• Interim DFARS Rule Imposes New Business System Regime and Contract Payment Withholding System
  • May 31, 2011 | Authors: Scott A. Freling; Alan A. Pemberton; Jennifer L. Plitsch
  • Law Firm: Covington & Burling LLP - Washington Office
  • The Department of Defense (“DoD”) issued an interim rule on May 18, 2011 (76 Fed. Reg. 28856) that allows contracting officers (“COs”) to partially withhold contract payments after determining that a contractor’s business system exhibits a “significant deficiency.” DoD issued the interim rule in response to comments received on two previously proposed iterations of the rule and in order to comply with requirements set forth in the 2011 Defense Authorization Act. The rule applies to solicitations issued on or after May 18 and to solicitations pending on May 18 that will be awarded on or after August 16, 2011. In addition, COs are encouraged to amend current contracts to include the rule’s new requirements. Comments on the rule may be submitted through July 18, 2011.