5 Steps to Manage Government Regulations for Contractors

This excellent infographic on government regulations for contractors as reported by Ross Gianfortune at Government Executive, outlines five steps for government contractors to successfully manage regulatory compliance. We don’t want to steal any thunder from the good folks at BDO (the creators of the infographic), so we expanded on each of their steps with our resources and perspective.

1. Have a Strong Grasp of Your Current Contract Requirements

What am I required to do? Do I have the processes and systems in place to satisfy the contractual and regulatory requirements? We developed a series of Readiness Assessments™ for that very purpose! Our Assessments guide you through a continuous improvement process of self-evaluation, ranking, action plans, and continued self-evaluation until all areas of your business are operating at their prime.


2. Design a Proactive Plan Prior to Any Audit

I can’t say this enough: “Start with the end in mind. You have the test – use it to prepare.” Almost every presentation I make stresses the importance of using the existing audit guidelines and checklists when developing internal processes and systems. While the Government issues a number of regulations for government contractors through the FAR, DFARS, CAS, and Executive Orders, they also provide a significant amount of resources contractors can use for self improvement. Start with the DCAA and DCMA websites for audit guidelines, checklists, and FAQs.


3. Partner with an Outside Resource

Here’s the part of the post where I say, “Hire me!” Seriously, hire a professional! Outside resources are good for a number of reasons. They are experienced in specialized areas of running a business (accounting, contracts, exports, etc.), they have lists of resources, they know what works and what doesn’t, and they are unbiased in the way your company operates – they can tell you how it should be done irrespective of the politics and bureaucracy within your organization. In fact, we have a whole list of FREE resourcesblog posts, and presentations on our website.


4. Be Responsive and Transparent During an Audit Process

Clean up the low-hanging fruit before the auditors arrive. I hear some business managers and owners say, “We have to give the auditors something to find – that’s their job.” I say, “Don’t give them anything to find and they won’t dig.” Let’s face it, if you can’t do the easy stuff right, how is an auditor going to believe you’re doing the difficult stuff right? For example, if your accounting system properly segregates allowable and unallowable costs, direct and indirect costs, and ties all direct costs to an end customer job, there is less for an auditor to suspect about your accounting practices. Further, a written accounting manual about how the system is designed, how internal controls work, and how types of costs are treated goes a long way to proving to an auditor that you know your stuff.


5. Ensure Compliance is Also a Strategic Exercise

Strategic exercises are those activities which take us from good to great. They are the practices that take us beyond “the way we’ve always done it” to the daily application of the highest standards. Compliance is saying what you do (having a written policy or procedure), doing what you say (following the written policy every day), and having evidence to back your claim (transactional history and audit records). Doing the right thing has to be more than a motto on the wall, it has to be visible in every transaction.