13. National Security

Comment: A respondent stated that the withholding of payments could lessen competition and endanger national security. According to the respondent, national security in many respects is dependent on contractors. From weapon systems to wartime services, contractors perform a vital role in national security. The respondent stated that the economic times are bleak, which is already requiring contractors to operate on thin margins. The respondent expressed concern that if a contractor has a withhold placed upon its billings and is unable to meet financial obligations and, therefore, is unable to meets its contractual terms due to reduced cash flow, then national security will be compromised.

Response: This rule will not cause long term harm to the defense industrial base or national security. Rather, DoD contractor competition and national security will be enhanced with the improvement of DoD contractors' business systems, and imminent cost savings that will result. Contractor business systems and internal controls are the first line of defense against waste, fraud, and abuse. Weak control systems increase the risk of unallowable and unreasonable costs on Government contracts, unnecessarily draining limited DoD resources at the taxpayers' expense.