Government contractors face a demanding combination of challenges. SAP S/4HANA migration changes core financials, project accounting and reporting structures while federal acquisition rules continue to evolve. At the same time, contracting officers and auditors expect continuous compliance with federal acquisition regulation (FAR) and defense federal acquisition regulation supplement (DFARS) with no gaps.
A successful transition takes more than a strong technical cutover plan. It requires a strategy that blends compliance into every stage of the program, so that systems, data and controls stay audit-ready before, during and after going live.
How to Ensure FAR/DFARS Compliance During SAP S/4HANA Migration
Compliance in a SAP S/4HANA migration is not a single configuration step, but a coordinated strategy across people, processes and tools. Compliance teams need to understand how requirements like FAR Part 31 cost principles and DFARS 252.204-7012 cybersecurity safeguards map to S/4HANA data models and security roles. Technical teams also need clear guidance on what “compliant” looks like in the target system. Applying certain best practices can help reduce risk.
Understand the High Stakes of Noncompliance
During an enterprise resource planning (ERP) migration, every core control is in motion. Chart of accounts design, project structures, timekeeping integration and cost allocations all shift.
If FAR and DFARS requirements slip during that window, the consequences can be serious. The Defense Contract Audit Agency (DCAA) can question costs, issue audit findings and recommend withholdings on payments when accounting systems or timekeeping controls fail to meet allocability and allowability standards. Advisory firms that support contractors emphasize that failed DCAA audits often lead to revenue disruptions, additional oversight, and higher internal costs to remediate issues and rebuild documentation.
On the cybersecurity side, DFARS 252.204-7012 references the NIST SP 800-171 requirements for protecting Controlled Unclassified Information (CUI). NIST describes these protections as mandatory for nonfederal systems that handle CUI in federal contracts. If a migration weakens access controls, logging or incident response around SAP, contractors may no longer meet those standards. Loss of compliance can also affect eligibility to participate in bidding.
SAP S/4HANA migration is not just an IT event. It is a period where data integrity, segregation of duties and cybersecurity controls must be proven again under active auditor scrutiny.
Follow Proactive Premigration Steps
SAP migration experts at global technology firm Cognitus state that a successful and compliant transition begins long before the technical work starts. It recommends a proactive checklist that includes three main streams of work — organization, risk assessment and data planning.
First, contractors benefit from assembling a cross-functional governance team early. This group should include IT, finance, project controls, compliance, contracts and legal. Its role is to interpret FAR and DFARS obligations into system requirements, approve design decisions affecting auditability and keep leadership informed of risks.
Next, the team should run a focused compliance risk assessment against the future S/4HANA landscape. This process begins by cataloging existing controls and mapping them to S/4HANA capabilities. Examples include timekeeping, labor distribution and project collection controls, as well as indirect rate calculation logic and cost pools. It also requires DFARS- and NIST 800-171-aligned security requirements for role design, logging and incident response.
Finally, Cognitus emphasizes the importance of a precise data migration plan for compliance-critical data. This plan should define which contracts, billing schedules, indirect rate histories, cost transfers, timesheets and audit trails must be preserved, how they will be assessed, and how historical data will stay accessible in the new environment.
By taking these steps before design freezes and mock-ups, contractors avoid retrofitting compliance at the end of the project, when costs are higher and options are limited.
Choosing the Right Compliance Solution for SAP
Working with the right technology comes after the preparations. Certain providers lead the way in enforcing compliance inside SAP S/4HANA and supporting a defensible posture with auditors and customers.
Cognitus sets the standard in regulated industries and government contracting on SAP. Its CIS-GovCon solution is an endorsed application and covers the full project and contract life cycle for federal work. It supports contract management with government-specific structures, project accounting aligned to cost principles, billing that considers complex funding, and modification requirements and subcontractor management.
Because it operates within SAP S/4HANA, it keeps compliance data, processes and reporting in one integrated environment. For contractors planning a migration, this kind of embedded solution helps translate FAR and DFARS requirements into configuration, workflows and reports instead of scattered spreadsheets or custom code. Given Cognitus’s focus on complex and regulated industries, many organizations view it as the choice to anchor their compliance model in the new system.
The Future of Federal Contracting: Mastering Contract Clause Management With AI
As SAP S/4HANA becomes the digital backbone of GovCon, compliance is shifting from periodic checks to continuous management. Federal contracts reference thousands of clauses across FAR, DFARS and agency supplements, each with its own reporting, flow down and performance obligations.
For many companies, these obligations can still be found in spreadsheets and shared drives. However, that approach can break down once volumes increase and contracting strategies rely on speed and precision. Artificial intelligence is starting to change this picture. AI can now scan solicitations for high-risk clauses and support drafting agreements that are more consistent and easier to manage throughout their life cycle.
In an analysis piece, Cognitus explores how AI can help federal contractors move from reactive to proactive clause management. It describes patterns where AI tools extract clauses and key data points from contracts, classify obligations and flow downs by risk and actions, and monitor performance data and alerts linked to those clauses.
When combined with S/4HANA, this approach allows contract obligations to connect directly to master data, projects, work breakdown structures and billing events. For example, an AI engine might tag a DFARS cybersecurity clause with a requirement for specific reporting. This can be surfaced in SAP tasks and workflows, ensuring that nothing gets lost between legal review and operational teams.
Cognitus’ perspective highlights an important shift. Compliance is no longer just about getting the accounting right or passing a single DCAA audit. It is about continuously understanding what each clause requires and making sure the ERP, project systems and security tools work together to meet those expectations. This will enable contractors to adapt to future regulations more quickly with reduced manual rework.
A Compliant Migration Is a Successful Migration
SAP S/4HANA migration places government contractors under a bright spotlight where technology changes and regulatory expectations intersect. Teams that treat FAR and DFARS compliance as a core design principle build safer systems, reduce audit exposure and protect access to future work. By working with purpose-built solutions, such as CIS-GovCon from Cognitus, contractors can move with confidence that their new environment offers the support they need to achieve their goals.
