Contractor Woes Point to the Problem of Pushing Out the Bow Wave

Written on July 17, 2019

There are almost as many different approaches to how a contractor reacts to the discovery of potential compliance problems as there are contractors. The tendency among some companies is to take as little action as possible in order to have minimum disruption to the conduct of normal business. The problem with that approach is that it does nothing to stop a problem from growing.  One prominent supplier of spare parts to the DOD recently learned this lesson. The company had already been warned by the DOD IG for overcharging the government for spare parts. It now faces another investigation by the same organization, as well as Congressional scrutiny. This can lead to much more operational disruption than if the problem had been identified and dealt with appropriately. There’s also the matter of additional cost, which cuts into the company’s profits and creates uncertainty among owners and investors. These are some high prices to pay for, ironically, charging high prices for spare parts. It would likely have been better for the firm to address issues of overcharging when they were first raised, handle them through administrative channels and reimburse the government for overages.  Ignoring compliance problems won’t make them go away. A good compliance system really costs only pennies on the dollar. Which would you rather do: 1. Have a two- week issue where your firm pays thousands back to the government; or 2. Have a two-month issue that will end up costing you millions?  Don’t count on no one ever looking down the corridor you would rather they not. Make sure your compliance programs are an integral part of your company’s federal business.

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