If you lead a company that does business with the United States Department of Defense (DoD), then you must ensure compliance with Federal Acquisition Regulations (FAR). DoD implementation of the FAR is issued in the Defense Federal Acquisition Regulation Supplement (DFARS) under the authority, direction, and control of the Secretary of Defense. The DFARS contain: (i) requirements of law; (ii) DoD-wide policies; (iii) delegations of FAR authorities; (iv) deviations from FAR requirements; and (v) policies/procedures that have a significant effect beyond the internal operating procedures of DoD. These regulations exist to aid the United States in acquiring quality supplies and services that satisfy mission capability and operational support at a fair and reasonable price.
The DFARS are comprehensive in scope, encompassing 53 Chapters of detailed procedures and protocols. Examples of topics include: quality assurance, foreign procurement, small business set asides, standards of conduct, procurement of special materials, value engineering, whistleblowing, security and much more. Furthermore, the DFARS are frequently updated and amended, so companies must be vigilant to stay current with the evolving regulations. A significant recent supplement (relating to NIST 800-171) addresses cybersecurity, controlled defense information (CDI) and controlled unclassified information (CUI).
Failure to comply with the DFARS can have significant negative effects on a company, potentially leading to disqualification from selling goods or services to the DoD for an extended period of time, or even criminal consequences to company personnel. Accordingly, to assure compliance, we recommend that companies doing business with the DoD assign a leading manager, with direct reporting to the CEO, to be responsible for DFARS compliance across all functions of the business.
Companies with a large percentage of their revenues from the DoD, know the DFARS well. But companies in the aerospace industry with just a small portion of their revenues from the DoD must also be fully compliant. Failure to comply can have a substantial negative impact on the value of your business from the perspective of potential buyers.
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Managing Director, Defense