As many government contractors have had the misfortune to discover, the strength of a company’s compliance programme is only as strong as its weakest link. It only takes one instance of supply chain non-compliance for an organisation to be in breach of its contracts. In the US federal procurement environment, such breaches have even more costly ramifications. A material breach in supply chain compliance under a US government contract can result in default termination, civil and criminal False Claims Act liabilities, and potential ineligibility for future award of government prime contracts and subcontracts.

However, even while many organisations’ procurement functions have moved to a more sophisticated and integrated supply chain model, policies and procedures to address supply chain compliance specific to US government contract requirements are often inadequate. This article highlights ‘high risk’ areas for supply chain non-compliance that US government contractors need to consider when putting together their organisation’s compliance programmes.

Historically, an organisation’s purchasing department focused on getting the correct part at the lowest price. As the economy became more global, and price competition intensified, the potential supply base for many organisations increased significantly. The potential supplier may not know the business for which it is issuing quotes, it may be located in a foreign country and it may be unfamiliar with the unique requirements of US federal government contracts. A government contractor’s supply chain management function must ensure compliance with a broad range of laws, regulations and policies, many of which are industry specific.

Apr-Jun 2018 Issue

Womble Bond Dickinson (US) LLP