General Dynamics 2015 Annual Report Download - page 15

REGULATORY MATTERS
U.S. GOVERNMENT CONTRACTS
U.S. government contracts are subject to procurement laws and
regulations. The Federal Acquisition Regulation (FAR) and the Cost
Accounting Standards (CAS) govern the majority of our contracts. The
FAR mandates uniform policies and procedures for U.S. government
acquisitions and purchased services. Also, individual agencies can
have acquisition regulations that provide implementing language for the
FAR or that supplement the FAR. For example, the DoD implements the
FAR through the Defense Federal Acquisition Regulation Supplement
(DFARS). For all federal government entities, the FAR regulates the
phases of any product or service acquisition, including:
•acquisition planning,
•competition requirements,
•contractor qualifications,
•protection of source selection and vendor information, and
•acquisition procedures.
In addition, the FAR addresses the allowability of our costs, while
the CAS address how those costs should be allocated to contracts. The
FAR subjects us to audits and other government reviews covering
issues such as cost, performance, internal controls and accounting
practices relating to our contracts.
NON-U.S. REGULATORY
Our non-U.S. revenue is subject to the applicable foreign government
regulations and procurement policies and practices, as well as U.S.
policies and regulations. We are also subject to regulations governing
investments, exchange controls, repatriation of earnings and import-
export control.
BUSINESS-JET AIRCRAFT
The Aerospace group is subject to Federal Aviation Administration
(FAA) regulation in the U.S. and other similar aviation regulatory
authorities internationally, including the Civil Aviation Administration of
Israel (CAAI), the European Aviation Safety Agency (EASA) and the Civil
Aviation Administration of China (CAAC). For an aircraft to be
manufactured and sold, the model must receive a type certificate from
the appropriate aviation authority, and each aircraft must receive a
certificate of airworthiness. Aircraft outfitting and completions also
require approval by the appropriate aviation authority, which often is
accomplished through a supplemental type certificate. Aviation
authorities can require changes to a specific aircraft or model type
before granting approval. Maintenance facilities and charter operations
must be licensed by aviation authorities as well.
ENVIRONMENTAL
We are subject to a variety of federal, state, local and foreign
environmental laws and regulations. These laws and regulations cover
the discharge, treatment, storage, disposal, investigation and
remediation of materials, substances and wastes identified in the laws
and regulations. We are directly or indirectly involved in environmental
investigations or remediation at some of our current and former facilities
and at third-party sites that we do not own but where we have been
designated a Potentially Responsible Party (PRP) by the U.S.
Environmental Protection Agency or a state environmental agency. As a
PRP, we are potentially liable to the government or third parties for the
cost of remediating contamination. In cases where we have been
designated a PRP, generally we seek to mitigate these environmental
liabilities through available insurance coverage and by pursuing
appropriate cost-recovery actions. In the unlikely event we are required
to fully fund the remediation of a site, the current statutory framework
would allow us to pursue contributions from other PRPs. We regularly
assess our compliance status and management of environmental
matters.
Operating and maintenance costs associated with environmental
compliance and management of contaminated sites are a normal,
recurring part of our operations. Historically, these costs have not been
material. Environmental costs often are recoverable under our contracts
with the U.S. government. Based on information currently available and
current U.S. government policies relating to cost recovery, we do not
expect continued compliance with environmental regulations to have a
material impact on our results of operations, financial condition or cash
flows. For additional information relating to the impact of environmental
matters, see Note N to the Consolidated Financial Statements in Item 8.
AVAILABLE INFORMATION
We file reports and other information with the Securities and Exchange
Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended. These reports and information
include an annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy statements. Free copies of these
items are made available on our website (www.generaldynamics.com) as
soon as practicable and through the General Dynamics investor relations
office at [phone]. The SEC maintains a website (www.sec.gov)
that contains reports, proxy and information statements and other
information. These items also can be read and copied at the SEC’s
Public Reference Room at 100 F Street, N.E., Washington, DC 20549.
Information on the operation of the Public Reference Room is available by
calling the SEC at (800) SEC-0330.
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