DoD scales back plan to restrict payments to some contractors

SEAN REILLY -  December 15, 2010 – Under a barrage of contractor criticism, the Defense Department has softened a plan to hold back contract payments as a way to prod companies to fix problems in their accounting and other business systems.

In a proposed rule released in January, DoD had sought authority to withhold 10 percent of payments if a particular business system was found to be deficient. Under a new proposal published this month in the Federal Register, that amount is cut to 5 percent and for small businesses would be limited to 2 percent. If a deficiency is considered high risk, the maximum that could withheld would be capped at 20 percent, down from 100 percent in the original proposal. And in response to complaints that the original draft was overly subjective, officials spell out compliance criteria more clearly.

In general, the revised proposal does a “much better job of laying out the attributes of each of these business systems” and then linking enforcement to compliance with those attributes, said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, a contractor trade group. While not ready to give the revision a passing grade without more study, “I liked what I saw,” Chvotkin said.

But Scott Amey, general counsel at the Project on Government Oversight, viewed the new proposal as “a giant step backward” for contractor accountability. And because DoD is issuing a second proposed rule, another year may pass before contracting officers get the authority to withhold payments, said Amey, who had wanted the Pentagon to make its original draft more stringent.   (Click HERE  to read entire article)