracting by suspension/debarment.
    • Investigate When Problems Arise
      • Civil liability (among other consequences) can arise from deliberate ignorance of issues relating to government contracting. Government contractors are expected to investigate timely and thoroughly when issues arise.
  • Procurement
    • Sanctions List
      • The Company is expected to screen employees, suppliers, and certain others and to avoid doing business with entities specifically excluded from the U.S. marketplace, such as the Specially Designated Nationals list.
    • Flow Down Requirements
      • The Company has an obligation to “flow down” or otherwise include certain terms and conditions of its prime contract into its subcontract.
    • BAA/TAA
      • Certain laws exist limiting the goods and services that the Company can purchase to those manufactured, substantially transformed, or otherwise assembled in the US. Those laws include but are not limited to the Buy American Act and Trade Agreements Act. Each have their own requirements and exceptions that must be adhered to.
    • Specialty Metals
      • Certain laws exist limiting the melting and incorporation of certain metals into products for the US government.
  • Information Technology
    • Information Security
      • The Company is required to adhere to certain standards of care when handling, transmitting, or otherwise using sensitive information including but not limited to Personally Identifying Information, Sensitive but Unclassified Information, and Classified Information.
  • Human Resources
    • Timekeeping
      • Accurate timekeeping is a requirement on government contracts. Civil and criminal laws can punish inaccurate timekeeping, and the company (and individuals) can be removed from the marketplace through suspension/debarment for certain time charging problems. Best practices include but are not limited to training concerning time charging and supervision of timekeepers.
    • Training
      • Contractors are obligated to create a culture and work environment that avoids misconduct. Training is a central element in that effort, as it informs the employee population of company norms and expectations.
    • Executive Compensation and Disclosure
      • Certain disclosure obligations exist for executives of government contractors.
    • Background Checks
      • At a minimum, contractors should understand the citizenship and good character of their employees. Requirements increase as contracting opportunities become more sensitive, involve national security, or are classified.
    • Pay & Benefits
      • Contractual requirements impact minimum wage, pay and benefits for government contract employees performing many types of government contracts. This also includes Service Contract Act (services contracting) and Davis-Bacon Act (construction contracting) provisions.
    • Anti-Discrimination
      • In addition to other laws, US government contracts impose by contract certain anti-discrimination policies and provisions and can cause loss of contract (among other remedies) for noncompliance.
    • Revolving Door
      • Specific rules exist for hiring and supervising former government employees. Additionally, certain restrictions exist concerning the duties that the former government employees may perform as well as the interactions they may have with the government.
    • Lobbying Restrictions
      • US Government contract funds may not be used for the purposes of lobbying.