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Monday, May 1, 2017

SMALL BUSINESS JOB COST ACCOUNTING BASICS





INTRODUCTION

Many clients in the start-up service contracting business to the federal government have recently experienced DCAA audit difficulties, suspended billings or negative marks on pricing proposals for not having addressed job cost accounting and business system issues involving Federal Acquisition Regulation (FAR) Cost Accounting Standards (CAS) requirements.  This article will address the basics of resolving those issues in a service contracting start-up environment.


"Small to Feds" has addressed the requirements of CAS and the associated business system design requirements previously in the following articles that are suggested for review as refreshers:


http://www.smalltofeds.com/2008/03/establishing-far-and-cas-compliant.html


http://www.smalltofeds.com/2009/09/federal-government-contracting-small.html


http://www.smalltofeds.com/2008/02/dcaa-audits-and-small-business-job-cost.html


http://www.smalltofeds.com/2008/08/provisional-indirect-rates-in-small.html


DEFINING YOUR COMPANY AND ITS COMPLIANT JOB COST ACCOUNTING - RULES OF THE GAME

Please view the below matters in the context of your business system design at the cost element and job description level:

You must consider the job cost accounting implications of the government contract environment; i.e how do the individual labor charges every day on time cards for the company employees and management get booked to the correct accounts or expense pools and do they or do they not become part of the labor distribution directly to contracts or indirectly though overhead and G&A applications at month end (in effect is the government billed for the cost?).


In most small start-ups the best way to handle this is to write job descriptions for every position, including the owners and executives as well as other employees. Each job description is declared chargeable as direct only, indirect only or in rare exceptions, both direct and indirect chargeable.


Job descriptions are also declared salaried or hourly, exempt and non-exempt under the Fair Labor Standards Act,  which drives eligibility for time and one half for overtime.  All company personnel are furnished copies of job descriptions and informed of their direct or indirect, salaried or hourly status as a function of their employment offers. (You should generate retroactive offer letters for everyone in the company, have all personnel accept them in writing and put the letters and the job descriptions in the company personnel files for audit purposes)


Job descriptions are assigned to labor cost element codes in the job cost system (as opposed to other codes for materials, subcontract, travel and other direct costs that may require separate cost element codes to distinguish them for accounting purposes.


A direct charge job description will always have a contract charge number every day for every hour of work (typically technical performers) This usually drives the employee eligibility for overtime pay for hours in excess of 40. A company policy should be established early for this matter. Most companies pay straight time for hours in excess of 40 for salaried direct charge personnel.  Exceptions are hourly non-exempt personnel who must be paid time and one half under the law.


An indirect job description performer will charge every day on a time card to an overhead or G&A account and the associated labor cost will become part of expenses that are distributed at month end to all contracts, based on the direct labor dollar content of each contract for the accounting period (typically secretaries, administration personnel and the like charge to overhead and the owners and executives charge to G&A (unless an executive is working exclusively in an individual overhead cost center - that person would then charge the overhead charge number for that cost center or directly to a project if performing project-direct effort).


Exceptions to the above would be where a direct charge employee has no contract home and his labor must be charged somewhere. In that instance he would charge to a company overhead account or G&A account outside the overhead pool and his or her labor would not become part of the allocation to contracts, effectively making it come out of the company bottom line (profit). This situation normally drives layoffs or finding the person a contract home to charge.


Labor donated to the company as a form of loan must also be charged in the exceptions manner discussed above (loan labor liability account) and may not be charged or recovered via a contract bill to the government directly or as part of an overhead allocation. DCCA really goes looking for this type of thing.


Where an executive normally charging to an overhead or G&A pool, is a key person on a contract or performing direct effort on a contract for parts of his or her day, that person would charge the contract charge numbers for those efforts and the overhead or G&A accounts for company business of an indirect nature.


CHECKLIST
The above rules of the game (disclosure practices in DCAA parlance) normally force several business system tangibles.  It is suggested that you generate the following as a minimum in your startup preparations for demonstration during a proposal or fact finding audit:


1. Time Cards with a time card policy requiring they be filled out daily and turned in and approved by a supervisor weekly, then booked into the accounting system weekly.


2. Expense Reports bearing charge numbers for accounting as direct or indirect expenses.


3. Written Purchase orders to suppliers bearing charge numbers for accounting as direct or indirect purchases


4. Labor Job Descriptions - specially ear marked in the manner discussed above.


5. Cost element assignments for accounting purposes for 1-4, above.


6. Charge numbers for 1-4 above. A charge number is the combination of an employee number, supplier number, expense report number and a cost element, charged to a unique direct charge contract number, an overhead pool expense account or a G&A expense account.


7. Consider hiring a payroll service company  to support salaries and regular paychecks plus tax and withholding for EVERYONE IN THE COMPANY.


8. A monthly closing where direct costs are burdened with indirect costs and billings are generated to customers creating accounts receivable for that which can be billed and liabilities for that which cannot.


9. Revenue accounting upon receipt of a payment from a customer directly to the contract against which a bill was generated with offsetting receivable reductions at the contract level.


10. The discipline and attention to set up 1-9 and demonstrate its operation to a DCAA auditor.


CONCLUSION

Every successful small business in federal government service contracting has gone through the above; some proactively and others when they have had difficulties with a DCAA audit during a proposal or cannot get paid when they are under contact. The choice is yours.  It is not rocket science but it is different and it is a serious matter and must have your attention.

Saturday, April 1, 2017

What Small Business Should Know About FAR and CAS




Federal Acquisition Regulation & Cost Accounting Standards

      Rules of the Game
       Developing Your Game Plan
INTRODUCTION

Small businesses consistently encounter FAR and CAS requirements upon entering or growing into federal government contracting.   The purpose of these standards is to supply uniform regulatory guidance to all companies doing business with the government and to the agencies that buy from them.

This article will discuss a basic understanding of FAR and CAS as well as the methods to design approaches to meeting them. 

OVERVIEW

The below table contains the principal FAR chapter titles and each of the 19 CAS clause titles (CAS 419 was never written).  Linked below the table are the web sites that can be utilized to explore these documents. 



PLEASE CLICK ON IMAGE TO ENLARGE
The FAR applies to the full acquisition cycle for all supplies and services the federal agencies buy.  The CAS apply to consistency in estimating, pricing, job cost accounting, billing and closeout of financial data under the contracts for supplies and services regulated by the FAR. 
FAR and CAS are not "Rocket Science" but they are different than the commercial business sector.  
HOW TO DETERMINE WHAT FAR AND CAS MEAN TO YOU

No one ever reads the full body of FAR and CAS from cover to cover.  They are reference documents, maintained by the government to oversee the contracting process.  From time to time changes to the regulations are offered for public comment at the FAR web site.  Such changes are more common in the FAR than in CAS.  The CAS have been constant for several years and are not as dynamic as the detail processes in the FAR. 

FAR

Determine the regulation basics that apply to any given job considered for bidding.  Examine a few solicitations in your area of expertise at the FEDBIZOPPS web site:


Use the FAR and CAS links to determine the basic terms and conditions and examine the solicitation source documents to read in detail the clauses you must understand to effectively bid federal work.  

CAS

Small businesses are generally required to meet modified CAS coverage.  A business system meets Modified Cost Accounting Standard (CAS) Coverage defined by the government when it it satisfies the following:

Standard 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs
 
http://edocket.access.gpo.gov/cfr_2005/octqtr/pdf/48cfr9904.401.pdf

Standard 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose
 
http://edocket.access.gpo.gov/cfr_2004/octqtr/pdf/48cfr9904.402-50.pdf

Standard 9904.405, Accounting for Unallowable Costs
 
http://www.smalltofeds.com/2007/04/unallowable-costs-under-federal.html

Standard 9904.406, Cost Accounting Standard―Cost Accounting Period
The following article contains practical business system guidance regarding building a Modified CAS Coverage Small Business System for federal government contracting:

HELP
 
When you have confusion regarding interpreting a requirement, seek assistance in the table of contents to the free book at this site offering guidance under the topic in question:


PLEASE CLICK ON IMAGE TO ENLARGE

You may also set up a free counseling connection at Micro Mentor:


Search for Mentor Kenneth Larson 

SUMMARY

While assessing the impact of FAR and CAS on your company educate yourself on that what directly affects your company first in making the transition to federal government contracting and growing into the field.

Carefully  maximize your existing business processes and systems first before making changes and do not jump to instant fixes with exotic software tools a supplier or consultant has told you will make you compliant or competitive overnight in government contracting.
FAR and CAS are generally logical bodies of regulation that have come about due to the need to control and make consistent the government and industry approaches to meeting prudent and sound contracting objectives with the necessary  transparency to govern. 

FAR and CAS do not impose business systems.  They do require that you disclose the way you meet regulatory requirements in the way you operate with your processes and tools. Plan the approach and learn to convey it to auditors, contracting officers and industry partners.


Grow into the business by exploring the venue and having it grow into you.








 

Wednesday, March 1, 2017

MANAGING SMALL BUSINESS RISK IN FEDERAL GOVERNMENT CONTRACTING

Image: Govconadvisors.com

The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as  they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with)

Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices.

A prime example of an abusive practice is large corporations signing  teaming agreements during proposal efforts and then not awarding  subcontracts to the small enterprise as agreed, keeping the majority of work for themselves.

Agencies take forever these days to put in place actual prime contracts after source selections and award to a small business. They do not realize that a small enterprise does not have deep pockets and must have cash flow to sustain a new program with new employees.

Funding levels on IDIQ and Omnibus programs are insufficiently committed and the small enterprise is not adequately informed about limitation of funds and  funding exposure. 

http://www.smalltofeds.com/2007/09/limitatoin-of-funds-and-funding.html

I have seen enough small  businesses succeed in the government contracting field that I am  convinced that the government needs more active roles in education of  the small enterprise and more trained contacting officers that understand the limitations of a small business.

The most common traumatic situation I encounter is with newly  established businesses who have won their first government contract and  have no CAS compliant job cost accounting system in place to bill it  out. The government has assumed that capability will materialize and  when it does not they audit the bills, find no backup and shut down the  cash flow until the system is fixed. At that point the business can fail. The company should have been educated much earlier in the process about these requirements.

 http://www.smalltofeds.com/2012/09/what-small-business-should-know-about.html

The number of poorly performing SETA contractors in roles not suited  to them in contract administration support is increasing in federal  agencies. These firms need to be vetted and better managed for the  omissions and commissions they contribute to the above.

  http://www.smalltofeds.com/2012/07/is-small-business-federal-government.html

Not every small enterprise can get  into a class on government contracting at George Washington University,  The Defense Acquisition University or send their personnel to lengthy  and costly seminars conducted by organizations like the National Contract  Management Association. These are  great education sources but do not  come close to filling the complete requirement and they cost time and money.

The contracting officer and his staff as well as larger enterprises need to be upgraded in the skills necessary to guide - not abuse - the small business in federal government contracting.

Wednesday, February 1, 2017

WHAT SMALL BUSINESS SHOULD KNOW ABOUT "FEDBIZOPPS.GOV" - THE FEDERAL BUSINESS OPPORTUNITIES WEB SITE



INTRODUCTION

This posting will provide strategic guidance on FEDBIZOPPS and factors for using it in small business marketing to government agencies and prime contractors.

A PUBLIC DOMAIN ACQUISITIONS BULLETIN BOARD

Established as the public announcement vehicle for all federal procurements over $25K, FEDBIZOPPS is a web-based, "Public Announcement Bulletin Board" to satisfy fairness in government contracting laws mandated by US law. It is a terrific market research tool and an absolute necessity once a solicitation has gone formal to stay abreast of modifications, changes in proposal due dates, questions and answers and other necessary information that contracting officers are required to make public.

WHAT ANNOUNCEMENTS MEAN

FEDBIZOPPS is the mandated posting point for contracting officers in all federal agencies. It is also the required notification point for GSA schedule solicitations, contract award announcements of all types and other information that is required by law for communication to the public in a fair and open manner regarding federal government procurement of supplies and services. The site contains "Sources Sought" and bidders conference notices, government requests for industry comment on draft RFP's and formally published solicitations with proposal due dates. The current FEDBIZOPPS "Agency Tab" lists 126 agencies:

https://www.fbo.gov/index?s=agency&mode=list&tab=list

A solicitation posted at FEBIZOPPS generally means that a procurement has received funding and the contracting officer has been authorized to start the source selection process.

Often misunderstood, is that much has occurred in the way of marketing activities by companies in advance of notices formally published by the government on FEDBIZOPPS. By the time the formal, solicitation is published it is too late to market for setting a procurement aside for a small business designation if it has not already been established as such. In addition, formal solicitation publication closes the window on self-marketing by HUB Zone and 8(a) firms for set asides to them individually without competition. In short, businesses have been marketing for the requirement long before it became formally announced at FEDBIZOPPS.

Finding a solicitation that is ideal for your company for the first time on FEDBIZOPPS is excellent market research insight into what the agency publishing the requirement is buying. However, a careful bid/no bid analysis should be conducted as to whether it is prudent to go through the expense of a proposal if the opportunity has not been a new business target for your firm earlier in the game. Please see the following article on completing a bid/no bid analysis:

http://www.smalltofeds.com/2007/02/federal-government-contract-proposal.html

NAVIGATING THE SITE

Start by registering at FEDBIZOPPS. Many of the features available to users are not accessible without a registration. Begin some careful searches by key words into agency solicitations that could use your products and services. The FEDBIZOPPS user guide is available as a free download at the "Boxnet" cube of this web site to the immediate left of where you are now reading. Study it before you complete your registration. Be specific in your key word selections on the feature that allows direct emailing to you of announcements by agencies.

The data base is huge and it is best to move from specific key word selections to the more general with experience to avoid being inundated with meaningless solicitations. Some companies establish a separate email address for the FEDBIZOPPS mailings to keep the results out of the mainstream of other business. The mailings are totally automated so there are no marketing factors to consider in setting up such an arrangement.

As you examine the solicitations, see who has indicated an interest in bidding them among your competitors and the primes you are pursuing and then target such projects for participation by your firm either as a prime yourself or as a subcontractor. Pay particular attention to "Sources Sought", Draft RFP "Request for Industry Comments" and similar announcements that indicate an early requirement taking shape.

For active solicitations that you wish to monitor, check the "Follow" Box on FEDBIZOPPS to receive updates and announcements by email. Once the solicitation reaches the formal RFP stage and a due data for a proposal has been established, if you have decided to bid the job the "Follow" feature is especially critical.

If there is a bidders conference and you intend to bid the job, make plans to attend. When questions are solicited you may ask them but remember that your question and its associated answer will be published by the government so be careful not to educate your competition to your win strategy in the process.

You do not have to indicate you are interested in bidding the job by registering as an "Interested Vendor" in order to bid a solicitation. Some companies prefer not to advertise their bid intentions, seeking to avoid competitors modeling their firm.

A MARKET RESEARCH SOURCE

If you are new to federal government contracting and wish to determine the best market for your supplies and services, observing what a given agency is buying on FEDBIZOPPS is a key factor.

Keep in mind that the decision makers in government contracting are the technical managers and process people behind the scenes in an organization (either government agency or large company). They have the budget authority, program responsibility and accountability. These people pass their decisions on to buyers and contracting officers via signed requisitions. Buyers and contracting officers are really no more than gate keeping staff members, knowledgeable in legalities, terms and conditions and who sign on behalf of the agency or company AFTER an internal review by the executives who have technical and management responsibility.

Thus your real marketing targets are behind the gatekeepers and little is achieved by marketing to a contracting officer or buyer. This rule of thumb applies with prime contractor contracting specialists and administrators as well as government personnel. For further details on the roles of these personnel please see the following link:

http://www.smalltofeds.com/2007/06/federal-government-contracting-customer.html


Once again, bidding an active solicitation after it has hit FEDBIZOPPS may be too late. The idea is to use them for market research so you can target similar projects earlier in the process. Research the technologies and services in which your targeted agencies and primes are involved through trade magazines, Internet articles, web sites, employment hiring fairs and industry conferences.

Focus your marketing campaign on finding evolving projects you can use as vehicles to approach teaming partners and agencies directly with a marketing campaign geared to your capability statement. Develop a solution to the specific needs of the project and present it to gain their attention.

Your principal challenge as a small product and services provider is finding evolving programs and projects into which your capabilities fit. Once you have found such targets it is then a matter of marketing brusquely to get into the game with eye catching solutions and capabilities.

SUMMARY

When a procurement becomes public on FEDBIZOPPS it stays public, but many invisible strings behind the scenes are likely already attached to it by aggressive and talented companies who may have sculpted the requirement with the agency, assisted in writing the statement of work or influenced the structure of the specifications to favor their products and services. All this is good, competitive marketing practice in the government contracting venue, just as it is in the commercial marketplace.

Use FEDBIZOPPS as discussed here in consonance with the following teaming and marketing articles:

http://www.smalltofeds.com/2009/05/small-business-teamiing-in-government.html

http://www.smalltofeds.com/2009/07/multiple-front-marketing-in-small.html

http://www.smalltofeds.com/2006/12/marketing-small-business-in-federal_17.html

FEDBIZOPPS is an absolute necessity once you make a bid decision. It is an extensive resource prior to such decisions and if utilized prudently it can enhance your small business government contract marketing plan dramatically.

Sunday, January 1, 2017

ORGANIZATIONAL CONFLICTS OF INTEREST (OCI) IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

 
Image:" C2 essentials.com"


INTRODUCTION

While planning, marketing, teaming, proposing or performing under federal government programs (particularly service contracts) the small business will encounter the term, "Organizational Conflicts of Interest" or "OCI". The term has been established by the government as part of the process to control procurement integrity.

OCI clauses in solicitations and contracts require that companies certify their organizations and personnel as not having a procurement integrity issue with regard to a pending contract award or disclose what may be deemed an issue and provide mitigating factors to still be considered.

This site has discussed procurement integrity and the law at the following article:


Meeting OCI requirements involves strategic planning to avoid situations where your company, your management and/or your personnel are placed in potentially compromising positions while government contracting in your industry.

An apparent win can be delayed indefinitely by a competitor protest claiming OCI. Government actions after the fact if an OCI violation is uncovered will be annotated to a contractor's past performance history and in severe cases result in disbarment from government contracting.

This article will define Organizational Conflict of Interest (OCI),  discuss situations under which OCI issue are likely to occur and recommend strategic planning and processes to manage the requirement. 

DEFINITION

The term "organizational conflicts of interest" means that a relationship or situation exists whereby an offer or a contractor has past, present, or currently planned interests that either directly or indirectly (through a client, contractual, financial, organizational or other relationship) may relate to the work to be performed under the forthcoming contract and:

 (a) may diminish its capacity to give impartial, technically sound, objective performance

 (b) may result in it having an unfair competitive advantage.

It includes chief executives and directors, to the extent that they will or do become involved in the performance of the contract, and proposed consultants or subcontractors where they may be performing services similar to the services provided by the prime contractor. 

It does not include the normal flow of benefits from the performance of the contract.

EXAMPLES

1. Competing for a management/services contract that might require the contracting company to evaluate its own or its competitors’ products for use by the government

2.  Competing to supply products/services for which you have designed the specifications

3.  Access to other companies’ proprietary information that has not been authorized for use in landing/performing the contract

4.  Access to other companies’ proprietary information obtained by leveraging the contract in question, which might provide an unfair competitive advantage.


The below article in the Washington Post addresses an apparent blatant example of OCI:

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/09/AR2009070902927.html


TYPICAL OCI REPRESENTATION AND DISCLOSURE

Below are exampes of typical representation certifications and disclosure statements required by OCI regulations.   For a given procurement either the Representation or the Disclosure is submitted - not both:
OCI REPRESENTATION STATEMENT

I hereby certify (or as a representative of my organization, I hereby certify) that, to the best of my knowledge and belief, no facts exist relevant to any past, present or currently planned interest or activity (financial, contractual, personal, organizational or otherwise) which relate to the proposed work; and bear on whether I have (or the organization has) a possible conflict of interest with respect to (1) being able to render impartial, technically sound, and objective assistance or advice; or (2) being given an unfair**competitive advantage.

Signature: Date:

Name : Organization:

Title :


OCI DISCLOSURE STATEMENT


I hereby certify (or as a representative of my organization, I hereby certify) that, to the best of my knowledge and belief, all relevant facts--concerning past, present or currently planned interests or activities (financial, contractual, organizational or otherwise) which relate to the proposed work and bear on whether I have (or the organization has) a possible conflict of interest with respect to (1) being able to render impartial, technically sound, and objective assistance or advice, or (2) being given and unfair**competitive advantage--are fully disclosed on the attached page(s) and formatted to show:

o For ease of presentation, divide following data into four parts: Organizational,
contractual, financial, other;

o The company, agency, organization in which you have a past, present, or currently planned interest or activity (financial, contractual, organizational, or otherwise);
 
o A brief description of relationship;

o A period of relationship;

o The extent of relationship (e.g., value of financial interest of work; percent of total holdings, total work, etc.).


Signature:


 Date:


** An unfair competitive advantage does not include the normal flow of benefits from the performance of the contract. 

STRATEGIC MANAGEMENT FACTORS

When considering the implications of OCI, examine your strategic plan for the following factors:

1.   Examine your market niche and what aspects of it would be subject to OCI as a function of your company role in it or the roles of past and future  personnel and suppliers or prime contractors. 

2.   If you are considering becoming  a SETA contractor determine what portion of the market in your industry will be unavailable to you in that role.  Systems Engineering and Technical Assistance (SETA) contractors are civilian employees or government contractors who are contracted to assist the government (In some areas of DOD, the acronym SETA refers to "Systems Engineering and Technical Assessment" contractors; also refers to "Systems Engineering and Technical Analysis.")  SETA contractors provide analysis and engineering services in a consulting capacity, working closely with the government's own staff members. SETA contractors provide the flexibility and quick availability of expertise without the expense and commitment of sustaining a government staff long-term.

3.  Bear in mind that non-disclosure agreements and OCI requirements for major programs have long term implications and expiration dates. 

4.  Keep in mind that subcontractor and prime contractor relationships also bear on OCI.  Vet your prospective teaming companies and suppliers carefully with regard to the OCI impact they may have on ventures you undertake and flow the requirement down to them in the early stages of any teaming agreement with them. 

5.  Carefully consider the following guidance from FAR Part 9.505:

 
“Each individual contracting situation should be examined on the basis of its particular facts and the nature of the proposed contract. The exercise of common sense, good judgment, and sound discretion is required in both the decision on whether a significant potential conflict exists and, if it does, the development of an appropriate means for resolving it. The two underlying principles are—

 
(a) Preventing the existence of conflicting roles that might bias a contractor’s judgment; and

 
(b) Preventing unfair competitive advantage. In addition to the other situations described in this sub-part, an unfair competitive advantage exists where a contractor competing for award of any Federal contract possesses — Proprietary information that was obtained from a Government official without proper authorization; or  Source selection information (as defined in 2.101) that is relevant to the contract but is not available to all competitors, and such information as would assist that contractor in obtaining the contract.”

CONCLUSION AND RECOMMENDATIONS

If a potential for a conflict of interest is real, it is best to make that fact a principal factor in your bid/no bid decision.

If you feel the risk could be mitigated and an effective OCI management plan could be submitted as part of your proposal to the government then carefully establish how such practical matters as firewalls, OCI certifications and clearances at the individual worker level will be handled.

Keep careful records of all written certifications and commitments in the form of NDA's, Teaming Agreements and OCI Certifications and Disclosures.  Review them on a regular basis for renewal, expiration and in connection with bid/no bid decisions.

Be open and honest in your presentation of the facts to the government.  Your past performance rating will take a major hit if OCI is uncovered after award and you have not made full and open disclosure previously.

Thursday, December 1, 2016

INTRODUCING FEDERAL GOVERNMENT CONTRACTING INTO YOUR COMMERCIAL SMALL BUSINESS

Image: FCW.com


INTRODUCTION

Many inquiries have been received from commercial firms and startups regarding entering the small business federal government contracting market. Topics relevant to the issue have been posted at this site since 2006, but a comparison has not been made between the commercial and government environments to benefit readers. The purpose of this article is to compare small business federal government contracting as opposed to selling commercial products and services. The comparison may be useful for those who are considering melding commercial and federal government business or starting an enterprise involving both venues.

 
WHAT FEDERAL GOVERNMENT CONTRACTING IS - AND IS NOT


Small business federal government contracting is not rocket science - to succeed you must take what you do well in the commercial market place or what your experience leads you to believe you can plan successfully as a commercial enterprise and then apply it in a slightly different manner from a business perspective to accommodate federal government contracting requirements. Very few companies enter federal government contracting without some commercial experience and success. Very few startups entertain contracting exclusively to the federal government without commercial work to sustain operations while the more lengthy government procurement process is being pursued.


Federal government contracting is controlled by the Federal Acquisition Regulation (FAR). Bid and proposal types are driven by the nature of the supply or service being procured. No one reads the FAR cover to cover - It is a source book for when you need it. The FAR and associated regulations are taught in only a few colleges, such as the Defense Systems Acquisition University at Ft. Belvoir and the George Washington School of Government Contracting. Very few CPA's are familiar with the US Government FAR Cost Accounting Standards (CAS) and I am not aware of any questions regarding CAS on current CPA exams. In general one must grow to understand these requirements and that usually happens by doing business under them.


BUSINESS DRIVER COMPARISONS


The following are some common driving business factors and a commercial versus federal government comparison for each:

PLEASE CLICK ON IMAGE OR DOWNLOAD TO ENLARGE


SUMMARY


The above are not all the driving factors you should consider when weighing the differences between commercial and government work, but they are some of the most significant. Becoming a government supplier may not result in the highest profit-making product/service line in your enterprise but the venue has the potential to pay the bills and be a major platform for stability and long term growth. It should not be your only endeavor but it could be a major element of your total business plan.

Please see the Table of Contents at this site and the free downloads of books and materials for further details.

Tuesday, November 1, 2016

Small Business Federal Government Contracting and You

PLEASE CLICK ON ABOVE IMAGE TO ENLARGE
Use the Search Box at the web site for Listed Articles: 

Small Business Federal Government Contracting


Download Free Books & References in the Right Margin "Box" at the above site.

Locate Ken for free counseling at the Micro Mentor Web Site:

 Micro Mentor 


Catch the latest in News for the Government Contracting Industry:

 Government Contracting News


About Ken Larson 

Over 40 years in the Defense Industrial Complex. Veteran 2 tours US Army Vietnam. Subsequently spent over 30 years in federal government program and contract management and 10 years in small business consulting.  

As a Micro Mentor Volunteer Counselor, Ken Larson assists many small businesses with their planning and operations processes. Receives many inquiries from small companies wishing to enter or enhance their position in federal government contracting. Volunteer time, books, articles, and resources are 100%  free, maintained exclusively for small business on the above subjects.



Saturday, October 1, 2016

New Federal Fiscal Year - Have You Managed Contract Funding Risk?


INTRODUCTION

As the federal fiscal year draws to a close and the new year opens this month, an astute contractor will have examined the funding status of all government contracts for risk.

Limitation of funds and funding exposure must be a vital topic for every government contractor.

THE FUNDING CHALLENGE

Many federal contracts are funded incrementally, usually based on the government fiscal year that runs from 1 October to 30 September. Although the government may negotiate dollar price ceilings for cost plus and time and materials contracts or firm, fixed total price arrangements, the contracts themselves may be incrementally funded, particularly if they extend over two government fiscal years. A contract may contain negotiated prices or a cost ceiling but also specify an incremental funding value.

The contractor is required to inform the government when actual costs incurred plus obligations to suppliers or payroll on a specific contract reach certain thresholds of the current incremental funding specified in the contract (usually 80%). The government is then obligated to further fund the contract. 

In the event the contract is not funded further, the contractor has the right to stop work before he exceeds the incremental funding. Some contractors choose to operate on "risk," continuing to perform on a contract while exceeding the incremental funding in booked cost and obligations. 

The government is under no obligation to reimburse the contractor for invoiced amounts exceeding incremental funding. Nearing the end of a government fiscal year, a contractor may find delays in funding reaching all the way to congress. This situation must be managed with the government contracting officer. Limitation of Funds and Funding Exposure

STOP WORK ORDER

In the current political climate with a new Presidency at hand, Sequestration still in vogue and new fiscal year appropriations being incrementally approved by Congress, contractors may receive stop work orders from agencies unless their contracts were fully funded in the previous fiscal year.   Even then, the government reserves the right to de-obligate funding on contracts, which can effectively bring them to a halt. 


Stop work orders are serious matters and require special handling to comply with government direction and manage the associated financial risk. 

Upon receipt of a stop work order you have no guarantee of payment for any transaction date-stamped in your accounting system after the date of the stop work order (or the commencement date of a stop work order specified in a Contracting Officer's Letter).

Applicable charge numbers in the accounting system must be closed until the stop work order is lifted and any effected suppliers and subcontractors must be notified to do the same.

To the degree the government has made progress payments or has any other form of payment invested in a physical product to date it has ownership rights. If that is the case, treat the physical material work-in-process as government owned, store it as such without performing any more effort on it and await further disposition.

To the degree the government has not paid anything on the contract or delivery order they have no ownership rights to the physical product and you are free to complete it and sell it to another customer (commercial or government that has not stopped work). If the government recommences the order, quote a new price and delivery from ground zero.

At the bottom line a stop work is blunt and to the point.  Treat it as if you will never hear from this customer again to manage the risk.

To the degree you do hear from the Contracting Officer again and he or she has the funding to recommence work, be prepared to submit a proposal for what it will take to start the effort and a realistic delivery schedule to complete it, but do not build any retroactive costs incurred during the stop work period into your logic and expect to bill them; they may not come to payment fruition. 

Continuing effort on a contract after receipt of a stop work is high risk. Astutely managing your options is a far better approach.   What is a Government Contract Stop Work Order?

SUMMARY

Having a limitation of funds and funding exposure process in the company should be a standard part of doing business.  A, shrinking, remaining funding level condition on incrementally funded contracts should trigger a risk analysis and government notification process throughout the year.  The federal fiscal year-end brings an additional element of risk to the process with the annual budgeting, approval and appropriations process required by law. 









Thursday, September 1, 2016

7 Techniques to Profile Your Government Contract Competition



INTRODUCTION

Even though small businesses enjoy set aside opportunities in government competition, the majority of set-aside procurement bids are populated with several competitors.
Early market research, industry teaming and customer relations are necessary on the road to a set-aside win.  Marketing to Achieve a Set aside Government Contract

Once a bid target is selected, competitive analysis is vital. This is particularly true in service contracting.  As the small enterprise moves on into the full and open market, it is even more vital to know who else is bidding and their relative strengths and weaknesses.
Make a bid/no bid decision. Making an Astute Bid/No Bid Decision

If you decide to bid, develop a model of your competition as a validating tool for your proposal approach.  Develop a profile of your competitor’s likely technical solution, past performance, personnel qualifications and cost buildup.

WHO IS THE COMPETITION?

The FEDBIZOPPS web site contains an “Add Me to Interested Vendors” feedback link at every published solicitation.  Although many firms may not wish to tip their hand with an entry, those who are seeking teaming partners may list their firm in this feature. Federal Government Business Opportunities

If the government is offering a bidder’s conference, go to the meeting and attend any tours offered. Then obtain the list of attendees from the solicitation contracting officer.

Examine the contract award history on the agency web site and award notices under the “Agency Listing” at FEDBIZOPPS.  Determine who has been awarded previous contracts by the agency and who the present incumbent may be for your bid if the requirement is not a new one and is presently being performed by another company.

Make inquiries regarding the competitor through industry partners and prime contractors with whom you are associated and with whom you hold Non-Disclosure Agreements. Question them regarding the pending procurement who they believe are the bidding companies.

PROFILE YOUR COMPETITOR

Check the Competitor’s  General Services Administration (GSA) ScheduleMost government contractors who have been in business long enough to qualify for a significant procurement also establish a GSA Schedule.  Virtually all of them post that schedule at their web site.  For products it will contain the prices through profit for items the company wishes to sell off the schedule to the government.  For services the schedule usually contains fully loaded labor rates through overhead, G&A and profit.  Examine the schedule and note the prices, comparing them to your cost build ups. GSA schedules are usually projected for a 5 year period.  Achieving and Utilizing a GSA Schedule

Consider A Freedom of Information Act (FOIA) Request. Note from company web sites, FEDBIZOPPS award announcements, press releases and other public data the contract numbers your competitor has been awarded by the agency to whom you are bidding.  Consider similar program history in other agencies if the present bid has no recent competitor history. Then submit a FOIA request to the agency FOIA Point of Contact listed at the government web site, identifying the document or documents you are requesting specifically by name and identifying number (s).  When requesting contracts, RFP’s, change orders and similar data, always include the contract number and be specific with regard to references to all changes.  If proposals are requested include a specific request for management, technical and cost volumes. The more detail you provide the more likely the response will supply what you wish to have. Utilizing the Freedom of Information Act

Obtain Competitor Dunn and Bradstreet (D&B) and Better Business Bureau (BBB) Reports. You have a D&B Number.  So do your competitors.  Use your registration at the Dunn and Bradstreet web site to order a D&B report on your competition.  It will provide detailed history of the company, its ownership, the length it has been in existence, its credit and payment history, as well as other useful information.  D&B charges a fee for the reports, but you can order them as needed and pay by the report.   Dunn and Bradstreet  A BBB report is free and may provide insights into complaints, problem resolutions and related matters from the buying public.Better Business Bureau

Review the “Project on Government Oversight” (POGO) Federal Contractor Misconduct Database (FCMD).  This data base has surprising detail on many government contractors who have undergone federal legal actions such as defective pricing and other violations of the FAR, yet remain in business having paid fines or financed continuing litigation.   The site is free POGO Contractor Misconduct Data Base

Make a Physical Visit. Visit your competitor’s location, particularly if it is local.  Make sure you are viewing the cost center out of which the job will be bid.  Many businesses have multiple cost centers at multiple locations to maximize competitive factors on government contracts.  Cost Center Strategic Planning  Without entering the facility, assess the size of the operation, the traffic entering and leaving and relative indirect cost factors that can be generally observed, such as square footage, headcount of employees, the size and content of the parking lot and related matters.

Post Generic Help Wanted Ads at Your Web Site and Elsewhere on the Web.  Without revealing the specific contract or program (unless you believe it will benefit you) publish job descriptions and openings for the skill sets necessary to perform the work required by the new program, even if you already have the personnel on board.  Look for interviewees who have worked for, or are presently on, the competitor’s payroll and invite them for a visit at a neutral location. Some companies even announce a job fair for the program.  Talent is fluid today. It is also being re-defined.  Thus, what used to be considered a “Pool” (either captive or available) is now a technologically-equipped, high speed resource of communicators with motivated skill sets seeking opportunity. Economic hardship has also put a hard, cynical edge on many.  Selling must occur both ways (employer and employee).  To an extraordinary degree the age in which we live is requiring us to redefine trust and the degree to which communication and expectation contribute to it. Loyalty has taken a back seat to the above.  Recruiters, companies and entrepreneurs must recognize these hard facts of life.  Is the term, "Talent Pool" Obsolete?

Develop A Cost Model of Your Competition. Make a copy of your cost model spreadsheet for the job and modify it to look like your competitor. To see examples, check the models labeled “Attachments A and B” in XLS spread sheets within the “Books by Ken” BOX in the right margin of this site.  Plug your direct costs for labor, material, ODC (travel and the like) into the competitor model, then using information developed above, evolve estimated indirect cost factors for Overhead, G&A and Profit/ Assume that all competitors will have to pay the same relative wage scale as you have determined by salary survey  to attract or retain talent and a fringe benefits package to meet government requirements for vacation, sick leave, holidays, taxes and similar expenses. Then focus on the overhead and G&A as key factors in winning the pricing criteria for the job, comparing your bid to the competitor cost model. Pricing Small Business Federal Government Contracts

SUMMARY

An effective competitor profile contains performance, historical, demographic, statistical, physical operations, human resource and cost information that is trending in nature and provides insights and comparative balance to a challenging bid. It is a key tool in performing risk analysis and making related trade off judgments in the final submission of your bid or proposal.