Mandatory disclosures, business ethics, and compliance programs place new requirements on Utah businesses and contractors. In addition, increased oversight from government agencies and auditors place more pressure on those businesses, contractors, and vendors who supply services.
Regulatory compliance is an important part of fulfilling agreements today. It’s part of a growing need for program assessments, development, and implementation of government and public sector contract management.
Contract Risk Profiles
A variety of risks may influence the particulars of government contract oversight. The five most important factors must be individually and collectively considered. Use these elements to better understand, manage, preview, and mitigate regulatory compliance risks.
How large is your business?
A contractor’s size can determine whether your business is considered a contractor or a sub-contractor. The requirements or exemptions differ between small and large businesses:
- A small business (as defined by the SBA size standards) is exempt from some federal regulations.
- As the business grows, it should anticipate more oversight and higher regulatory compliance requirements.
How commercially viable is your product or service?
The government wants access to reasonably-priced products and services. “Reasonable price” is determined in the commercial marketplace. For that reason, the contractor’s cost to produce the product or service doesn’t matter to the government. Commercial goods contracts are often exempt from many federal regulations and may not be subject to audit and oversight regulations. Businesses selling both non-commercial and commercial goods must show these goods are competitively priced to deflect a government audit.
What type of contract best suits your business?
Contract type rests at the heart of contract risk. The government determines the types of cost and performance risks of both parties:
- Contractors who accept higher performance or cost risks have less rigorous regulatory compliance requirements.
- If the government agrees to higher cost and performance risks, the contract must agree to a higher amount of regulatory compliance burdens.
- Contractors must be aware and prepared for federal cost-reimbursable contracts and government oversight to arrive in tandem.
What is the size of your contract?
Smaller, “simplified acquisition” contracts of less than $150,000 typically have the least compliance requirements attached. Larger contracts carry more regulatory burdens. Contractors with a large number of lower dollar contracts may not attract as much governmental oversight as a smaller number of larger value contracts.
What is the competition and negotiation process for your contract?Your project may require the presentation of a sealed bid or a one-on-one negotiation. When considering the above four factors, smaller-value contracts are associated with fewer government regulations and oversight.
Prepare to succeed as a government contractor. TR Spencer & Associates stands by to assist your business in understanding regulatory compliance issues. Contact the law office today for further information.