Winning a government contract is just the beginning. Staying compliant with federal regulations is an ongoing responsibility that can make or break your contracting business. Violations can result in contract termination, suspension, debarment, or even criminal charges.

This guide covers the essential compliance requirements every contractor must understand.

The Federal Acquisition Regulation (FAR)

The FAR is the bible of government contracting. It contains the uniform policies and procedures for all federal agencies. Key things to know:

  • FAR is codified in Title 48 of the Code of Federal Regulations
  • It's over 2,000 pages across 53 parts
  • Every contract includes clauses from the FAR
  • Agencies can supplement the FAR with their own rules

DFARS and Agency Supplements

Defense contractors must also follow the Defense Federal Acquisition Regulation Supplement (DFARS):

  • Adds requirements specific to DoD contracts
  • Includes cybersecurity requirements (DFARS 252.204-7012)
  • Contains specialty metals restrictions
  • Specifies country of origin requirements

Other agencies have their own supplements too—NASA, GSA, and DLA each add their own requirements.

Key Compliance Areas

1. Labor Laws

Government contracts are subject to multiple labor standards:

  • Davis-Bacon Act: Prevailing wages for construction
  • Service Contract Act: Wage and benefit requirements for service contracts
  • Walsh-Healey Public Contracts Act: Manufacturing wage and safety standards
  • Fair Labor Standards Act: Minimum wage and overtime

2. Equal Employment Opportunity

Contractors must maintain affirmative action programs:

  • Executive Order 11246 (equal opportunity)
  • Section 503 of the Rehabilitation Act (disability inclusion)
  • Vietnam Era Veterans' Readjustment Assistance Act

3. Cybersecurity

Defense contractors face strict cybersecurity requirements:

  • NIST SP 800-171 compliance for CUI (Controlled Unclassified Information)
  • CMMC (Cybersecurity Maturity Model Certification) coming soon
  • Incident reporting within 72 hours
  • DFARS 252.204-7012 flow-down to subcontractors

4. Small Business Requirements

If you win a small business set-aside:

  • Must maintain small business size status
  • May have subcontracting limitations
  • Must report subcontracting plans if required
  • Cannot misrepresent size or status

Contract Clauses to Know

Every contract includes clauses that create compliance obligations. Watch for:

Termination for Convenience (FAR 52.249-2)

The government can end your contract at any time. You get paid for work completed and costs incurred, but no lost profits.

Changes (FAR 52.243-1)

The government can modify contract requirements. You must continue performance while negotiating price adjustments.

Default (FAR 52.249-8)

If you fail to perform, the government can terminate for cause and buy elsewhere at your expense.

Inspection (FAR 52.246-2)

The government can inspect work at all times. Non-conforming work can be rejected.

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The DLA course includes a comprehensive compliance checklist covering FAR, DFARS, and DLA-specific requirements.

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Record Keeping Requirements

Proper documentation is essential:

  • Keep records for 3-6 years after final payment
  • Cost accounting records for cost-reimbursement contracts
  • Timekeeping records for labor-hour contracts
  • Subcontractor files if you have flow-down requirements
  • Invoices and payments for all contracts

Audits and Reviews

Expect oversight:

  • DCAA audits: Defense Contract Audit Agency reviews costs
  • DCMA reviews: Defense Contract Management Agency monitors performance
  • IG investigations: Inspector General can investigate fraud
  • Contracting officer reviews: Day-to-day oversight

Common Compliance Violations

Avoid these mistakes:

  • Mischarging: Billing for costs not allowed by the contract
  • Defective pricing: Providing inaccurate cost or pricing data
  • False claims: Submitting invoices for work not performed
  • Organizational conflicts: Having interests that conflict with contract performance
  • Failure to report: Not disclosing required information

Consequences of Non-Compliance

Violations can result in:

  • Contract termination
  • Financial penalties and damages
  • Suspension from future contracts
  • Debarment (can be permanent)
  • Criminal prosecution for fraud
  • False Claims Act liability

Building a Compliance Program

Smart contractors proactively manage compliance:

  1. Assign responsibility: Designate a compliance officer
  2. Document procedures: Create written policies and processes
  3. Train employees: Regular training on relevant requirements
  4. Conduct self-audits: Find and fix issues before the government does
  5. Seek help: Consult attorneys or compliance specialists when needed

When to Get Legal Help

Consult a government contracts attorney for:

  • Complex contract interpretations
  • Disputes with the government
  • Audit findings or investigations
  • Claims preparation
  • Debarment or suspension proceedings

Bottom Line

Compliance isn't optional—it's a cost of doing business with the government. The contractors who succeed long-term are those who treat compliance as seriously as they treat winning contracts.

Start with understanding your specific contract clauses, build good record-keeping habits, and don't hesitate to seek help when requirements are unclear.

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