MAIL BAG: WHEN BUYING A COMPANY IT’S BEST TO LOOK UNDER THE COMPLIANCE HOOD
New reader H.R. Clinton of Chappaqua, NY writes: “My company rushed out and brought a Schedule contractor that had good sales, but not much infrastructure. Now we find out that they have a major compliance issue. What went wrong?” Excellent question, H.R. Despite their own awareness of government contract compliance, government contractors may fail to examine the compliance practices of a targeted acquisition, focusing mainly on the financial aspect of the deal. It is critically important, though, to conduct a thorough compliance review on any contractor your firm may buy, before the deal closes. For Schedule contractors this means a review of compliance with the Price Reductions Clause, Trade Agreements Act, ethics rules, and any small business subcontracting responsibilities. Corporate officials shouldn’t get too excited about the possible benefits of a combined organization until this review is completed. Just as with a used car purchase, your firm doesn’t want to buy somebody else’s problem. Has this ever happened? You bet. Just ask Oracle, a firm that paid over $98 million to settle compliance problems related to a company they purchased. That’ll certainly take the wind out of someone’s sails.