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How to Audit Government Contracts and Identify Issues

Risk & Compliance

The federal government spends billions of dollars on contracts with private businesses of all size and in all sectors. For many businesses, contracting with the government is an excellent and consistent way to generate revenue. However, with that revenue comes a great deal of responsibility. There are a lot of different rules and regulations to understand, with two important ones being the Federal Acquisition Regulation (FAR) and the Federal Acquisition Streamlining Act (FASA). Although contracting with the government has a ton of advantages, it can also present a lot of problems if your company is ill-equipped to handle it. Here are five questions your company must consider when assessing its existing or future government contracts to identify potential issues:

What is required?

When a government solicits businesses to bid on the chance to enter into a contract for the provision of a good or service, that solicitation is usually fairly detailed. There will be product specifications, technical requirements, quality expectations, and the list goes on. Even businesses that have a long history of government contracting must carefully read each solicitation to ensure that it understands precisely what will be required.

Can your company really fulfill those requirements?

Regardless of whether your company is a seasoned or novice government contractor, it is always critical to analyze your business’s existing obligations before entering into others. Government contracts have a reputation for being even more stringent than other contracts, even though all contracts are inherently stringent. As a result, your company must determine whether it can realistically meet all outlined requirements, regardless of whether it meets all of the other criteria.

Does your company understand the rules and regulations?

In addition to the contract-specific requirements, there are usually a whole slew of rules and regulations that dictate how federal agencies must operate. It is probably safe to say that even the individuals running those agencies are not fully aware of every single detail contained within those government regulations. However, for companies looking to bid on and enter into government contracts, it is incredibly important to do ample research beforehand to ensure that someone has a strong grasp of the system.

Can your company actually comply with those rules and regulations?

Understanding the rules and actually complying with them are quite different matters. There is a common misconception that non-compliance is synonymous with a breach or a violation, but that is not always the case. Granted, non-compliance with a government contract may result in penalties or fines, but in many instances compliance is more about acting responsibly and ethically. A government contract may stipulate that certain types of employees be hired or that a certain code of conduct be instituted. It can really mean quite a few different things, and thus a company must really ask itself if it will be able to comply with those mandates, which must obviously be considered in the context of the company’s mission and budget.

What other opportunities are available?

As mentioned, contracting with the government can be a great opportunity for smaller enterprises and may even help launch fledgling businesses. But, just because a company is able and willing to bid on and enter into government contracts does not mean that it should do so, especially if it will be at the exclusion of other opportunities. Depending on where a company is financially, it may make sense to work its way up to a government contract, as dealing with these agreements requires a different level of knowledge and expertise. In addition, there is a steep learning curve associated with government contracting and no room for a trial and error method of doing business. Consequently, companies must determine whether their efforts are best directed elsewhere until they are fully capable of handling the increased pressure associated with government contracting.

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