Defense Demands Business System Improvements The Defense Department wants to withhold partial payment from contractors whose business systems don’t measure up to government standards. In a notice published in the Jan. 15 Federal Register, DOD said, “Weak control systems increase the risk of unallowable and unreasonable costs on government contracts.” Under the proposed rule, contracting officers would be permitted to hold back partial payment on several types of contracts: cost reimbursement, time-and-materials and labor-hour. The rule lists six criteria that contractors’ financial and accounting systems must meet to comply with federal standards. Last year Congress’s Commission on Wartime Contracting found widespread deficiencies in the business systems of contractors working in Iraq and Afghanistan. The commission said those deficiencies led contractors to be paid for unallowable costs unless auditors caught the discrepancies. The proposed rule is DFARS Case 2009-D038. Comments are due March 16.