27. Required Withholds

Comment: A respondent stated that the NDAA for FY 2011 provides the contracting officer the latitude to make reasonable decisions regarding withholding stating that "an appropriate official of the Department of Defense may withhold up to 10 percent. * * *," however, the rule makes withholds an imperative. The respondent suggested that the rule should reflect the language in the law.

Response: Section 893 of the NDAA for FY 2011 requires the Secretary of Defense to develop and initiate a program for the improvement of contractor business systems to ensure that such systems provide timely, reliable information for the management of DoD programs. Further, the statute sets forth that an appropriate official of the Department of Defense may withhold up to 10 percent of progress payments, performance-based payments, and interim payments under covered contracts from a covered contractor, as needed, to protect the interests of the Department and ensure compliance, if one or more of the contractor business systems has been disapproved. As a matter of policy, the DoD program that implements section 893 mandates withholds for significant deficiencies found in contractor business systems to protect DoD and the U.S. taxpayers from potential waste, fraud, and abuse, as allowed for in the statute.