Thursday, July 7, 2016

Department of Energy Withdraws its Proposed "Business System" Rules

Back in 2014, not to be outdone by the Defense Department, the Department of Energy proposed its own Contractor Business System rules (see 79 FR 18415). These proposed rules were similar in scope to those being considered and ultimately adopted by DoD. They covered five of DoD's six business systems: accounting, estimating, purchasing, EVMS and property management. DOE's contractor business systems did not cover MMAS (Material Management & Accounting Systems), perhaps because DOE's contractors are not typically in the manufacturing business. The proposed rules included compliance enforcement mechanisms that would, like the DoD rules, allow contracting officers to withhold a percentage of payments when one or more of the business systems contained significant deficiencies.

Yesterday's Federal Register included the announcement that the Energy Department has withdrawn its proposed rules (see 81 FR 43971) . It gave no explanation for withdrawing the proposed rules other than a terse statement that read "... the Department has determined that it will not proceed with the rulemaking and, as such, is withdrawing the proposed rule.".

Perhaps DOE learned something from DoD's implementation problems. Although the rules exists, there are scarcely any audits being performed to determine the state of contractor compliance with those rules. DCAA (Defense Contract Audit Agency) is not making such audits a priority and some proposed rules a year or so ago that would require contractors to hire outside audit firms to perform the reviews (under DCAA supervision) was withdrawn as unworkable.

Notwithstanding the starts and stops, DoD has not given up on auditing contractor business systems. Tomorrow, we will discuss a provision in the FY 2017 NDAA (National Defense Authorization Act) that attempts to restore audit coverage of the six DoD contractors' business systems.

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