Defense contractors would have 45 days to fix their financial and business systems — if auditors determine they have problems — before the Pentagon starts withholding payments to them, under a proposed new rule.

The rule would apply to companies that get paid based on their actual costs, as opposed to those that are paid a negotiated fixed price.

The proposed rule in Friday's Federal Register clarifies the penalties contractors potentially face if the Defense Contract Audit Agency finds problems with their accounting systems, price estimating systems, material management systems, purchasing systems or property management systems.

Existing rules allow the Pentagon to withhold payments from contractors if their business systems are found deficient, but that step is rarely taken by officials on grounds that most Defense Department contracts lack a provision that provides for that. The proposed rule outlines a new contract clause that would be included in future DoD contracts that would promote the use of penalties when contractors fail to fix their business systems. Last year, a Wartime Contracting Commission hearing revealed that contracting officers weren't withholding payments from contractors DCAA said had deficient systems, putting billions of taxpayer dollars at risk of being misspent.

David Ricci, executive director of the Defense Contract Management Agency, which is supposed to implement DCAA recommendations, said contract managers were reluctant to withhold payments because it was unclear when such penalties could be applied since no contract clause existed to enact the penalty.