What really is “Compliance” after all?

So often, we read or hear about “compliance” as it relates to government contracting.  Web searches for “FAR Compliance”, “FAR 15 Compliance”, “DCAA Compliance”, and “Government Contract Compliance” may bring you to completely different results on the web, when each of these requests may be for the same exact need.

What are we really asking for in our search when wondering about being a compliant government contractor?

Let’s take a look at a handful of areas that require attention in a government contractor’s organization.  We have kept this list limited to the topics most troublesome for the majority of government contractors. We know there are more that can be added to this list, but for this example we’ve identified seven areas:

1) Finance/Accounting (Travel and CAS may be grouped here)

2) Timekeeping (this can be grouped with Accounting, but we like assessing it separately)

3) Contract Management

4) Subcontract/Purchasing Management

5) Standards of Business Ethics

6) Property Management

7) Human Resources related topics

If tested or evaluated on any of these seven areas above, would the government give your company a passing grade?The government assumes, and will check, to make sure that your organization is compliant in following the regulations.

Simply put, “Compliant” to the government means that: Your organization has implemented policies, procedures and processes that follow (comply) with government regulations and contract specifications.  Additionally, your organization must be practicing these policies, procedures and processes.  Your company may be compliant in some areas and not in others.  100% compliance in all areas is ultimately the goal to reduce risk and increase opportunity with the government customer.

One of the most talked about areas that gets the most press is of course in the Finance/Accounting area (the dreaded DCAA audits).  Accounting Systems Audits, Incurred Cost Audits, Financial Capability Audits, etc. are all examples of reviews the government will order to ensure compliance by a government contractor.

One area that is often overlooked or ignored, but is critical for attaining compliance, is in the area of Subcontracting/Purchasing.  These areas can be split in two, but in the end, the same function is being conducted; a government contractor is using taxpayer money to buy goods and/or services.  Therefore, is your organization procuring goods and services under your government contracts in a compliant manner (even if you are a sub at any tier)?

How do you know if you are compliant?  Read, understand and follow the FAR, read all its supplements, become familiar with often cited Acts and common special clauses.  Ignorance is not bliss when it comes to compliance.  There is no claiming lack of understanding or knowledge as a reason for not being a compliant government contractor.

One method many companies use is to take a stab at building a compliant organization, then looking for an outside review or third party mock audit of critical areas.  This can be extremely helpful in identifying gaps not only between your company’s policy, procedure and processes and the government requirements, but also in identifying gaps between your company’s day to day activities and what your policies actually say.

Also, don’t be afraid to ask the government liaisons for any advice or guidance they may be able to provide.  Some agencies, officers, and liaisons may be more forthcoming with assistance than others. Forming relationships and asking for help from those who are looking to make sure you are compliant can never hurt.


About Stephanie Amend

Stephanie is the Principal and CEO of Arrowhead Solutions, LLC, a solutions firm specializing in assisting established small businesses be successful government contractors.


  1. “How do you know if you are compliant?” Great question! Good article.

    Many supplier organizations depend on a Compliance Lead to either write and institute policy or call in the “red team” for the audit (mock or actual). I have seen other organizations who will depend on the individuals (such as the Subcontracts or Contracts Manager) to carry the load of “acting compliantly.” The relationship with the customer organizations – your Contracting Officer, DCMA and DCAA – go a long way to getting the organization up to fully compliant government contracting program without the cold sweat of reacting to a non-compliance notification or an award held up. Seeking the customer input (asking for advice/direction) is far better than awaiting the repercussions of failure to act. It also makes the effort clearly a team play instead of “us vs. them.” In thrity years I have only seen a single instance where the request for assistance blew up. The PCO was reassigned shortly thereafter.

    Compliance, like quality, has to be the strategic goal of the owners or CEO/Board for it to become part of the organization’s culture. The last thing one wants to hear is a CEO saying, “What, we are not compliant?” He/she didn’t know or didn’t care and either is a red flag.

    Thanks, this is a good discussion point for suppliers big and small.

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