PGI 242.7502: Policy.

(d) Disposition of findings.

(3) Final determination.

(ii)(A) Monitoring contractor's corrective action. In collaboration with the auditor, monitor the contractor's progress in correcting material weaknesses and deficiencies. If the contractor fails to make adequate progress, take whatever action is necessary to ensure that the contractor corrects the material weaknesses and deficiencies. Potential actions include: disapproving the system; bringing the issue to the attention of higher level management, as applicable; and for material weaknesses, implementing or increasing the withholding in accordance with 252.242-7998, Contractor Business Systems.

(B) Correction of material weaknesses.

(1) When the contractor notifies the contracting officer that the

contractor has corrected the material weaknesses; request that the auditor review the correction to determine if the weaknesses and deficiencies have been resolved.

(2) Determine if the contractor has corrected the material weaknesses.

(3) If the contracting officer determines the contractor has corrected the material weaknesses, send the contracting officer's notification to the auditor; payment office; appropriate action officers responsible for reporting past performance at the requiring activities; and each contracting and contract administration office having substantial business with the contractor as applicable.

(g) Mitigating the risk of material weaknesses and system deficiencies on specific proposals.

(2) When identified deficiencies impact negotiations of a proposal, consider the following taking alternative actions, including—

(i) Allowing the contractor additional time to correct the deficiency and submit a corrected proposal;

(ii) Considering another type of contract;

(iii) Using additional cost analysis techniques to determine the

reasonableness of the cost elements affected by the deficiency;

(iv) Reducing the negotiation objective for profit or fee; or

(v) Adding a contract (reopener) clause that provides for adjustment of the contract amount after award.

(3) When incorporating a contract reopener clause, negotiate price adjustments required by the clause. A contract reopener clause based upon a deficiency should—

(i) Clearly identify the amounts and items that are in question at the time of negotiation;

(ii) Indicate a specific time or subsequent event by which the contractor will submit a supplemental proposal, including certified cost or pricing data, identifying the cost impact adjustment necessitated by the deficient accounting system;

(iii) Provide for the contracting officer to adjust the contract price unilaterally if the contractor fails to submit the supplemental proposal; and

(iv) Provide that failure of the Government and the contractor to agree to the price adjustment must be a dispute under the Disputes clause.