Contract & Regulatory Compliance

With new business ethics, compliance programs, and mandatory disclosure requirements, government contractors must manage these efforts while maintaining their focus on operations.

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Baker Tilly offers a robust array of services to help contractors proactively address compliance and minimize risk.

With the recent implementation of new business ethics, compliance program, and mandatory disclosure requirements, government contractors now face the daunting task of managing these efforts while maintaining their focus on organization operations.

Moreover, the growing pressure for increased Defense Contract Audit Agency and inspector general oversight means that contractors must act immediately to ensure compliance and avoid the repercussions of an unfavorable government audit or Department of Justice referral.

Baker Tilly can provide your organization the following services to proactively address compliance and minimize risk.

  • Broad and special purpose government contract compliance risk assessments, program assessment, development, and implementation
  • Contract management assessments and best practices
  • Outsourced or co-sourced internal audit services
  • Federal acquisition regulation compliance

Understanding your contract risk profile

Although many factors can influence the nature and extent of government contract oversight, five have the greatest impact. They are interdependent on each other, and therefore must be considered individually and in the aggregate. Successful contractors use these factors as a tool to understand, anticipate, manage, and mitigate government contract compliance risk.

Contractor size

  • Contract requirements and exemptions vary for smaller and larger firms, as well as whether a firm is a contractor or a sub-contractor. Small businesses (meeting the Small Business Administration’s size standards) are exempt from some of the government’s most onerous regulations. As contractors grow, they can expect more regulatory burdens and more direct government oversight.

Product/Service Commerciality

  • The government’s rules require it to acquire commercial products and services at reasonable prices established in the commercial marketplace, making a contractor’s production costs irrelevant. Accordingly, commercial item contracts are exempt from many onerous regulations and generally insulated from many (but not all) government audit and oversight activities. Contractors selling commercial and non-commercial items on a single contract must persuasively demonstrate commercial pricing to rebuff the government’s ever-present desire to audit production costs (and deny reasonable commercial margins).


Contract Type

  • Contract type is the nucleus of government contract risk. It is the instrument by which performance and cost risks are allocated between the parties. Contractors willing to accept greater performance and cost risk are rewarded with less burdensome requirements. As the government accepts greater performance and cost risk, contractors must accept heavier regulatory compliance and oversight burdens. Contractors new to cost reimbursable contracts must enter with eyes wide open and with considerable organizational preparedness for the oversight that will ultimately follow.

Contract Size

  • Contracts below the simplified acquisition threshold ($150,000) generally carry the fewest compliance requirements. Additional regulatory burdens accumulate as contract value grows beyond $700,000. Generally, a large volume of low dollar contracts will attract less direct government oversight than a small volume of large dollar contracts.

Competition & Negotiation

  • The competitive spectrum ranges from sealed bidding to sole-source negotiation. Combined with the four factors above, competitively awarded fixed price contracts for commercial items offered by small businesses below $150,000 carry the least compliance and oversight risk. The opposite carries the most risk. In the absence of commercial market information and competitive forces, the government deploys its arsenal of regulations to prescribe nearly every contractor business activity.
Understanding the Service Contract Act in an era of enforcement
May 25Article

Understanding the Service Contract Act in an era of enforcement

Navigating the complexities of the federal marketplace

Baker Tilly positions top government contractors and their legal counsel for success in the federal marketplace by helping to proactively address complex economic, regulatory, and competitive pressures. We are one of the largest teams in the country dedicated to serving the unique needs of government contractors. Our industry insight and tailored approaches help our clients make better business decisions, strengthen their competitive position, and mitigate risk. 

Count on us to guide you through:

  • Assessing opportunities in the federal market and developing an actionable strategy to increase federal contract revenue.
  • Rethinking and improving business policies, practices, and controls to withstand today’s heightened level of scrutiny.
  • Leveraging technology to strengthen processes, improve efficiencies, optimize resources, streamline operations, and deliver more profitable projects.
  • Understanding compliance risks and identifying control gaps related to regulatory and contractual requirements.
  • Correcting underlying issues with a compliance transformation process and creating a platform for future compliance.
Our cross-functional team of advisors has the knowledge, skills, and experience to deliver creative solutions based on industry best practices.
Brent Calhoon Partner, CPA