Everyone knows the first rule of business is there are risks to be taken and rewards for taking those risks. But lately, when doing business with the Defense Department and other government agencies, it’s been all risk with little reward. In the government’s appropriate zeal to protect taxpayer dollars, it has forgotten that its business relationships with contractors are two-way streets. One place this is most evident is in the Defense Department’s proposed rule governing when it’s appropriate to withhold payments from contractors because of faulty business systems.
When initially proposed in January 2010, PSC found the rule failed to fully describe the attributes of each of the six business systems that a contractor would need to comply with in order to have an “approved” system. It’s hard to follow your customer’s wishes when the customer won’t define the boundaries and standards. We also found the enforcement and penalties in that proposal were disproportionate to the deficiencies identified and the risk to the government from one or more of those deficiencies. In some cases, Defense agencies would be allowed to withhold payments in situations where government dollars were NOT at risk, and that’s a risky proposition for any business. The customers’ auditors weren’t even required to review and validate fixes and release properly earned funds in a timely manner.
While the proposal was improved significantly with the Dec. 3 revision, it still falls short in several key areas, as PSC and other industry groups spelled out in
comments submitted on January 10 by the Council of Defense and Space Industry Associations.
