Small Business Federal Government Contracting

Coming February 1 2012 - Free Download- 4th Edition of "Small Business Federal Government Contracting"

2012-01-01T05:31:00.007-06:00

The 4th Edition of "Small Business Federal Government Contracting" will be available on 1 February 2012 as a download from the first, vertical, Box Net Cube in the left margin of this site.

The document has been expanded to include articles published during the 2010 and 2011 business years and is presented in the logical order of topics normally encountered by an enterprise entering or growing into small business government contracting.

You may now preview the topics here at this site by using the site search box at the top of this page and the table of contents published below or by going to the Box Net Cube and using the preview feature.

Black = 3rd Edition Issue Now Available as a Download - Articles 2006 through 2009
Red = Supplementary Articles Published at this Site During the Year 2010
Green = Supplementary Articles Published at this Site During the Year 2011

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HAPPY HOLIDAYS 2011 FROM SMALL TO FEDS

2011-12-01T05:43:00.000-06:00

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2011-11-05T10:45:00.001-05:00

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10 GOLDEN RULES FOR SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTORS

2011-11-01T05:17:00.001-05:00

1. Do not promise what you cannot deliver

2. Do not overextend your resources and get a reputation for poor performance.

3. Do not tell the customer what he or she wants to hear. Tell them what they need to know. They will respect you for it.

4. Network constantly on professional sites such as Linked In. Hit the "Answers" feature and accumulate an "Expert" rating from your peers in your field.

5. Blog like there is no tomorrow. A blog is quite different than a web site. Provide good, solid information free of charge and use blog searches for synergistic businesses to team with. Teaming is an absolute necessity these days.

6. Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in. Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will be in demand for follow up business.

7. Quote and bill what the client can afford and grow with him (in content and resources).

8. Be dedicated to working yourself out of a job with a specific customer and having your client take over by training him. He will remember you and recommend you to 10 others.

9. Remember growth is a function of persistence and foresight. Know where your market is headed and get their first - then write and speak about your success indirectly by helping others. Demonstrate humility and a satisfaction in helping others succeed. They will find ways to give you credit. There are ways of tooting your horn without making peoples' lights go out.

10. Word of mouth advertising from pleased clients is a sure ticket to success.

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2011-10-18T10:40:00.002-05:00

small business federal government contracting http://formspring.me/smalltofeds

MARKETING TO ACHIEVE A SMALL BUSINESS SET ASIDE CONTRACT

2011-10-01T05:10:00.004-05:00

"THE EARLY BIRD GETS THE WORM"

INTRODUCTION

Marketing is one of the greatest challenges for the smallbusiness federal government contractor. We have previously discussed thefederal government marketing process at the following articles:

http://www.smalltofeds.com/2010/11/insights-to-succeed-in-small-business.html

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

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

http://www.smalltofeds.com/2010/06/techniques-for-product-development-in_01.html

This posting will address sculpting a government contractingbusiness opportunity to the point where it becomes a sole source or smallbusiness group-designated set aside procurement.

GENERAL CONSIDERATIONS

Small business group-designatedprocurements are far more frequent than sole source contract awards. Agencies must prepare special justificationsfor sole sourcing and those most frequently approved are for Hub Zone andSmall, Disadvantaged [8(a)] firms (see table below).

Small business group designations are beneficial to firmswho hold them by enhancing the probability of an award through agencyrestrictions on prime contractor bidding to only those who hold the groupdesignation. Others may bid as subcontractors to the prime but the prime small businesscontractor must be capable of performing at least 51% of the total effort interms of work scope, hours and dollars.

In either sole source or group-designated marketing, anagency making the buy must be convinced that sufficient capability exists in asingle company or in the small business designated group community to set acontract aside. The agency must be convinced early – before a formalprocurement announcement is published on FEDBIZOPPS.

Marketing to achieve a limitedcompetition under a small business group designation or eliminate competitionunder a sole source contract assumes the marketing enterprise has one or moreof the following federal government set-aside designations:

DESIGNATION TARGET

Small Business (Group Designation Set Aside Potential)

Small Woman-Owned Business (GroupDesignation Set Aside Potential)

Small Veteran-Owned Business (GroupDesignation Set Aside Potential)

Small Disabled Veteran-Owned Business (Group Designation Set Aside Potential)

Small Hub Zone Business (SoleSource & Group Designation Set Aside Potential)

Small Disadvantaged Business 8(a) (Sole Source & Group Desingation Set Aside Potential)

Federalgovernment procurements are further classified under the SBA Small BusinessSize Standards in terms of North American Industrial Classification System(NAICS) Code, number of personnel and/or annual sales. To determine whether afirm qualifies for a given bid, note the NAICS for a given solicitation and downloadthe SBA Small Business Size Standards from the second, vertical Box Net“References” Cube in the left margin of this site.

Part ofthe sole source or designated group set aside marketing task is to suggest tothe agency the NAICS Code (hence the size standard) for a prospectiveprocurement.

Registeringto bid government contacts and establish sole source and group designations maybe achieved using guidance in the below articles:

http://www.smalltofeds.com/2009/06/federal-government-contracting-small.html

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html

Hub Zoneand Small Disadvantaged Business 8(a) designations are lengthy certificationprocesses. The remaining designations in the above table are self-certifying atthe Central Contractor Registration (CCR) web site, but are verified by sitesurveys and bid vetting for each solicitation prior to contract award.

EARLY REQUIREMENT TARGETING ISTHE KEY TO SUCCESS IN SET ASIDE MARKETING

Effective set aside marketingreaches the agency decision makers with technical, budget and scheduleauthority before a synopsis of the requirement is posted on FEDBIZOPPS.

The objective of this form of targeted marketing is to getconcurrence from the government to set the program aside sole source if thecompany has an 8(a), or Hub Zone Certification or reserve it by one of theabove group designation classes to eliminate the prospect of full and opencompetition involving large business.

Become known to targeted agency personnel by visiting their program offices and meeting the decision makers. Bring a capability statement:

http://www.smalltofeds.com/2011/05/your-capability-statement-cape- for.html

Present your qualifications openly, objectively and specific to their needs. You must determine what those needs are through market research, trade magazines, research on what they are buying on FEDBIZOPPS, as well as postings on their web site that are future-program oriented.

Subscribe to periodicals like "Washington Technology" and other trade magazines. Observe agency trends and analysis that impact your market segment. There have been set aside programs marketed by small companies through acquainting agency management and technical personnel with capabilities they were not aware existed in the small business community or fulfillment of needs they in fact did not know they had.

Pay particular attention to FEDBIZOPPS "Sources Sought" or “Requests for draft RFP Comment” on programs that have yet to be formally solicited. Obtain an appointment to present your capabilities to the decision makers (not the gate keepers). Be courteous to contracting officers but understand they are not the individuals who make source selections. Understand that once the requirement is formally published on FEDBIZOPPS the gate closes on informal visits to the customer and the competition begins in the form of proposals by competitors. It is too late at that point to set the program aside for a sole source or a small business designation if it has not occurred by the publication stage.

Cultivate teaming relationships with other firms in your industry and look for early opportunities in agencies, not only to prime a program but to bring a team of qualified contractors in lesser roles to fulfill them with you or join a team being led by a more experienced firm:

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

Understand the small business start up past performance challenge and work to meet it:

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

Attend small business outreach events by agencies and prime contractors. Stay attuned to who is attending and research their needs and requirements.

Make a point to be present at bidders' conferences for existing solicitations that you may not choose to bid but which may lend insight into the agency needs and prime contractor relationships in the future.

SUMMARY

As a small business becomes known in the federal governmentcontracting community, successful marketing of sole source or group-designatedbusiness becomes easier, but it is always a challenge due to the need fortaking early action in windows of opportunity. Find those windows and communicate capabilities to the decision makersand industry team members who can help you.

If you are eligible for any of the designations discussed inthis article, make small business set asides or sole source procurements keyelements in your marketing plan.

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2011-09-07T10:27:00.001-05:00

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SMALL BUSINESS FEDERAL GOVERNMENT CONTRACT DISPUTES AND APPEALS

2011-09-01T05:35:00.001-05:00

{EAV_BLOG_VER:6910f8d5b926de89}

REQUESTSFOR EQUITABLE ADJUSTMENT (REA)

ALTERNATIVEDISPUTE RESOLUTION (ADR)

ANDCLAIMS

I. INTRODUCTION

The Federal AcquisitionRegulation (FAR) contains provisions for contractors and the government toresolve contract disputes. Such mattersarise due to events during performance, many times surfacing weaknesses in theoriginal contract work definition, technicalparameters, schedule factors or related terms and conditions that can lead to changeimplications effecting cost, schedule and delivery.

In short, when theunderstanding the parties thought they had at negotiation and execution of thecontract is in dispute, there must be a resolution.

Such conditions openthe baseline of the contract to further clarification and negotiation. The FAR recognizesthat a fair and equitable process is necessary to settle such matters andre-establish a mutually agreeable contract baseline.

II.GENERAL CONSIDERATIONS

As wehave conveyed earlier in discussions on contract terminations, certainconditions are usually present when a disputed contract is on the horizon.

Contractbaseline management has been discussed previously in the following article:

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

The abovearticle offers six (6) rules of thumb:

1. KNOW -The contract value and its ceiling amount

2. KNOW -The incurred cost to date and commitments

3. KNOW -The scope of work and whether or not your current efforts are supporting it orsome other objectives

4. KNOW -The estimated cost at completion based on where you are at today

5. KNOW -Your customer and who among the customer population is prone to direct out ofscope effort.

6. KNOW -WHEN TO SAY "NO" to "Scope Creep" and say it officially inwriting to the contracting officer specified in your contract.

The remainder of thisarticle will discuss the three most common processes that contract disputesundergo and selecting the best method considering the circumstances that existon the contract.

III.REQUESTS FOR EQUITABLE ADJUSTMENT (REA)

An REA ismost often the first and the least formal step undertaken by a contractor whenthere has been a clear and recognizable departure from the contract baseline interms of events that warrant cost, schedule, technical performance or terms andconditions parameter modification. Itdoes not start the formal claims process under FAR with associated interestimplications.

Submittedin the form of a proposal for contract change, the REA cites the "Beforeand After" conditions of the contract baseline and the details regardingthe delta. Implicit in the submissionare actual cost records, documents regarding government actions and guidance,an estimate of the new baseline impact in terms of cost, schedule or technical modificationsto the agreement and a request for contract change.

Thegovernment agency may approve or deny the proposal, further negotiate thedetails with the contractor and may or may not modify the contact. The following article is an excellent guideto use and preparation of REA’s:

http://www.cbh.com/news/newsletter_details.asp?id=144

IV. ALTERNATIVEDISPUTE RESOLUTION (ADR)

ADR takes advanceplanning on the part of the government agency and the contractor. Not every government contracting officechooses to place an ADR clause in contacts they execute. Not every contractor is willing to accept oneat contract award.

ADR is intended to be an alternative to theREA and formal claims process, whereby the government and the contractor agreein advance to place an ADR clause in the contract and subject any dispute thatarises to the ADR process for resolution.

Below is a quote from the FAR on the use of ADR:

33.214 Alternativedispute resolution (ADR)

(a) The objective of using ADRprocedures is to increase the opportunity for relatively inexpensive andexpeditious resolution of issues in controversy. Essential elements of ADRinclude—

(1) Existence of an issue incontroversy;

(2) A voluntary election by bothparties to participate in the ADR process;

(3) An agreement on alternativeprocedures and terms to be used in lieu of formal litigation; and

(4) Participation in the processby officials of both parties who have the authority to resolve the issue incontroversy.

(b) If the contracting officerrejects a contractor’s request for ADR proceedings, the contracting officershall provide the contractor a written explanation citing one or more of theconditions in 5 U.S.C. 572(b)or such other specific reasons that ADR procedures are inappropriate for theresolution of the dispute. In any case where a contractor rejects a request ofan agency for ADR proceedings, the contractor shall inform the agency inwriting of the contractor’s specific reasons for rejecting the request.

(c) ADR procedures may be used atany time that the contracting officer has authority to resolve the issue incontroversy. If a claim has been submitted, ADR procedures may be applied toall or a portion of the claim. When ADR procedures are used subsequent to theissuance of a contracting officer’s final decision, their use does not alterany of the time limitations or procedural requirements for filing an appeal ofthe contracting officer’s final decision and does not constitute areconsideration of the final decision.

(d) When appropriate, a neutralperson may be used to facilitate resolution of the issue in controversy usingthe procedures chosen by the parties.

(e) The confidentiality of ADRproceedings shall be protected consistent with 5 U.S.C. 574.

(f)(1) A solicitation shall notrequire arbitration as a condition of award, unless arbitration is otherwiserequired by law. Contracting officers should have flexibility to select theappropriate ADR procedure to resolve the issues in controversy as they arise.

(2) An agreement to usearbitration shall be in writing and shall specify a maximum award that may beissued by the arbitrator, as well as any other conditions limiting the range ofpossible outcomes.

(g) Binding arbitration, as anADR procedure, may be agreed to only as specified in agency guidelines. Suchguidelines shall provide advice on the appropriate use of binding arbitrationand when an agency has authority to settlean issue in controversy through binding arbitration.”

V. CONTRACT CLAIMS

A formal contractclaim is a significant step in the relationship with your customer. It acknowledges that the REA and ADR (ifapplicable to the contract) processes have not been effective in resolving thedispute and refers the matter to a formal claim which has the potential foradjudication. It also starts theinterest clock in terms of government payment liability in the event the agencyloses the claim during adjudication.

Below are the majorclauses regarding formal contact claims and the certifications by thecontractor that apply. They have significantlegal implications.

https://www.acquisition.gov/far/html/Subpart%2033_2.html

VI. SUMMARY

When contractdisputes or the potential for claims and appeals arise it is best to view eachinstance uniquely in deciding which of the three avenues discussed in thisarticle may be appropriate.

Contract disputes areserious matters. In the event the impact to the company from a risk perspectiveis substantial, it is best to involve a law firmthat specializes in government contract claims for advice on how toproceed.

Great Article on the Current Global Political and Economic Crisis‏

2011-08-10T10:37:00.001-05:00

This free article by George Friedman at STRATFOR makes a great deal of sense, in an objective fashion, of the economic and political unrest globally. It is well worth the read:

http://www.stratfor.com/weekly/20110808-global-economic-downturn-crisis-political-economy?utm_source=freelist-f&utm_medium=email&utm_campaign=20110809&utm_term=gweekly&utm_content=readmore&elq=c375cfa4e7d54d339618164cc63e31c8

FEDERAL GOVERNMENT CONTRACT TERMINATIONS

2011-08-01T06:00:00.000-05:00

I. INTRODUCTION

On occasion the government finds it necessary to terminate contractual arrangements with contractors. FAR Sub-part 49.5 governs such actions. This article will discuss the two most common forms of contract termination, what you should know about them and how to manage them.

II. GENERAL CONSIDERATIONS

Certain conditions are usually present when contact termination is on the horizon. These factors range from product and services obsolescence to developments that change the direction and amount of agency funding. They may also include customer relations difficulties or changes in the mission of an agency.

It is best to manage the risks associated with terminations by viewing them in the light of funding and performance liability. We have previously discussed limitation of funds and funding exposure in the following articles:

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

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

If it is generally known, for instance, that if the government is having funding challenges in terms of justifying the next phase of a program, your company should carefully monitor incurred costs and commitments so they do not exceed the existing funding on the contract.

Moreover, if performance on a particular contract has been sub-par, deliveries have been late and corrective action has not remedied the situation, the reality of a termination for default should be assessed from a liability perspective; particularly concerning costs the government may bill the contractor for inconvenience. Receipt of "Show Cause" notices or "Cure Letters" are signs the government is positioning a justification for contract termination.

Terminations for default are particularly harmful to a contractor's past performance rating on federal government contracts:

http://www.smalltofeds.com/2011/04/your-small-business-federal-government.html

The remainder of this article will focus on each of the two major types of terminations and how to manage each.

III. TERMINATION FOR CONVENIENCE

This form of termination arises from standard clause(s) in your government contract that give the government the right to unilaterally terminate the contract at any time with or without giving any reason. The contractor is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred. Please see the following link for applicable clauses:

https://www.acquisition.gov/far/current/html/Subpart%2049_5.html

A termination for convenience is the least risky form of termination to the contractor. Although receiving a notice that your contract is being terminated for convenience is never good news, it does offer the opportunity to recover costs you have incurred and those you estimate will impact your business due to the termination.

Actions necessary:

1. First, insure your costs to date, plus commitments have not exceeded the funding level of the contract. If they have, consider asking for a funds amendment to your contact to cover the overrun. It may not be granted by the government. Next, immediately notify departments internal to the company with regard to the termination and inform them that their charge numbers for the program have been closed. Close all charge numbers.

2. Notify all suppliers and subcontractors with respect to the contract termination, direct that they cease work, discontinue deliveries and submit to you a termination proposal containing itemization and costs associated with terminating their order or contract. You will negotiate with your supply chain and include their costs in your termination settlement proposal to the government.

3. Open a contract termination charge number for selected use by those who are associated with the termination to charge related time and expenses for ceasing work, inventorying material, supporting a termination proposal, dealing with suppliers, handling special requests or other direct efforts to cease work. It makes no difference whether the individuals are direct or indirect in their normal time keeping. This special accounting charge number will be utilized to record the cost to your firm for terminating the contract and proposing a settlement to the government.

4. Complete your contract termination settlement proposal and submit it to the agency contracting officer to meet the date specified by the agency for same. The following article originally appearing in the Air Force Law Review is an excellent reference for your termination settlement proposal preparation:

http://findarticles.com/p/articles/mi_m6007/is_2002_Spring/ai_103223911/

5. When the contract termination settlement proposal has been negotiated and formalized with an amendment to the contract, closeout the contract in accordance with the following government approved practices:

http://www.smalltofeds.com/2010/12/contract-closeout-in-small-business.html

IV. TERMINATION FOR DEFAULT

A termination for default rises from standard clause(s) in your contract that give the government the right to unilaterally terminate the contractor if the contractor fails to perform according to the specified terms. The contractor is generally not entitled to any payment for the unfinished part of the contract and, instead, may be liable for (1) repayment of monies advanced, (2) liquidated and other damages and (3) excess cost incurred by the government in completing the contact under a new contractor. Please see the following link for applicable clauses:

https://www.acquisition.gov/far/current/html/Subpart%2049_5.html

The Government contracting officer will terminate a contract for default when he or she determines that the contractor has failed to adequately perform in accordance with the contract. The Default clause applicable to fixed-price contracts limits the Government's liability for unaccepted work, subjects the contractor to actual (or liquidated) damages, and may subject the contractor for the excess cost of re-procurement. Moreover, the default becomes part of the contractor's past performance record which will harm the contractor's ability to compete on future contracts. Because the Government is not liable for work not accepted, the termination for default has a greater adverse consequence on supply contracts than service and construction contracts.

The government may terminate all or part of a contract for anything that was done that was not in the interest of the government, including:

Attempted fraud

Failure to meet quality requirements

Failure to deliver the supplies or perform the services within the time specified in the contract

Failure to make progress and that failure endangers performance of the contract

Failure to perform any other provisions of the contract.

Cure Notice

Before terminating a contract for default because of your failure to make progress or to perform, the contracting officer will usually give you a written notice, called a "cure notice." That notice allows you at least 10 days to cure any defects. Unless the failure to perform is cured within the 10 days, the contracting officer may issue a notice of termination for default.

Show-Cause Notice

If there is not sufficient time for a cure, the contracting officer will usually send a show-cause notice. That notice directs you to show why your contract should not be terminated for default. It ensures that you understand your predicament, and your answer can be used in evaluating whether circumstances justify default action.

If a contractor succeeds in appealing the termination for default, the default is usually converted into one for the convenience of the Government.

Actions Necessary:

1. When a termination for default is at hand, contact a law firm that specializes in government contract terminations and proceed within the guidance offered by them in pursuing any part of the termination that could be converted to a termination for convenience or other form of relief with respect to conditions over which you may not have had control or for which you may be entitled to a request for equitable adjustment or contact claim.

2. You should also proceed in accordance with paragraphs III. 1. through III. 3. above to limit your internal and supplier liability as well as isolate costs associated with the termination for a potential settlement or claim.

When the contract has been amended by termination for default, close out the contract in accordance with the following government approved practices:

http://www.smalltofeds.com/2010/12/contract-closeout-in-small-business.html

V. SUMMARY

Contract terminations should be avoided if at all possible. They are expensive on the part of both the government and the contractor. The negative aspects of a termination for default, in particular, can last for years in government contractor past performance data bases.

TOTAL TIME ACCOUNTING

2011-07-01T05:18:00.001-05:00

It is necessary to establish a written policy and procedure disclosing time keeping practices to DCAA and to fact-finding teams on proposals as the company process for both pricing and accounting for overtime as a whole. In doing so, topics such as compensated and uncompensated time must be addressed.

Include in the policy/process for pricing and job cost accounting those steps required for compensated overtime to personnel who are non-exempt from the Fair Labor Standards Act (hourly who receive time and one half).

Also include the policy/ process for pricing and job cost accounting, those steps required for uncompensated overtime to personnel who are exempt from the Fair Labor Standards Act (salaried who receive pay at straight time for hours in excess of 40 and those who do not receive pay at all for hours in excess of 40) The former are usually engineers and technicians. The latter are usually management or staff).

I encourage "Total Time Accounting" to my clients to make all hours worked a part of the record and stay away from waste fraud and abuse or defective pricing allegations.

I believe the below article by Find Law contains the best approach to the issue of uncompensated overtime and I encourage my clients to make part of their policy the practice specified in the last 4 paragraphs of the article:

http://library.findlaw.com/1999/Jul/1/127569.html

"In our view, contractors performing labor-hour, time-and-material, or cost reimbursable contracts should avoid any timekeeping system that fails to accurately report the total time worked. Such a system under-bills clients for work performed and thereby affects a company’s bottom line. Moreover, any timekeeping system that by its very design under-reports actual hours worked invites labor mis-charging and false claim allegations.

A total time accounting system that accurately reports hours will generate the proper amount of revenue for contractors on each of their labor-hour and time-and-material contracts. Cost reimbursable contracts have an added twist. Many cost reimbursable contractors who report total time use a diluted hourly rate approach for distributing labor costs to projects. For example, if an employee is paid $1,000 per week and works 40 hours, the projects are charged $25 per hour. If the same employee works 50 hours the following week, the hourly rate is diluted and projects are charged $20 per hour. In this example the contractor gets no additional revenue for the extra 10 hours of effort — they are provided free of charge to the Government.

Fortunately, acceptable standard cost approaches will negate this windfall to the Government and still allow the contractor to take advantage of uncompensated overtime. The most common of these approaches involves charging direct labor to projects at a standard hourly rate established annually for each direct labor employee. Actual hours are charged to projects at this standard rate.

For uncompensated overtime situations, the variance between labor charged to projects and actual compensation is credited to overhead. Such an approach allows contractors to account for their hours in an accurate, straightforward manner, bill for the hours actually worked, and effect a competitively beneficial decrease in their overhead rates. DCAA has recognized this as an acceptable method of accounting for labor costs, and we think that it generally beats just giving the Government hours of effort for free."

WHAT TO EXPECT FROM PRE-AWARD SURVEYS AND FACT FINDING

2011-06-01T05:40:00.000-05:00

INTRODUCTION

When a government contracting specific market target has been identified and a proposal has been submitted, pre-award surveys and fact finding by the buying agency or the prime contractor often follow. These processes take two forms:

1. A survey visit to the small company facility

2. Inquiries with respect to supplementary details for enhancing the customer perspective on a proposal submittal.

Undertaking the above processes with a government agency differs from that of undergoing them with a prime contractor. You are not required to disclose proprietary data to a prime contractor. Please see the following articles for further information in this vital area:

http://www.smalltofeds.com/2008/09/protecting-intellectual-property-and.html

This article will discuss each of the above processes and suggest measures to prepare for, conduct and succeed at pre-award surveys and finding.

PRE-AWARD SURVEY
A pre-award survey is a government or prime contractor visit to a supplier's facility. The Procurement Contracting Officer (PCO) or the Administrative Contracting Officer (ACO) and the Contracting Officer’s Technical Representative (COTR) as well as members of their respective staffs may attend.

In some instances the local Defense Contract Management Area Office (DCMAO) is involved. As you become a regular supplier to an agency, site survey visits will normally cease or occur only rarely.

For further explanation of the above government officials and their roles, please see the following article:

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

The site survey team is interested in establishing the physical presence of a new supplier, the technical capability and the human resources to perform the prospective work and the quality of the environment in which the effort will be performed. A "Pre-award Survey of Prospective Contractor" Forms are completed and become part of the contract file:

http://fast.faa.gov/ProcurementToolboxForms.cfm

Pre-Award Survey of Prospective Contractor SF-1403 8/1997
Pre-Award Survey of Prospective Contractor (Accounting System) SF-1408 8/1997
Pre-Award Survey of Prospective Contractor (Financial Capability) SF-1407 8/1997
Pre-Award Survey of Prospective Contractor (Production) SF-1405 8/1997
Pre-Award Survey of Prospective Contractor (Quality Assurance) SF-1406 8/1997
Pre-Award Survey of Prospective Contractor (Technical) SF-1404 8/1997

Select the person who will lead the meeting with the government survey team. This person should be empowered to speak for the company and should be completely familiar with details of the solicitation and your company's offer.

If relevant, make available one or more technicians to answer questions. Identify any disparities that may exist between the solicitation and your company's offer that should be resolved during the initial meeting with the survey team. Think about how you can demonstrate actual technical capability or the development of technical capability on the proposed contract. Make sure your facilities and equipment are available and operable. If they are not, be prepared to demonstrate that they can be developed or acquired in time to meet proposed contract requirements.

Make sure that your labor resources have the proper skills or that personnel with the needed skills can be hired expeditiously. Gather and make available to the survey team documentation, such as previous government contracts or subcontracts or commercial orders, to demonstrate a past satisfactory performance record with regard to delivery, quality and finances. Gather financial documentation for the team financial analyst, including the company's current profit and loss summary, balance sheet, cash flow chart and other pertinent financial information. Make sure the plans are in place for vendor supplies and materials or subcontracts to assure that the final delivery schedule can be met. Make sure that these plans are verifiable.

Review any technical data and publications that may be required under the proposed contract and make sure you understand them. If the contract is a type other than a firm-fixed price or if you have requested progress payments, prepare adequate accounting documentation for review. Review your quality control program and make sure that it is workable and consistent with the quality requirements stated in the contract.

PROPOSAL FACT FINDING
Fact-finding usually involves the government requesting additional information to supplement that which was submitted by you in your proposal. These areas of interest are early indications of where the negotiator is looking for weaknesses in your cost justifications or disconnects between your technical approach and the cost you are estimating to do the job. If you have subcontractors or major material suppliers, the government may ask for copies of your vendor proposal evaluations. The government may wish to examine cost history for the last time you performed similar efforts.

Keep in mind that most government agencies put together an independent cost estimate of what they feel the item or service should cost. These are commonly called "Should Cost Estimates". The additional requests for information during fact finding are feeding the should cost estimate. The Procurement Contracting Officer (PCO ) typically has an end user for the product or service internal to his organization who will become the Contracting Officer's Technical Representative (COTR) when the contract is awarded.

The COTR has a strong influence on the negotiations and will usually be present when negotiations commence. On many occasions, the COTR is the real internal customer at the agency. He has fiscal, technical and schedule responsibilities to his management for the program you are servicing. He simply cannot sign for the government.

The PCO has the agency warrant to commit the government and knows the most about public law and the Federal Acquisition Regulation (FAR) as it is applied to contracts the agency undertakes. It is the COTR who is likely feeding the PCO requests for fact-finding data. Keep in mind that the COTR and the PCO are formulating their assessment of the cost and the risk associated with the program during the fact-finding process. Cost is the first item of negotiation and risk has a direct influence on the government's position on profit.

The contacting officer may order a Defense Contract Audit Agency (DCAA) audit. The Request for Proposal (RFP) to which you responded may in fact have ordered a copy of your proposal be submitted to the DCAA Office nearest your location. If you are a new supplier to the government, DCAA may ask for a copy of your long-range plan containing your direct and indirect rate structure. They will verify the rates utilized in your proposal against your LRP, evaluate escalation factors utilized for long term projects and check the math. For guidance on these matters, please see the following article:

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

The auditor will ask for copies of major material and travel quotations and insure that government per diem rates are utilized for lodging and meals in the cost proposal. DCAA may also visit your facility to check compliance with Cost Accounting Standards insuring that the company sets up each new government contract on job cost accounting in the identical manner in which it was proposed; in effect identifying direct labor, direct material and other direct costs to each contract monthly and allocating overhead and G&A utilizing the same numerator and denominator relationships upon which the contract was originally estimated.

DCAA is paid by the PCO to perform the audit. The audit does not extend to negotiations and at the audit conclusion the auditor files a report with the PCO. The report will contain information on any errors uncovered and findings on the adequacy of the accounting and long range planning systems. DCAA will not express an opinion on the cost content of the proposal in terms of a value judgment regarding prices for prospective supplies and services. If the auditor does not offer an exit interview, ask for one. Better yet, ask for a copy of the audit report to the PCO. Many DCAA offices will provide a copy to audited contractors. DCAA does not have the authority to direct a proposal revision based on audit findings. An astute contractor will immediately correct any errors found by the auditor in the proposal and examine other audit findings in preparation for negotiations.

SUMMARY
With adequate preparation and an understanding of what the processes involve, the small enterprise can succeed in passing government agency or prime contractor site surveys and fact finding.

Remember that these encounters are extensions of your image as presented in your proposal. They are building block in nature and serve to establish, reinforce or change a customer’s view of your company and your proposal.

YOUR CAPABILITY STATEMENT (CAPE) FOR SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

2011-05-01T05:35:00.001-05:00

INTRODUCTION

Federal government contracting is all about relationship development. Marketing to influential agency personnel, industry partners, prospective team members, employees, associate contractors and others who can help you requires a hard hitting synopsis of what your firm brings to the table.

Place into a capability statement (CAPE) the specific information others need to know for a sound decision about your company qualifications. This information includes such items as a D&B Number, government registration numbers, North American Industrial Classification System (NAICS) codes and the like. These items are elected or determined when you register your company for government contracting.

KEEP IT SHORT

An electronic capability statement (CAPE) for government contracts should be short and hard-hitting. It should be 1 -2 pages and should highlight the salient points of products and offerings, personnel and qualifications.

Below are examples of two good capability statements in the public domain. The first is a services company, the second example is for a company selling off-the-shelf products.

CLICK ON IMAGES OR DOWNLOAD TO ENLARGE

MAKE IT PROMOTIONAL

A good CAPE will be a promotional brochure that on paper and through the electronic media advertises who you are, what you do and why the government or prime contractors should buy from you. Major elements of your capability statement, in addition to your small business designation and certifications, are as follows:

(1) Company overview

(2) Supplies and services description couched utilizing your marketing ideas and strategy.

(3) Past performance of your enterprise or your personal background and qualifications

(experience, education, etc.).

(4) Facilities or capabilities overview (How you perform your service couched in a manner that will appeal to your target market).

(5) Explanation of the positive results the client should expect.

(6) Points of contact and ways to contact you for meetings, placing an order and contracting your services.

INCLUDE GRAPHICS

The document itself can be created with some graphics, pictures, themes and sales pitches in MS Word or Power Point Software. "Art Explosion Publisher Pro" is an inexpensive product which is useful in creating business brochures. It offers templates and works well with photos, graphics, background, etc. A picture of your product also helps.

DISTRIBUTION

Your capability statement should be distributed on paper to your target market as a brochure, emailed as an attachment and linked into related industry web sites or partner marketing to get the word out about your product or service. Your CAPE targets contracting officers and prime contractor buyers who are seeking to fulfill their small business buying goals. It is a way to get you in the door and speak to, or correspond with, the management and technical personnel who are the decision makers in sourcing small business buys.

SUMMARY

A good quality CAPE is the spearhead of your marketing campaign and your visual image; focused and direct, it must be informative, concise and a snapshot of the very best you can offer.

YOUR SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING PAST PERFORMANCE RECORD

2011-04-01T05:13:00.001-05:00

“Relevant information for future source selection purposes, regarding a contractor’s actions under previously awarded contracts. It includes, for example, the contractor’s record of conforming to contract requirements and to standards of good workmanship; the contractor’s record of forecasting and controlling costs; the contractor’s adherence to contract schedules, including the administrative aspects of performance; the contractor’s history of reasonable and cooperative behavior and commitment to customer satisfaction; and generally, the contractor’s business-like concern for the interest of the customer.”

FAR 42.1501

CLICK ON IMAGE OR DOWNLOAD TO ENLARGE

INTRODUCTION

As a small enterprise enters the government contracting venue, the phrase “Past Performance” almost immediately comes to the fore. When examining government Requests for Proposal (RFP’s) a section of the award criteria is almost always specified for past performance ratings on previous similar government work.

We have discussed meeting the initial past performance challenge for companies new to government contracting in the following discussion:

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

The primary purpose of past performance evaluations is to ensure that accurate data on contractor performance is current and available for use in source selections. A past performance evaluation report provides a record of a contractor’s performance, both positive and negative, on a given contract during a specified period of time.

This article will focus on accessing your past performance record, and explain how the government rates a contractor’s past performance:

ACCESS

The following is an extract from the Contractor Past Performance Information Retrieval Web Site on obtaining information on your company information there:

http://www.ppirs.gov/ppirsfiles/faqs.htm

“Contractors obtain access to PPIRS through the Central Contractor Registration process. To obtain access, a contractor must enter a Marketing Partner Identification Number (MPIN) in their profile in the Central Contractor Registration system (http://www.ccr.gov/). This can then be used to access their own reports in PPIRS. If they are already registered in CCR, contractors will be asked for their DUNS number and Transaction Partner Identification Number (TPIN) when they update their contractor profile to include the past performance point of contact and MPIN. Contractors should ensure that they know their DUNS number and TPIN number in order to update contact information in their CCR profile. To access information in PPIRS, they log in using their DUNS and MPIN number.

Performance Assessment reports are NOT required on every contract. The government has issued agency guidelines that define when a report card should be completed. Generally report cards are required for all contracts for products or services that are greater than $100,000. However, DOD has been granted a waiver to that requirement (See class deviation 99-O002 of 29 January 1999). Instead, within DOD, they categorize procurements by business sector and dollar value groupings. These are listed in the DOD Guide to Collection and Use of Past Performance Information. A copy of that guide is available at http://www.acq.osd.mil/dpap/Docs/PPI_Guide_2003
.
If you are providing commodities or services in the Systems or Operations Support business sector then a report would be required if the total dollar value of any one contract exceeds $5,000,000. For Services and Information Technology, the threshold is any contract that totals over $1,000,000. For Ship Repair and Overhaul contracts the reporting threshold is $500,000. For Fuels and Healthcare, it is only $100,000. Within DOD, there are also specialized past performance databases for the Construction (CCASS) and Architect-Engineering (ACASS) business sectors. If you are doing business in those specialized business sectors, your past performance information would be in either ACASS or CCASS. For more information ACASS/CCASS, go to https://www.nwp.usace.army.mil/ct/i. Another guide that is applicable to all agencies is the OFPP Best Practices for Collecting and Using Current and Past Performance Information.

We've been collecting report card information for about the past five years. Not all assessing officials have yet gotten into the habit of completing report cards. If one is not completed, it will not be in the PPIRS system. If you know that you have a contract that falls within the reporting limits indicated above, then you should contact that contract's program manager or contracting officer to assure that a report card is completed. By doing that, you will ensure that a record of your performance will be available to source selection officials for consideration in future contract awards.

CCR information is contained in a different database than PPIRS. Currently, the CCR file is updated to PPIRS weekly (usually on Thursday mornings). call our Help Desk at (207) 438-1690 and we will research and help correct a problem.

A report card is not required until at least twelve months have passed since the contract was awarded. So, a report card may not yet be due. Second, the government is allowed an additional period of time for report processing. Even if a contractor has commented on a report card, it still must be processed by the program manager/assessing official and possibly a reviewing official before the completed report is entered into the PPIRS database and made available to source selection officials.

Tip: As a contractor, you do not have to enter any parameters on the “Assessment Reports” selection screen to view all of the information assigned to your DUNS and MPIN number. Just click on “Submit” to view all the PPIRS information for your company. The application has already restricted you to view only PPIRS information assigned to your DUNS and MPIN combination. The filters that are available on the “Assessment Reports” retrieval menu simply allow you to further restrict your view to a defined subset of the information that is available to you.

PPIRS contains all of the records that have been submitted by the contracting official responsible for preparing the report. NIH, NASA and DOD operate systems to track contractor performance. These systems feed into PPIRS. DOD also has specialized databases that track performance on construction (CCASS) and Architect-Engineering (ACASS) contracts. ACASS data is not yet in PPIRS, but plans are underway to make that information available in PPIRS. Use of PPIRS is not mandatory, therefore an agency may track performance using a manual process.”

PAST PERFORMANCE REVIEW CONTENTS BY KEY ASSESSMENT ELEMENT

Below are the key assessment elements required for contractor reviews of major procurement sectors in federal government contracting.

Assessment Elements for the Systems Sector

Technical (Quality of Product) —This element is comprised of an overall rating and six sub elements.

Activity critical to successfully complying with contract requirements must be assessed within
one or more of these sub-elements. The overall rating at the element level is the Program Manager's integrated assessment as to what most accurately depicts the contractor's technical performance or progress toward meeting requirements. It is not a predetermined roll-up of the sub-element assessments.

Product Performance—Assess the achieved product performance relative to performance
parameters required by the contract.

Systems Engineering—Assess the contractor's effort to transform operational needs and
requirements into an integrated system design solution.

Software Engineering—Assess the contractor's success in meeting contract requirements for software development, modification, or maintenance. Results from Software Capability Evaluations (SCEs) (using the Software Engineering Institute {SEI's} Capability Maturity Model {CMM} as a means of measurement), Software Development Capability Evaluations (SDCEs), or similar software assessments may be used as a source of information to support this evaluation.

Logistic Support/Sustainment—Assess the success of the contractor's performance in
accomplishing logistics planning.

Product Assurance—Assess how successfully the contractor meets program quality objectives (e.g., producibility, reliability, maintainability, inspectability, testability, system safety) and controls the overall manufacturing process.

Other Technical Performance—Assess all the other technical activity critical to successful
contract performance. Identify any additional assessment aspects that are unique to the contract or that cannot be captured in another sub-element.

SCHEDULE—Assess the timeliness of the contractor against the completion of the contract, task orders, milestones, delivery schedules, administrative requirements, etc.
COST CONTROL—(Not required for firm-fixed-price or firm-fixed-price with economic price adjustment contracts.) Assess the contractor's effectiveness in forecasting, managing, and controlling contract cost, including reporting and analyzing variances.
Management—This element is comprised of an overall rating and three sub-elements. Activity critical to successfully executing the contract must be assessed within one or more of these sub-elements. This overall rating at the element level is the Program Manager's integrated assessment as to what most accurately depicts the contractor's performance in managing the contracted effort. It is not a predetermined roll-up of the sub-element assessments.
Management Responsiveness—Assess the timeliness, completeness, and quality of problem
identification, corrective action plans, proposal submittals (especially responses to change orders, engineering change proposals, or other undefinitized contract actions), the contractor's history of reasonable and cooperative behavior, effective business relations, and customer satisfaction.

Subcontract Management—Assess the contractor's success with timely award and management of subcontracts, including whether the contractor met or exceeded small business, small disadvantaged business, small business HUBZone, veteran-owned small business, service disabled veteran-owned small business, and women-owned small business participation and subcontracting goals.

Program Management and Other Management—Assess the extent to which the contractor
discharges its responsibility for integration and coordination of all activity needed to execute the contract, identifies and applies resources required to meet schedule requirements, assigns
responsibility for tasks/actions required by contract, and communicates appropriate information to affected program elements in a timely manner. Assess the contractor's risk management practices, especially the ability to identify risks and formulate and implement risk mitigation plans. If applicable, identify and assess any other areas that are unique to the contract or that cannot be captured elsewhere under the Management element.

Assessment Elements for the Services, Information Technology, and Operations Support Sectors
QUALITY OF PRODUCT OR SERVICE—Assess the contractor's conformance to contract requirements, specifications, quality of software product and development, and standards of good workmanship (e.g., commonly accepted technical, professional, environmental, or safety and health standards).
SCHEDULE—Assess the contractor’s timeliness against the completion of the contract, task orders, milestones, delivery schedules, and administrative requirements (e.g., efforts that contribute to or effect the schedule variance).

COST CONTROL—(Not required for firm-fixed-price or firm-fixed-price with economic price adjustment contracts.) Assess the contractor's effectiveness in forecasting, managing, and controlling contract cost, including reporting and analyzing variances.
BUSINESS RELATIONS—Assess the integration and coordination of all activity needed to execute the contract, specifically the timeliness, completeness, and quality of problem identification, corrective action plans, proposal submittals, the contractor's history of reasonable and cooperative behavior, customer satisfaction, timely award and management of subcontracts, and whether the contractor met small business, small disadvantaged business, small business HUBZone, veteran-owned small business, service disabled veteran-owned small business, and women-owned small business participation and subcontracting goals.

MANAGEMENT OF KEY PERSONNEL (for Services and Information Technology business sectors only)—Assess the contractor's performance in selecting, retaining, supporting, and replacing—when necessary—key personnel.

SUMMARY

Regular review of your past performance information system data is vital to your future marketing efforts. Please feel free to download the Guide to the Past Performance Retrieval System in the second, vertical Box Net "References" cube in the left margin of this site.

WHAT IS A "COMPLIANT" GOVERNMENT CONTRACTING SMALL BUSINESS SYSTEM?

2011-03-01T05:45:00.001-06:00

INTRODUCTION

Many inquiries have been received through SCORE and Linked In regarding compliance in small business government contracting business systems. It seems the single word, "Compliance", implies many different things:

Small Business wishes to know about compliance to assess the cost of doing business with the government, assure readiness and business system capability.
Software Suppliers maintain they have compliant tools to achieve government contracting business management and wish to sell them.
The Defense Contract Audit Agency (DCAA) has the mission to insure compliance with Cost Accounting Standards (CAS) under the Federal Acquisition Regulation.
Defense Contract Management Area Office Fact Finding Teams wish to observe small business systems to determine if an enterprise is capable of pricing, job cost accounting and billing consistency.
Prime Contractors wish to know if a subcontractor is compliant with FAR and CAS so related flow down clauses can be made part of contractual agreements.

COMPLIANCE CRITERIA
The criteria for determining government contracting small business system "Compliance”, as discussed above, is met when:

1. The business system is unique to the company, and recognizes the way the firm is organized and the way it manufactures or delivers products, supplies or services. Each company does business in a slightly different way, performs services or delivers products with organizations that function in various manners and yet all ultimately meet Modified US Government Cost Accounting Standards (CAS) objectives by live data demonstrating consistency with regard to cost allocation to contract objectives in pricing, job cost accounting, billing and closeout.

2. The business system meets Modified Cost Accounting Standard (CAS) Coverage defined by the government is as follows:

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://edocket.access.gpo.gov/cfr_2007/octqtr/pdf/48cfr9904.405-40.pdf
http://www.smalltofeds.com/2007/04/unallowable-costs-under-federal.html

Standard 9904.406, Cost Accounting Standard—Cost Accounting Period

http://edocket.access.gpo.gov/cfr_2001/octqtr/pdf/48cfr9904.406.pdf
Modified, rather, than full, CAS coverage may be applied to a covered contract of less than $50 million awarded to a business unit that received less than $50 million in net CAS-covered awards in the immediately preceding cost accounting period.

The following article contains practical business system guidance regarding building a Modified CAS Coverage Small Business System for federal government contracting:
http://www.smalltofeds.com/2010/10/managing-risk-in-small-business-federal.html

SUMMARY
Read the above government requirements and business system development guidance, and then give your selected method of business management the Modified CAS litmus test. Make a judgment that it is the best for your company and try it out on DCAA. If they have problems with the approach you can adjust it.

The bottom line objective is that you wish government approval going forward so that your rates are accepted in proposals, your audits have a satisfactory outcome and you get paid when you submit a billing. Without those critical success factors the business cannot operate.

SBA New Woman-Owned Small Business Program

2011-02-03T06:20:00.002-06:00

On October 7, 2010, the U.S. Small Business Administration published a final rule effective February 4, 2011, aimed at expanding federal contracting opportunities for women-owned small businesses (WOSBs).

The Final Rule sets forth procedures authorized by the Small Business Act to help ensure a level playing field on which WOSBs can compete for Federal contracting opportunities, while helping achieve the existing statutory goal that 5 percent of Federal contracting dollars go to women-owned small businesses. Some of the components of the Women-Owned Small Business Program include:
To be eligible, a firm must be 51 percent owned and controlled by one or more women, and primarily managed by one or more women. The women must be U.S. citizens. The firm must be “small” in its primary industry in accordance with SBA’s size standards for that industry. In order for a WOSB to be deemed “economically disadvantaged,” its owners must demonstrate economic disadvantage in accordance with the requirements set forth in the final rule.
Based upon the analysis in a study commissioned by the SBA from the Kauffman-RAND Foundation (referred to as the Rand Report), the proposed rule identifies 83 industries (identified by 4 digit North American Industry Classification System, or NAICS, codes) in which women-owned small businesses are under-represented or substantially under-represented. The Rand Report is available to the public at http://www.Rand.org/pubs/technical_reports/TR442.
In accordance with the statute, the Final Rule authorizes a set-aside of Federal contracts for WOSBs or economically disadvantaged women-owned small businesses (EDWOSBs) where the anticipated contract price does not exceed $5 million in the case of manufacturing contracts and $3 million in the case of other contracts, if certain other conditions are met.
The Final Rule removes the requirement, set forth in a prior proposed version, that each Federal agency certify that it had engaged in discrimination against women-owned small businesses in order for the program to apply to contracting by that agency.
The Final Rule allows WOSBs or EDWOSBs to self-certify their status or to be certified by third-party certifiers, including government entities and private certification groups.
The Final Rule allows SBA to engage in program examinations to confirm eligibility of individual WOSBs or EDWOSBs.

Please see the following link for further details on qualifying for and and entering the program:

http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses

IS IT TOO COSTLY TO DO BUSINESS WITH THE GOVERNMENT?

2011-02-01T05:36:00.005-06:00

A recent question on the business social networking site, “Linked In” caught our attention.
Our reply is published below for those who may be interested in the cost aspects of entering the government contracting venue.

QUESTION:
"Is it too costly to do business with the Government? $89,000 per year and 19 1/2 months on average to win first government contract according to Amex Study . . . is it worthwhile to pursue government contracts?"

ANSWER:

If it was too costly to do business with the government, 302,315 companies and some of the largest corporations in the world would not be involved in it. See the below link to contract awards and amounts in 2010 to large enterprises:

http://www.usaspending.gov/explore?carryfilters=on

Top 10 Contractors FY 2010
1. LOCKHEED MARTIN CORPORATION  -                   $34,288,619,722
2. THE BOEING COMPANY                                          19,358,512,809
3. NORTHROP GRUMMAN CORPORATION                   15,472,742,729
4. GENERAL DYNAMICS CORPORATION                      14,903,216,900
5. RAYTHEON COMPANY                                             14,880,453,061
6. L-3 COMMUNICATIONS HOLDINGS, INC.                     7,629,644,919
7. UNITED TECHNOLOGIES CORPORATION                    7,330,023,190
8. OSHKOSH CORPORATION                                         7,197,520,183
9. SAIC, INC.                                                                   6,595,330,339
10. BAE SYSTEMS PLC                                                  6,587,705,335

23% of the above amounts must be awarded by the larger businesses on subcontracts to small companies under Federal Acquisition Regulations and large businesses must submit regular data to prove they have met their annual small business contracting goals.

Among the pool of small, small veteran-owned, small minority-owned, HUB Zone and small women owned businesses we have assisted over the last 15 years there have been many who have developed a sound approach to entering the field and managed the expenses quite well.
These enterprises have a good commercial services practice or product which they continue in a commercial cost center of the company. They establish a government contracting cost center and seek teaming arrangements with industry partners and long term government contracts.

They recognize that except for certain unallowable expense items, much of the operating expenses for government contracting can be included in the prices charged to the government and that as a small enterprise they can bill progress payments as often as twice a month.
The benefits in cash flow and stability are obvious once underway.

For more details at a free web site through SCORE assisting companies to enter government contracting, please the below link:

http://www.smalltofeds.com/2009/01/should-you-consider-small-business.html

For a recent grants and teaming program recently announced by the SBA and a new set aside program for woman-owned business please see the below links:

http://www.linkedin.com/share?viewLink=&sid=s226060018&url=http%3A%2F%2Flnkd.in%2FdXKMrH&urlhash=wzYg&uid=5430737913883136000&trk=NUS_UNIU_SHARE-lnk

http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses

2010 YEAR END SUPPLEMENTS TO SMALL BUSINESS FEDERAL GOVERNMENT CONTACTING GUIDEBOOK

2011-01-01T07:33:00.001-06:00

As we begin 2011 please note the supplements to the Book, "Small Business Federal Government Contracting" added during 2010.

Use the "Table of Recent Articles" in the left margin of this site to locate the ones you wish to read or the 2010 "Blog Archives" to update your copy of the book. You can also utilize the search box in the left margin of this site with the title of the supplement you wish to read. We will incorporate the 2010 supplementary articles in a the 4th Edition of the book. The supplements are annotated in red below:

TABLE OF CONTENTS

SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

1.FORWARD
WHAT IS A FEDERAL GOVERNMENT “CONTRACTOR”?
2. SHOULD YOU CONSIDER SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING?

CONTRACTOR REGISTRATION REQUIREMENTS
3. SMALL BUSINESS SET ASIDE DESIGNATIONS
4. SERVICE-DISABLED, VETERAN-OWNED BUSINESS EMPHASIS
5. REGISTERING FOR FEDERAL GOVERNMENT CONTRACTING

KNOW YOUR CUSTOMER
6. PROCUREMENT INTEGRITY AND THE LAW
ORGANIZATIONAL CONFLICTS OF INTEREST (OCI)
7. CUSTOMER RELATIONS
8. PROTECTING INTELLECTUAL AND PROPRIETARY DATA

ACQUISITION AND CONTRACT TYPES
9. ACQUISITION CATEGORIES
10. CONTRACT TYPES

MARKETING
11. INTRODUCING GOVERNMENT CONTRACTING INTO YOUR COMMERCIAL BUSINESS
SMALL BUSINESS GOVERNMENT GRANTS VERSUS DIRECT GOVERNMENT CONTRACTS
12. FEDBIZOPPS - THE FEDERAL BUSINESS OPPORTUNITIES WEB SITE
13. MARKETING IN THE FEDERAL ENVIRONMENT
14. SEVEN MANAGEMENT TECHNIQUES TO ACHIEVE A CONTRACT
15. MULTIPLE FRONT MARKETING
16. TEAMING IN GOVERNMENT CONTRACTING
17. OBTAINING AND UTILIZING A GSA SCHEDULE
18. IMPORT/EXPORT MANAGEMENT
INSIGHTS TO SUCCEED IN SERVICE CONTRACTING

PROPOSALS
19. PROPOSAL PREPARATION
20. THE “PAST PERFORMANCE” CHALLENGE
21. CONTINGENT HIRE AGREEMENT
MANAGING SUBCONTRACTORS AND INDEPENDENTS AS A PRIME CONTRACTOR
TECHNIQUES FOR PRODUCT DEVELOPMENT

THE CONTRACT
22. CONTRACT FORMAT
23. CONTRACT LINE ITEMS
24. STATEMENT OF WORK AND TECHNICAL SPECIFICATIONS
25. CONTRACT DATA REQUIREMENTS LIST (CDRL)
26. CONTRACT NEGOTIATION
27. CONTRACT WORK AUTHORIZATION
28. CONTRACT BILLING
29. CONTRACT PROPERTY MANAGEMENT
30. SECURITY CLEARANCES
CONTRACT CLOSEOUT

PRICING, BUSINESS SYSTEMS, FINANCE & ACCOUNTING
31. SMALL BUSINESS SYSTEMS DEVELOPMENT
MANAGING RISK IN BUSINESS SYSTEMS DEVELOPMENT
PRICING SERVICE CONTRACTS
32. UNALLOWABLE COSTS
33. LIMITATION OF FUNDS AND FUNDING EXPOSURE
34. ESTABLISHING COMPLIANT SMALL BUSINESS SYSTEMS
SMALL BUSINESS JOB COST ACCOUNTING BASICS FOR SERVICE CONTRACTS
35. DCAA AUDITS AND JOB COST ACCOUNTING SYSTEMS
36. PROVISIONAL INDIRECT RATES
37. EARNED VALUE MANAGEMENT SYSTEMS
38. CONTRACT BASELINE MANAGEMENT

You may download a copy of the book, less the supplements from the first Box Net Cube to your immediate left at this site.

HAPPY HOLIDAYS FROM SMALL TO FEDS

2010-12-12T08:00:00.001-06:00

PLEASE CLICK ON IMAGE TO ENLARGE

CONTRACT CLOSEOUT IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

2010-12-01T05:24:00.000-06:00

INTRODUCTION

If you are an off-the-shelf or purchased-finished supplier of goods to the federal government, your contact closeout is reasonably simple. You will make delivery at a firm, fixed price to the agency to which you have contracted and submit an invoice. The government will receive and inspect the delivery and approve your invoice for payment. Assuming there are no ongoing warranties, logistics support or similar contract line items involved, the government will then closeout the contract, as will you.

Contracts involving progress billing with retention, cost type contracts and those with intellectual property, government property, classified documents, provisional billing rates and similar more complex matters require astute attention to detail and considerably more administrative support and coordination between the contractor and the government for closeout. Successful contract closeout of these types of programs is an ongoing process beginning at contract award.

This article will discuss the principal features of the closeout process in small business federal government contracting and provide references for further process detail.

THE GOVERNMENT PERSPECTIVE

Below is a synopsis from the introduction to the Defense Contract Management Agency (DCMA) “Contract Closeout Guidebook” which is a free download from the second vertical “References” Box Net cube at this site. The synopsis and the book should be read carefully by small business federal government contractors:

“The contract closeout process starts at contract receipt and review and proceeds throughout the life of the contract. MOCAS input data must accurately represent the contract in order to ensure proper management, payment, and closeout. When all contract requirements have been met and the contract is physically complete, it should be moved to MOCAS Section 2. The easiest contracts to close are short term Firm Fixed Price contracts with one Accounting Classification Reference Number (ACRN) for each Contract Line Item Number (CLIN) and no special provisions. Cost-Type contracts with multiple ACRNs for each CLIN and special payment provisions are the most difficult to close.
Many closeout problems increase in difficulty over time. The inability to locate transaction support documents and to read faded print in hard copies of documents are two recurring problems.

Furthermore, if funds cancel before closure, appropriation law limits the types of adjustments that can be used to correct lines of accounting payment errors. Also, it can be difficult identifying and locating the responsible contracting officer because of reorganizations and closures directed by the Base Realignment and Closures Commission. In addition, over the past 20 years thousands of companies have gone out of business or been purchased by larger companies. Novation agreements may or may not have been signed by the gaining company. These activities have contributed to the difficulty in closing old contracts.”

TIPS TO INSURE SUCCESSFUL CONTRACT CLOSOUT

Consider the type of contact under which you are operating and locate that type in the DCMA “Contract Closeout Guidebook”. Insure the processes specified in the guide are followed in your contract administration from the onset of your contact. Government contract types are discussed at the following link:

http://www.smalltofeds.com/2008/04/federal-government-contract-types.html

Note the guide discusses both the role of the government and the contractor in closeout and the stages in achieving closeout in MOCAS - The government "Mechanization of Contract Administration Services" System.

Support Cost-Type Contracts With Timely Incurred Cost Proposal Rates and Submissions – Several articles at this site have addressed the development of forward pricing rates and associated DCAA audits and submissions. Here are the most important articles with respect to contract closeout:

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

To close out a cost type contract that has been billed throughout its life at provisional rates, regular incurred cost submissions must be submitted by the contractor and verified by DCAA. Provisional rates must then be adjusted to audited applied actual costs and the final billing determined. This could result in net excess funding on the program that must be returned or a requirement for addition funding at closeout. In either case, the business impact could be substantial for a small enterprise.

Note the Simplifying Techniques Specified by the Government in the DCMA Guidebook:

“What Contractors Should Do To Simplify Closeout

Verify payment accuracy and report discrepancies immediately.
Provide Contracting Officer with cost estimates for 75% and 100% of projected cost (usually 60 days in advance) in compliance with Limitation of Cost/Funds Clauses (FAR 52.232.20 through 21) for cost reimbursement and facilities contracts.
Submit patent reports on time to the Administrative Contracting Officer when required by the patent clause.
Submit Overhead Rate Proposals no later than 6 months after the end of the contractor's fiscal year.
Prepare final voucher no later than 4 months after settlement of overhead rates.
Consider Quick Closeout procedure when it's determined that normal closeout will be delayed.
Execute government property disposition instructions expediently.”

SUMMARY

Becoming informed on government contract closeout steps and putting in place processes to support them in your business system is the most important general principal to remember. Consider the type of contract you are releasing for incurred cost. Bear in mind how an individual contract impacts on your business system and insure your business system supports the type of contact you are putting into play. Develop a good working relationship with your contracting officers, DCMA and DCAA. For more on the roles of these government functions, please see the following link:

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

INSIGHTS TO SUCCEED IN SMALL BUSINESS FEDERAL GOVERNMENT SERVICE CONTRACTING

2010-11-01T06:29:00.003-05:00

INTRODUCTION

Service contracting to the federal government is a natural venue for small business. It does not require a product with a niche market or capital intensive manufacturing facilities.

Service contracting does require skilled management and labor resources capable of performing a scope of work for which the government has identified a need and for which outsourcing to an industry contractor has been selected as the means to fulfill that need. The venue demands strong human resources management, industry teaming and an enhanced business system to price, account and bill on a job cost basis under government service contracts.

Small enterprises in the commercial services market are tempted to immediately begin bidding jobs in federal government contracting, approaching them like commercial efforts. They quickly find there are major differences in the way the government contracts are marketed, proposed, priced and performed. These differences are not “Rocket Science” but it is necessary to learn about them and plan for success.

Here are 8 insights for planning your success in small business federal government service contracting:

1. UNDERSTAND THE LENGTHY SALES CYCLE

What immediately becomes apparent to the commercial small business when entering the federal contracting service contracting market is that the sales cycle is a long one and the preliminary steps are often hidden from public view.

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. For additional details please see:

http://www.smalltofeds.com/2009/09/what-small-business-should-know-about.html

Even if a company has had exposure to an agency, marketed on a program in advance of its announcement or become a member of an industry team to bid the job, the proposal and award process, to include negotiations and start up, can easily consume 90 to 120 days as a minimum. For major programs the process often exceeds 6 months in duration. Planning must occur for the expense associated with supporting such lengthy marketing efforts before any cash flow results.

2. APPRECIATE APPLICABLE DEFINITIONS, ROLES AND REGULATIONS

Participation in the government contacting market can involve participating as an individual, becoming a subcontractor as a company or seeking a prime contractor role. Those with product research and development support needs can participate in venues like Small Business Innovative Research (SBIR) and Mentor/Protege Programs. A GSA Schedule also provides opportunities for those in finished product sales. Please refer to the following articles for explanations of these roles and program definitions:

http://www.smalltofeds.com/2010/07/what-is-small-business-federal.html

http://www.smalltofeds.com/2010/06/techniques-for-product-development-in_01.html

http://www.smalltofeds.com/2010/01/small-business-government-grants-versus.html

http://www.smalltofeds.com/2007/05/achieving-and-utilizing-gsa-schedule.html

3. CONDUCT MARKET RESEARCH

If you are relying on FEDBIZOPPS or like sites for new business you will be very disappointed. Pre-solicitation notices do have promise, but you have to get inside an agency to find out who has the funding, the need and the decision-making authority. It is rarely the contracting officer who posts the notice who has these responsibilities.

Pre-solicitations are alerts to industry, attempts to gauge industry interest or a way of "Kicking the Can Down the Road" until funding becomes available. These notices are an indirect way of saying, "Come Visit Me and tell me about your company", or “Send Me your CAPE”. The full formal notification will come out at a time to be determined by when the agency gets the funding and how much interest there is in the contractor community. A schedule for when the formal bid notice will occur is rarely posted.

Please read the following article carefully for further guidance:

http://www.smalltofeds.com/2009/09/what-small-business-should-know-about.html

4. PROMOTE CAPABILITIES

Develop a capability statement (CAPE) to respond to government postings and mail directly to government agencies and to large corporations doing business with the government.

A capability statement is a necessity as a standalone marketing tool for dealing with government agencies and contractors. It should be short (no more than 2 pages) and hard hitting, containing all the information necessary for a government contracting officer or company buyer to place an order, as well as your registration information at local, state and federal web sites, your NAICS Codes and contact information.

Insert your CAPE in the tab at your web site where you discuss your background information and your government registrations.

See the second, vertical, Box Net “References” cube in the left margin of this site for an example of a good service contractor capabilities statement in the public domain.

5. ACQUIRE PERSONNEL STRATEGICALLY

Start up service contractors face the dual problem of establishing the enterprise with the one-time, non-recurring activities necessary to get the operation underway and at the same time acquire the core management talent and subsequent help as the business grows.

Even established companies who enter government service contracting find they cannot sustain a work force for large scale agency programs until the contracts are in hand to finance them.

A core team is an absolute necessity; it may be small and the business proposals may be few at first. But the core team product must be strategic in terms of high probability marketing to build the company base.

Supplementary help can be acquired by permanent ads at the company web site for generic skill sets, contingent hire agreements with prospective employees and similar techniques that position the resources on deck for business growth.

Small businesses commonly utilize contingent hire agreements to locate promising individuals who can bring projects or contacts with them when they join the firm. They are willing to negotiate a prospective wage and salary arrangement in advance of a proposal submission and commit to an offer of employment with benefits and commission should the program be won. They further offer to reimburse the participant for expenses and business related costs during the proposal period, if pre-approved.

The key to these arrangements is to identify target projects that both you and the candidate can go after, where the candidate is uniquely qualified to :

(1) Help win the job

(2) Contribute heavily to the proposal. Just bringing someone on who has no ability to offer targets usually does not work.

6. MAKE ASTUTE BID/NO BID DECISIONS

Government contract proposal preparation is time consuming and can be costly. Meeting the agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated.

When considering submitting a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid this job for lack of such a strategy. The elements of the process are in the form of questions to ask yourself against topics for key consideration at the following link:

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

Affirmative or non-affirmative answers to the topical questions and ability to fill in the blanks will drive your decision to bid or not bid a solicitation.

7. PREPARE YOUR BUSINESS SYSTEM FOR PRICING, ACCOUNTING AND BILLING

To effectively market a federal government contract a small business must sell on the basis of having a business system as well as technical performance infrastructure ready to run the job when a contract proposal is submitted. This dual requirement is where many small businesses fall short in their federal government contract start up planning.

Parallel thinking is required to plan for government project technical effort against a template of necessary business process infrastructure, driven by introducing Federal Acquisition Regulations (FAR) into the company. Key elements of the necessary business system infrastructure are discussed in the following articles:

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

http://www.smalltofeds.com/2010/10/managing-risk-in-small-business-federal.html

8. PROPOSE TO WIN BY MEETING THE PAST PERFORMANCE CHALLENGE

As a small business begins the proposal submission process to federal government agencies or to prime contractors, the past performance challenge is major. By definition a start-up company in government contracting has no direct government agency past performance projects to site in meeting the requirement in requests for proposals (RFP’s) for historical references to similar projects in terms of size, duration and complexity

So how can a new organization or one that is new to government contracting muster a response to the past performance challenge?

The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record.

For further details see the following article:

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

SUMMARY

This writing has conveyed insights for planning participation strategically in the small business federal government service contracting market.
Consider the lengthy sales cycle and the roles your enterprise can best play in the venue. Conduct thorough market research, promote your capabilities endlessly and make astute bid/no bid decisions.

You must acquire core and supplementary help as business growth permits by using methods to preposition human resources. Prepare dynamic proposals with unique project plans to meet the past performance challenge, then execute your project plans to succeed.

MANAGING RISK IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACT BUSINESS SYSTEMS DEVELOPMENT

2010-10-01T06:19:00.001-05:00

INTRODUCTION

Most small enterprises must undertake some form of business process augmentation when entering federal government contracting.

A previous article at this site addressed an overview of this challenge:
http://www.smalltofeds.com/2009/09/federal-government-contracting-small.html

The natural inclination for small business is to immediately jump to buying computer software tools in an effort to expedite the business system growth process. That propensity is often enhanced by software companies who maintain their product is “DCAA Compliant”, has been “Validated by the Government as an Earned Value Management System (EVMS)” and other similar claims.

This article will address cautions and tips regarding an immediate jump to software as a means of growing a government contract business system. It will recommend some rules of thumb to insure wise business system development decisions, specific to your company and managing the associated risks.

UNDERSTANDING THE REQUIREMENTS

The US Government learned decades ago that it cannot impose specific business systems on contractors. One of the last great attempts to do so was the Program Evaluation and Review Technique (PERT). It was abandoned in the late 1950’s and early 1960’s and replaced by a set of industry criteria now known as Earned Value Management Systems (EVMS).

Similarly, the Federal Government Cost Accounting Standards Board (CASB) determined that job cost accounting systems could not be imposed on contractors. Over the years they have developed and maintained a set of Cost Accounting Standards (CAS) which governs requirements for accounting on government contracts.

The GSA and similar agencies maintain policies on travel, human resources and wage/rate determinations that are not specific systems, but minimum standards as well. A small business entering federal government contracting should research the above and similar requirements in such areas as quality assurance, inspection and acceptance and export management.

PROCESS COMES FIRST – MAXIMIZE WHAT YOU HAVE

Given a thorough understanding of the requirements for a government contract business system that fills the need for your specific product or service delivery, the next step is to examine existing processes to determine if they can meet the need or be minimally supplemented to do so.

Finding a need for major process changes or enhancements in the existing business system is the beginning of a requirements analysis to determine the labor, process change, planning, costs and eventual selection of new automated tools that fit the company and that need.

Many start-ups and small enterprises find they can crutch their existing job cost accounting system for service contracts with spread sheets instead of buying an expensive, data base oriented, COTS software package initially. As the company grows into government contracting and the number of transactions and associated revenue warrants the expense, the firm can then evaluate more expensive packaged software tools and ease into them with a plan to minimize disruption.

A government contract award drives many things in government business, but small firms cannot wait until that event to position at least the minimal processes necessary to perform, price new business, function lawfully in the human resources area and submit supportable detail in billings.

Please see the following articles for guidance on minimal business system requirements for small business federal government contacting.

http://www.smalltofeds.com/2010/07/what-is-small-business-federal.html

http://www.smalltofeds.com/2010/05/pricing-small-business-federal.html
http://www.smalltofeds.com/2010/03/small-business-job-cost-accounting.html

RULES OF THUMB FOR SELECTING AUTOMATED TOOLS

From strategic planning to marketing, from forward pricing to job cost accounting, from subcontracting and vendor/contractor management to human resources policies, the small firm finds itself undergoing a business system design project upon entering the government contracting venue.

Understand the requirements first, review existing processes and tools next, develop a thorough requirements statement of what must be done in the way of enhancements and then consider automating. While performing your analysis keeping the following 5 rules of thumb in mind:

1. An electronic computer software package is not a system. One cannot acquire a system by acquiring computer capability.

2. One acquires a system by conducting systems analysis, achieving a design and processes by working with the people who will run the system. This is hard work and time consuming. Processes are improved and made more efficient by modifying user behavior not by automating it.

3. Once system and analysis and system design are complete one chooses tools to assist in running the system. The adequacy of a computer tool is driven by the requirements of the most efficient system design.

4. The biggest mistake implementation teams make is to believe they are buying a system when they buy a software tool or let the software drive the systems analysis process. That is like asking a mechanic to drive a wrench from New York to St. Louis. It has resulted in millions of dollars wasted and plummeting efficiency in many organizations, large and small.

5. It is necessary to design a system and processes unique to the company to meet user requirements before going shopping for computer tools. If you do not you will be pigeon-holing your company into a COTS mentality and become a slave to the company that owns the source code. If you want anything changed it costs a big buck.

MANAGING SUBCONTRACTORS AND INDEPENDENTS AS A SMALL BUSINESS FEDERAL GOVERNMENT PRIME CONTRACTOR

2010-09-01T10:25:00.028-05:00

INTRODUCTION

Industry teaming is a fact of life in small business federal government contracting. Your team for a given contract pursuit may consist of several types of industry partners external to your organization.

If you are the business lead by virtue of teaming agreements that recognize your small business set-aside designation as the qualifier for leadership, you have a management challenge. That challenge involves issuing agreements and purchase orders to independent contractors as individuals and negotiating fully executed subcontracts with firms subcontracting to you.

The techniques in managing each of these partner types are distinct. The contractual and regulatory factors are introduced in the following link:

http://www.smalltofeds.com/2010/07/what-is-small-business-federal.html

This article will convey guidance for a small business federal government prime contractor, in managing the external business relationships with other companies as subcontractors and independents as individuals.

EARLY AND CAREFUL PARTNER SELECTION/TEAM MANAGEMENT

Finding industry teaming partners should occur synonymous with finding an opportunity. We have previously discussed marketing federal business opportunities:

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

http://www.smalltofeds.com/2009/09/what-small-business-should-know-about.htm

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

Assuming you have located an industry partner or perhaps a mix of subcontractors and/or independent individuals you wish to engage, make sure they have the capabilities to perform the parts of the statement of work on the program you are targeting. Remember that the quality of your proposal, your probability of a win, and ultimately your past performance rating on the contract, will reflect your supplier management. The government will hold you accountable for their performance. In some cases agencies will reserve the right to approve your key personnel and subcontractors before issuing your prime contract.

Two general guidelines should be observed:

1. Do not subcontract in excess of 40% of the program to another company in terms of hours, dollars and % of total work scope. The FAR regulations specify 49% as a ceiling but it is best to reserve 60% of the effort for your company employees and independent contractors under your control to avoid appearances of a front.

2. Do not exceed 50% of the internal labor hours for your company share of the program with contractors as individuals. Government source selection boards need some assurance that the capability to lead and perform major parts of the program resides in the permanent party of the small business prime contractor.

If you exceed the 50% rule for independents, include contingent hire agreements demonstrating the point in time where they will become full time employees or will be replaced by full time employees. A contingent hire agreement may be downloaded from the Box Net References Cube in the left margin of this site.

Sign subcontractors and independents to proprietary data agreements.

Develop thorough teaming agreements with subcontractors, including an explicit statement of work attachment to each agreement quantifying, the work scope guidelines in paragraph 1, above. A teaming agreement is available for download in the Box Net references cube at this site.

The independent should also understand the specific work and hours he or she will be expected to perform on the job and such personnel should be retained on a contractor retention agreement which is also available for download in the Box Net References cube at this site.
Teaming agreements, contingent hire agreements, contractor retention agreements and subcontractor proposals must be either included in your proposal submission to the government or made available for government fact finding.

CONTRACT DOCUMENTATION AND TRANSITION FROM PROPOSAL TO CONTRACT

During the proposal stage of the business relationship with your industry partners you will be issuing them requests for proposals (RFP’s) for their portion of the effort.

For independent contractors this may be as simple as asking them to sign contingent hire agreements or contractor retention agreements.

But you must include in the RFP’s to the companies which you propose as subcontractors the terms and conditions of your agency prime contract RFP and other specific guidance to make the proposal and subsequent contracting process work smoothly. This should include administrative guidelines and agreed upon cost targets and technical guidance.

Specify a due date for their proposals in response to your RFP in time to roll their data into your cost volume and provide guidance on the handling of fully loaded rate backup to which you do not have access to forward to the government auditors. This usually includes sealed packages provided by your subcontractors that you will not open, since they contain overhead and G&A rate information which is highly proprietary to the subcontractor.

Keep in mind that you are in a constant negotiation with these partners until you award them subcontracts to replace the teaming agreements when your team wins the program. Please see the following article for detail guidance on that point:

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

Naturally the technical and management volumes of the proposal will be completed in consonance and in parallel with the subcontractor RFP cost proposal responses.

At contract award, be prepared to negotiate and execute formal subcontracts to the companies with whom you are teamed and to issue purchase orders to your independents to commence work. At that point you have achieved the contract baseline and you will commence work.
Insure that your subcontracts and purchase orders contain limitation of funds and funding exposure protection for all parties in accordance with the following article:

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

BASELINE MANAGEMENT

Please read the following article carefully on baseline management and bear in mind that work scope change sensitivity must be managed carefully and formally documented between you and your industry partners by change orders to formal subcontracts and purchase orders:

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

SUMMARY

This article has provided an overview of subcontractor and independent contractor management from the early marketing stages of a contract pursuit through proposal preparation and submission then contract award and baseline management.
Please read the reference links in the text above carefully and check the table of contents at this site for other information relevant to this topic.

WEIGHTED GUIDELINES PROFIT DETERMINATION IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACT NEGOTATIONS

2010-08-01T05:49:00.003-05:00

PLEASE CLICK ON IMAGE OR DOWNLOAD TO ENLARGE

DD FORM 1547 RECORD OF WEIGHTED GUIDELINES APPLICATION

INTRODUCTION

Previous posts at this site have discussed proposal preparation and negotiation:

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

http://www.smalltofeds.com/2010/05/pricing-small-business-federal.html

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

We have noted in the above discussions that the accepted template for negotiated procurements with the government is as follows:

A. Audit

B. Fact-finding

C. Pre-award Survey

D. Cost Negotiations

E. Final Profit Negotiations

F. Contract Award

Although policy in FAR Part 215-404-4 states that contracting officers ….” do not perform a profit analysis when assessing cost realism in competitive acquisitions”, it is wise to understand that during Steps A trough D above, the contracting officer and his representatives are indirectly forming opinions of the risk to the contractor and the mix of cost elements in the proposal. That opinion directly effects profit negotiations and judgments at Step E, above.

Although the above FAR clause allows for 3 methods of profit negotiation, this article will discuss the most common method contracting officers use -- the Weighted Guidelines Method.

ELEMENTS

Contractors should be aware that the Weighted Guidelines Method is mandatory for all negotiated procurements except Cost-Plus Award Fee Contracts and exceptions as approved by a higher authority. Contracting officers are to prepare their position using DD Form 1547 with associated backup and file it at the conclusion of negotiations.

Understanding the weighted guidelines method can assist in achieving a higher profit on a negotiation because a contractor can present a position at the table that logically supports the following elements required by FAR Part 215-404-4:

Performance risk

Contract type risk

Facilities capital employed

Cost efficiency

The detailed analysis guidelines for contracting officers under each of the above factors are contained at the following link:

http://www.acq.osd.mil/dpap/dars/dfars/html/current/215_4.htm#215.404-71

It should be noted that the Facilities Capital Cost Employed (FCCM) factor (a separate DD Form 1861) does not always enter into small business negotiations, because many start-ups and smaller enterprises do not propose it as part of their allowable costs due to elements they cannot demonstrate in capital investment, land, buildings and similar items.

UTILIZING THE FORM FOR NEGOTIATION

A DD Form 1547 accompanies this posting. An Excel version with arithmetic formulas and a separate tab for DD Form 1861, FCCM, can be downloaded from the second Box Net “References” cube in the left margin of this site.

Study the form and its guidelines at the above link. Apply it to your proposal. This puts your perspective on profit into the same structure as the contracting officer is required to develop his.

When profit discussions ensue and the contracting officer takes a position, ask for a copy of his weighted guidelines analysis form. If he does not provide it, or has not prepared one, give him yours with your position on profit, updated to reflect costs negotiated during steps A-D above.

A reasonable discussion can then occur on the elements of profit negotiation and offers, counter offers and ultimate agreement can be equitably reached with a known structure addressing risk and other required factors.

SUMMARY

The majority of negotiated cost proposal effort involves coming to an agreement with the government on cost realism via audit, fact-finding, pre-award survey and cost realism. But keep in mind that the government is forming an opinion on the elements of weighted guidelines profit determination during those stages as well.

You can influence the government negotiator (s) on the weighted guidelines profit elements during the early stages of negotiations as you settle on cost factors. You do so by presenting the data and narrative basis of estimate in such a fashion as to identify risk and other key area of weighted guidelines analysis. Insure the technical, management and cost volumes of your proposal, if they are required, are consistent in that regard.

Update your DD Form 1587 in your working file and prepare to use it as you settle on profit to conclude negotiations. Relate your profit position to weighted guidelines cost elements, as agreed upon with the government, supported by your proposal and any other documented disclosures you have submitted during negotiations. Doing so will support your position on profit and give the contracting officer an opportunity to accept it.

WHAT IS A SMALL BUSINESS FEDERAL GOVERNMENT “CONTRACTOR”?

2010-07-01T06:34:00.007-05:00

INTRODUCTION

There is often confusion regarding the definition of the term, “Contractor” in government work. The term is used in a conflicting manner to describe companies, individuals and business relationships. It has different connotations within corporations as opposed to government agencies, and is often confused with terms like “Subcontractor”, “Supplier” or “Vendor”.
This article will define the term, “Contractor” and discuss the regulatory factors and practical considerations related to use of the term from a small business federal government contracting perspective.

DEFINITIONS

1. Contractor (As Used In Corporations)
The term “Contractor” in corporations often refers to an individual, performing work for a company while not on the payroll as an employee, having no taxes, benefits or deductions taken from their pay and not covered by any form of insurance. The company issues a purchase order to the individual at an hourly rate and submits a Form 1099 to the US government reporting what the contractor is paid for services. The contractor must self-insure during the contract period and pay taxes on the money earned at the end of the tax year.
Recently there has been a dramatic decrease in the use of individuals as contractors in large government contracting corporations due to class action law suits brought by individuals who maintained they were utilized as employees without the associated benefits. The existing contractor work force was either offered permanent positions or released. Since that time, the use of contractors by large government prime contractors has been principally in specialty roles.

Corporations may also utilize the term “Contractors” when referring to companies in the manner defined by Definition 2, below. It is common for large prime contractors to use the term to describe themselves, their competition or co-equal teaming partners in joint ventures. When this 2nd definition is used it refers to a company, duly registered with the state and the federal government.

2. Contractor (As Used In Government Agencies)
The term “Contractors” in government parlance refers to businesses, not individuals. To become a contractor to a government agency, you must therefore form you own business. Government agencies do not engage individual “Contractors” as defined in 1, above. If they want individuals to perform services they put them on the agency payroll. If they want to acquire specialized outside services they contract with companies.

3. Subcontractor

A “Subcontractor" is a company that takes on a flow-down of liability from a prime contractor to complete a major portion of a large scale job for the prime contractor's customer. The subcontractor is obligated to the prime contractually in an identical fashion as the prime is obligated to the government agency. The prime contractor issues a subcontract with a statement of work and flow down terms and conditions from the prime contract to the subcontractor. In many instances the government requires review and approval of major subcontractor selections and holds the prime contractor accountable contractually at the prime contract level for the subcontractor(s) efforts.

4. Supplier (or Vendor)
The term, “Supplier” connotes basically commercial relationships with companies that supply off the shelf parts and materials or simple, generic services. The General Services Administration (GSA) and other federal agencies also use the term to describe companies in negotiating supply schedules or in buying items under the commercial sections in the Federal Acquisition Regulation (FAR), such as FAR Part 12. Supplier contracts generally emphasize, price, delivery and matters such as warranty and do not involve -complex terms and conditions or the flow down of liability from the ordering firm prime contract.

REGULATORY FACTORS

The Federal Acquisition Regulation (FAR) clauses governing small business state that a company undertaking a small business set-aside prime contract must be capable of performing 51% of the work scope under the terms of that contract and may not subcontract (as in 3, above) any more than 49% of the effort. These FAR clauses do not limit 1099 contractors (as in 1, above).

Many small enterprises use independent contractors on call to fulfill the manpower requirements of their contracts and specify these personnel in their proposals as qualified individuals. When these clients grow in long term contracts they make such personnel permanent party if the contractors are willing. Often contingent hire agreements are used for that purpose while proposing major programs. You can download a generic agreement from the "References" Box Net cube in the left margin of this site.

Contractors (as in 1 above) may be used to the extent they are necessary to win, but bear in mind the government prefers to see permanent party, since that implies stability (the government is conditioned to the perception that individuals , as contractors come and go).

Small business should propose work scope under set aside programs in teaming agreements so that the prime (small business) is performing at least 60% of the effort with employees or contractors to avoid the appearance of a front by a larger company (even though the statutory requirement is 51%).

In many cases it is preferable for a start-up small business to become a subcontractor, rather than a prime, building past performance associated with government contracting and developing beneficial teaming relationships with experienced government contracting firms.

SUMMARY
It is possible for a small business to perform, in tandem, one or more of the "Contractor" roles discussed in this article. Sometimes multiple roles are established with the same corporation or agency. Please examine the following articles at this site for information related to this topic:

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

http://www.smalltofeds.com/2009/05/generic-contingent-hire-agreement.html

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

http://www.smalltofeds.com/2008/09/protecting-intellectual-property-and.html

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

It is vital to understand the "Contractor" role definition for each contractual commitment to insure suitable risk analysis, a good past performance record, conflict of interest avoidance and a solid reputation in the industry.

TECHNIQUES FOR PRODUCT DEVELOPMENT IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

2010-06-01T10:46:00.008-05:00

INTRODUCTION

This article will suggest approaches in developing a product to the point where it can be marketed in the small business federal government contracting venue. Individuals usually succeed at such an endeavor by forming a company, separating it from their personal assets and then developing the company and its product(s); even if it is only a one-person operation at the start.

There are techniques for small business to gain government participation in growing an idea into a company. Small Business Innovative Research (SBIR) programs in all the major federal agencies seek concepts that can be funded and developed into products the government needs. Here are some examples:

http://www.dodsbir.net/

http://grants.nih.gov/grants/funding/sbir.htm

Service contracting is another form of gaining entrance into the market, creating opportunities for introducing products by selling skilled labor under a government agency service contract or prime contractor teaming arrangement.

A GSA schedule affords a platform for products, but sales must have been achieved historically in the commercial or government markets before applying because GSA relies heavily the most recent 2-year pricing data in negotiating a schedule.

The government contracting product venue is competitive and requirements by federal agencies are often bundled into larger systems procurements. Therefore, it is necessary first to position a small enterprise and its product offerings before tapping the federal market for development support.

GENERAL OVERVIEW

Product entrepreneurs all face the same challenges. Those who succeed recognize they need to visualize themselves in the product development business, structuring an enterprise, generating a business plan, protecting intellectual property and then seeking industry partners and investors to bring the product to market.

In the process, copyrights, patents and royalty issues may come into play and development and distribution agreements are formed. Pricing is finalized based on cost and expense projections and competitive factors unique to the company as negotiation results are achieved with industry teaming partners, developers, manufacturers and distributors.

Financing is always a factor and can be achieved through loans or investors with a good business plan. The remainder of this article will address the basic elements of a framework within which to succeed with your product development for federal government contracting.

BUSINESS STRUCTURE

For the majority of individuals who are starting single person or no more than 2 or 3 person operations, a Limited Liability Company (LLC) registered with the state and with the federal government is recommended.

It will separate personal assets from company assets and protect them. When product or services sales begin generating revenue an LLC has many tax advantages. It can be registered as Sub Chapter 'S' for tax purposes and revenue and the expenses can be passed through to personal tax returns, paying no taxes as a company. The double taxation issue prevalent with many of the other types of incorporation is avoided with a Sub chapter “S” LLC. An LLC assists in limits your personal liability for debt and court judgments that may not fall in your favor.

Representing the business as a company allows pursuing financing as an enterprise. You can think of a creative name for your LLC and you can complete the articles of incorporation necessary to bring your enterprise into existence. The term, "LLC" must conclude the name of your company if you decide to form such an organization.

Instructions for registering in your state and federally with the IRS are available at your state web site and at the IRS site. You will receive tax and employer identification numbers by registering your business.

PROTECTING INTELLECTUAL PROPERTY

Patents and copyrights for your idea may ultimately protect you to a degree but the government agencies granting them have no enforcement arm so you must discover a violation yourself, retain a lawyer, bring a court proceeding against a violator and then hope to recover your costs and a reasonable settlement if you win. Therefore, most of my clients with ideas such as yours use non-disclosure agreements (NDA’s) in dealing with other companies. Teaming is a practical fact of life in pursuing the larger federal government contracts.

You can download an NDA from the “References” Box Net Cube at this site. Fill in the blanks as appropriate for a given exchange with outside individuals and companies. Before you meet to disclose details with a potential teaming company or investor, for instance, ask them to sign the document with you up front, put a serial number on it and reference the serial number and the agreement and date on any written materials you give to them.

After the meeting draft a short letter, documenting the minutes of the meeting, what was discussed and stating that the verbal disclosures and materials in the meeting are subject to the agreement and reference the agreement by number and date. Put an acknowledgment line on the letter and ask them to return a signed copy to you. This confirms their receipt of your proprietary information and their agreement to protect it in accordance with the NDA.

There are certain exceptions with regard to individuals or companies you may be dealing with on investing where you may not choose to use an NDA. Some Angel and Capital Investors are sensitive about being asked to sign them. You will have to trade their objections off against the value they represent to your company and conduct your risk analysis on a case-by-case basis.

For detail information asserting rights in technical data and software to government agencies and protecting intellectual property with other companies please see the following article:

http://www.smalltofeds.com/2008/09/protecting-intellectual-property-and.html

BUSINESS PLANNING

Visit the SBA website on business planning. There are major topics in the business planning process which, when addressed in a plan, will insure the success of your enterprise and assist you in determining and supporting the amount of funding you need. Such topics as marketing, advertising, competitor analysis and financing are covered there. You will find a presentation and examples that you can follow in improving your plan or in generating a plan if you do not have one. The link to the site is below:

http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html

Articles on strategic planning and developing your marketing plan are also at the “References” Box Net Cube at this site. They address evolving an operations vision for your enterprise showing its potential to present to a banker or to an investor.

Here is a site with free business plan samples:

http://www.bplans.com/sample_business_plans/all_plans.cfm

It may assist you in visualizing your own business growth to look at an example of how someone else addressed a given topic. I have learned from having worked with many new business owners that it is best to have you examine the material and continue your plan, contacting me with issues and questions as they occur.

THINGS TO THINK ABOUT WHILE PLANNING

Locate teaming companies to further the objective that they would market your product as part of their offerings with your company licensing and sharing in the proceeds.

A business plan and the guidance above for its generation is the road map for developing ideas, laying out how to expand the sales of your product and researching your market to do so. It will also assist in developing pricing to considering the direct costs of product development, service implementation and distribution as well as the indirect costs of the enterprise itself (operating expenses).must be considered and financed.

A negotiation position for a given product will be driven by certain strategic factors:

1. Does a developer or teaming partner have a strong but realistic incentive to actively make the product a part of the marketplace?

2. Does market research indicate the idea will have strong sales volume once it is developed and distributed?

3. How much will a prospective teaming partner or investor have to invest in the product to get it to market? Does the product require testing?

4. Which is the better deal? Is it better to receive a 7% royalty on $5,000 worth of sales or a 1% royalty on $500,000 of sales? Even though 1% does not sound too impressive, of course it’s the better choice in this example.

A negotiation position should be based on support by for the argument that a concept will experience a certain level of sales and the royalty should be based on a % of estimated end user volume sales, discounted for the investment that the developer and distributor must make to get it to market.

The royalty should be outside of the distributor cost breakdown and the end user cost breakdown. It is simply a deductive factor the manufacturer will have to introduce into their profit equation after the costs have been tabulated. They should not view royalties as a cost factor; they should view them as a share of the profit on the total estimated sales.

Chances of succeeding with a negotiation with a developer and/or distributor are increased by showing understand the prospective market for the product and drawing some comparisons between the product and other similar successful products.

Naturally there will be some give and take with the other side about estimated costs to get the product to market. Be forthright in acknowledging their investment but also support a position with some research and comparative data on the product potential.

Lastly, settle on a % of the end user sales volume based on an estimate to which is agreed with the other party and insures that the purchase agreement for royalties entitles the agreed upon % on all future sales.

FINANCING

SCORE has a cooperative agreement with the SBA to assist prospective business owners in completing sound business plans, which can then be presented to a banker in applying for financial assistance.

In the event that 2 banking institutions deny a loan application, a candidate can apply to the SBA for a loan guarantee that may assist in achieving a loan, since it would back up the application to a bank.

Loan officers are interested in a business plan to get a view of the business future and place a value on products and services based on the market, the competition, the sales projections, costs, expenses and profit expectations. The link to the SBA loan guarantee program is below:

http://www.sba.gov/services/financialassistance/index.html

Veterans have access to small business loans via the Patriot express program:

http://www.sba.gov/patriotexpress/

ANGEL AND CAPITAL INVESTORS

Angel and private investors have two prominent characteristics:

(A) They want a high return on investment (ROI)

(B) They typically want a great deal of control of the operation.

According to the Colorado Capital Alliance, surveys of angel investors show that:

1. Angels are seeking companies with high growth potential, proven management and sufficient information about the company, its management team, and its market to be able to assess a company's value.

2. On average, Angels expect 10 to 15 percent above of the S&P 500 return on equity.

3. Typically, Angels invest in companies seeking between $50,000 and $1,000,000.

4. Angels generally prefer to finance manufacturing or product-oriented ventures, especially in the high-tech fields.

5. On average, Angels are 47 years old, have a postgraduate degree, and management experience in an entrepreneurial venture.

An angel investor may ask for at least ten to twenty times return in just five years. For many angel investors, it’s not just about the money; they want to actively participate in developing your business. They want to act as a mentor and sometimes even to take an active role in managing the company. This often translates into the angel investor having a seat on the company Board of Directors.

Angels are also highly interested in an exit strategy from for a full return on their investment in your business. The closest thing to it is an astute business plan that calls out the specifics of potential ROI, based on sound planning and analysis and addresses the following as possible exit strategies. Remember, investors are very aware that an exit strategy cannot be guaranteed. But they can be offered more than the wishful thinking that an IPO will occur in three years.

It is always good to have a lawyer involved in complex documents or in the development of documents. This will further protect a concept. A lawyer does not necessarily have to be present during the exchanges with prospective companies, but a lawyer review and comment on documents before they are signed.

SUMMARY

This article has conveyed preliminary steps for the small business in product development for the federal marketplace.

It should be noted that much of the process discussed in this article is the same for the commercial product development and a certain amount of commercial success is usually achieved before selling products in the government contracting venue. The exception to that rule is in highly technical product pursuits where the government is funding advanced development.

To consider non-profit grants and direct government contract funding potential please see the following article:

http://www.smalltofeds.com/2010/01/small-business-government-grants-versus.html

Once a company is formed, a product platform established and a position to market a useful product to the federal government is achieved, please see the following articles at this site in developing a marketing plan

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html

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

http://www.smalltofeds.com/2009/01/should-you-consider-small-business.html

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

With careful structuring, planning and marketing, a product with potential can find its place in federal government contracting.

PRICING SMALL BUSINESS FEDERAL GOVERNMENT SERVICE CONTRACTS

2010-05-01T05:59:00.004-05:00

Integrate Long-term Company Strategy

With Short Term Proposal Pricing Objectives
For Success

INTRODUCTION

Small businesses entering or growing into federal contacting often struggle with developing a pricing approach. They must design a pricing structure to pass an audit and win competitively. A winning strategy for federal services contracting must involve a view of the horizon as well as the instant bid on the table.

If you are a small enterprise selling off-the-shelf commercial items under FAR Part 12 or marketing commercial products on a GSA schedule, you may be initially challenged by the government contracting venue. With persistence you will establish selling relationships through agencies and prime contractors. Your pricing challenge is minimal. A service contractor faces a far greater challenge in understanding the nature of government contact pricing and winning at it.

Strategic thinking must therefore be applied to structuring a government service contracting cost center in your company. It must involve long term planning and designing a business system as well as establishing rates and factors to bid new work.

LONG TERM COMPANY STRATEGY

Build a Business System With Pricing in Mind:

We have previously discussed the basics of small business government contracting business system design:

http://www.smalltofeds.com/2010/03/small-business-job-cost-accounting.html

The structure or your pricing approach from the cost element level through burdens must use the same template as your job cost accounting and billing. The parallel mapping provides the consistency required to pass audits or get your billings approved on a service contract.

Please read the above article and its related references. Then design your processes recognizing the guidance there and applying it to your company organization, and the way you produce your supplies and services:

Sculpt the DCAA Auditor
As you begin submitting government contracting proposals you will encounter your local DCAA audit office. They learn about your company by auditing your cost proposal rates, job cost processes and systems, billings and contract closeouts.

Keep in mind that you are shaping opinions in these encounters on the part of these government personnel that will influence your future and be passed on in reports to contracting officers. Your unique company business system structure must be carefully explained to them against what they know best; their DCAA Audit manual and FAR Cost Accounting Standards:

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

Protect Rate Information

Your fully loaded rates will appear on your GSA schedule in the public domain, in subcontracts from prime contractors and in data acquired under the Freedom of Information Act (FOIA) by competitors.

It is generally recognized by all industries participating in federal government contracting that internal overhead and G&A rates and the data that support them are proprietary data. The reason for the proprietary nature of rate data between companies is that in government work firms are teaming with each other exclusively on one project and competing against each other on additional contracts or projects at the same time.

Companies do not disclose the details of their rates to other companies and they do not expect to see another company's proprietary rate information. So companies view each others rate information on a fully loaded basis, meaning the total of the base cost, any proprietary indirect cost and an agreed upon profit percent.

If a prime contractor requests that subcontractor proprietary rate information be supplied with a proposal the detail should be double wrapped and the package stamped, 'Government Eyes Only'. The prime will then hand the package off to DCAA without opening it and receive only the fully loaded result of the burdened rate pricing.

For further information on intellectual property protection and protective markings on government contract proposals please see the following article:
http://www.smalltofeds.com/2008/09/protecting-intellectual-property-and.html

Recognize Overhead and G&A Rates Are Critical

Assuming your competition pays a generally similar labor rate to their employees as you do and that fringe costs about the same for everyone, then overhead and G&A are what wins and loses contracts.

Please read the following articles carefully with regard to long range planning and setting your overhead and G&A rates:

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

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

Keep in mind that if you are performing work inside a government facility the government will expect to be charged a lower overhead rate than if you were paying the space and occupancy costs and the light bill. This is normally achieved by establishing a separate cost center for "On site" (Internal to government quarters) work with lower overhead expenses applied to project direct labor dollars in that cost center.

Price Set Aside Contracts the Same as Full and Open Competitions

If you are a small business lucky enough to receive a sole source set aside contract under an 8(a) or Hub Zone award, or if you are participating in limited competition under a small business set aside designation, use the same sharp pencil you use on the full and open market. Your goal is to compete for the long haul and inflating estimates on particular jobs due to limited competition has an inflationary effect on your business as a whole.

Your company past performance is being constantly evaluated by the government and prime contractor community. Consistency attains and retains new business. You will eventually grow to the point where set asides and sole sourcing will no longer be available; prepare early.

Know the True Value of Your Proposal

Develop risk thresholds (ceiling and floor) for your bids. The ceiling is the price for which you can bid a job, perform to meet specifications and win. A floor is the lowest possible price for which you can accept a contract and survive.

Do not bid or be negotiated out of these thresholds. “Buying In” does not work and sacrificing the future of your company by “Low Balling” cost proposals and hoping to get well on scope changes later is dangerous.

In government contracting the only worse scenario than losing a contract is winning it, performing poorly (cost, schedule or technical) and getting a black eye on your company past performance record that takes a long time to go away.

Understand a Proposal is the Opening Chapter a Baseline for Your Contract

Your proposal represents an initial offer to a government agency or a prime contractor. Please read the following articles on how this baseline is initially set and controlled through the negotiation process and ultimately through careful contract management.

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

SHORT TERM PROPOSAL OBJECTIVES

Make Bid/No Bid Decisions Wisely

Conduct your bid/no bid decisions effectively. Please see the bid/no bid analysis process at the beginning of the following article:

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

Be Conservative in Rough Order of Magnitude Pricing
A common government planning technique in the early phases of marketing is to ask questions and review and approve a concept paper by a company then informally request for "Planning Purposes", a rough order of magnitude cost estimate (ROM).

If you provide a ROM be very careful. It tends to get cast in concrete in the customer's mind, even though it is not the final, formal proposal. Make it conservative in cost content and schedule duration, then plan to beat it with your formal proposal.
Make sure you caveat the ROM if you are asked for it with the statement in your cover letter that it is for planning purposes only and is not a commitment on the part of your company. State that you will be happy to make a full formal proposal/commitment upon receipt of a formal RFP from an authorized contracting officer. Keep in mind that contracting officers are the only people who can commit the government:

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

The government usually goes forward with the concept paper and the ROM for approval of the funding necessary for the job. The "Agency Higher Ups" either give the project personnel the approval to do a set aside or they require a competitive procurement.

You may want to read the following article on Statements of Work:

http://www.smalltofeds.com/2007/10/contract-statment-of-work-and-technical.html

Know the Difference Between Firm, Fixed Price, Time and Materials and Cost Plus Contracting
During the solicitation and proposal process the contract type is specified.

Firm, Fixed Price (FFP) is the riskiest type of contracting and should be undertaken only when you have a definitive grasp of a precise statement of work with known variables and end products. You should have achieved similar work scope in the past or be delivering follow-on products and services that are mature in nature to undertake a firm, fixed price contract.

FFP is particularly risky in software development contracts or high technology program pressing the state of the art. You will receive no more in the form of funding than your bid price on a firm, fixed price contract.

Time and Materials (T&M) contracting places the risk on the government and is suited to long term service contracts of a development nature. T&M may be contracted with fixed labor rates, making the hours and pass through materials and other direct costs the only variables.

Cost Plus (CP) contracting is the least risky of all contract types and you are assured of receiving every dollar of cost incurred under this type of contract.

The lower the risk to the contractor the lower the expected negotiated profit rate you can expect, since the government considers risk the principal factor in profit negotiation.

For further explanation of contract types in more detail, please see the following article:

http://www.smalltofeds.com/2008/04/federal-government-contract-types.html

Develop a Price Profile of the Competition

Use a copy of your own forward pricing long range plan (LRP) to model your strongest competitors. Profile your best intelligence regarding their size, location, contract base and estimated overhead and G&A expenses. Then interpolate, from your knowledge of the market, their labor and fringe costs, as well as other direct costs as you prepare your proposal. Incorporate any unique approaches you estimate your competition may offer that impact cost.
Adjust your competitor cost model to perform “What If Analysis” during your risk assessment and proposal review process. For an example of an LRP cost model please see the Box Net Cube in the left margin of this site. It is Appendix B to the book, “Small Business Federal Government Contracting” and is available as a free download in Adobe format.

Understand “Best Value” Source Selection

When the government declares a “Best Value” proposal award process the agency will perform a weighted trade study of cost verses technical and management factors in reviewing proposals. They will announce the weight of each factor in relative terms within the solicitation so contractors can focus on the most important elements.

What best value means quite simply is that if you are the low price bidder you may not win. If a competitor proposes a superior technical and management approach, a higher weighted rating in those factors may offset an otherwise non-competitive bid price, resulting in an award. This is a fact you must keep in mind when preparing your own proposal. In short you must perform your own trade study on your own bid.

Past performance has also become a significant weight factor in proposal evaluations in recent years. To address this challenge, please see the following article:

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

A balanced proposal, with specific, heavy emphasis on government-designated weight factors and an economical, yet realistic cost/price usually wins. Offsetting weaknesses in any designated government weighted area by proposing excellence in other weighted areas is vital.

Beware of Unallowable Costs

Over the years the federal government has determined that certain costs cannot be allowed in prices, cost reimbursements or settlements under contracts with the US Government. The government is unwilling to pay for these costs as direct charges to federal government contracts or through indirect expense pools applied to federal government contracts.

A company is not prohibited from incurring unallowable costs, but they cannot be recovered either directly or indirectly under federal government contracts. To manage unallowable costs, separate accounts must be established for these type expenses and they must not be priced directly into federal government contracts during the proposal process.

Such costs cannot be made a part of the expense pools which are applied to federal government contracts through an overhead, material handling or G&A cost allocation at accounting period close or during forward pricing rate planning. For more detail on unallowable costs please see the following article:

http://www.smalltofeds.com/2007/04/unallowable-costs-under-federal.html

Integrate Pricing With Technical and Management Approaches

Establish price targets as soon as possible for major tasks, evolve a program plan, or if you are bidding a T&M, IDIQ type program develop a sample work order for a typical representative effort.

As the technical and management proposal move toward completion, use established checkpoints to evaluate the efficiency of your cost estimate, escalation factors, labor, material and other direct costs. Then apply your indirect rates and subject your total proposal to a credibility check with regard to a believable cost estimate considering your solution and its time frame.

Run your competition price model and bring in some outside experts to review the end product proposal “Cold” before it is submitted.
Manage Best and Final Offers (BAFO) Carefullly

Most government solicitations require a format and terms and conditions with submission that permit contract award without further discussion. However, many involve a down-select process, briefings by those selected in the “Competitive Range”, a call for best and final offer (BAFO) or negotiation to achieve a final price.

The best and final offer period is a sensitive time. Most contracting agencies that call for a BAFO will cite weaknesses or concerns in the selected contractor proposals. They wish to hear about solutions to those weaknesses during BAFO briefings and require a re-submitted offer to correct them. The price may be adjusted as well and that is a key consideration. Pay particular attention to the way the BAFO instructions and concerns, specific to your down-selection, are worded. Look for hints that indicate critical opinion about your pricing, and then adjust your costs.

Consider the cost, schedule, technical and past performance implications of the BAFO request letter from the government and revise your proposal by the required submission date. Close the loop on all matters with your suppliers, subcontractors and prime contractors, and then conduct your briefing to the customer when it is scheduled. Present a united front to win. Your price should be your best. You will not be offered a chance to bid another competitively on that program.

On some procurements you may be asked to undertake additional discussions to determine final contract pricing. Please see the negotiation template at the following article for guidance on that process:

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

SUMMARY

This discussion has conveyed how pricing should be a natural outgrowth of the organization structure, market strategy, competitive analysis, business system design and long range planning.

We have further explained how your long and short term pricing factors should be integrated with the management and technical elements of any given proposal. Take the long and the short view of your business by integrating long-term company strategy with short term proposal objectives

Excellent Information from SBA On Small Business and Health Care Reform

2010-04-22T10:39:00.000-05:00

Link at this site contains excellent initial information from the SBA on Health Care Reform and Small Business. It will be updated frequently:

http://www.sba.gov/healthcarereform/index.html

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

2010-04-01T06:56:00.002-05:00

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:

http://www.smalltofeds.com/2007/08/procurement-integrity-and-law.html

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.

SMALL BUSINESS JOB COST ACCOUNTING BASICS FOR FEDERAL GOVERNMENT SERVICE CONTRACTS

2010-03-01T10:41:00.006-06:00

INTRODUCTION

Many clients in the start-up service contracting business to the federal government have contacted SCORE recently experiencing 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.

SMALL BUSINESS GOVERNMENT GRANTS VERSUS DIRECT GOVERNMENT CONTRACTS

2010-01-30T10:17:00.004-06:00

INTRODUCTION

Start-ups, entrepreneurs and new small businesses regularly seek information regarding small business grants. There are many misconceptions about the nature of such instruments, who qualifies for them and what constitutes a small business grant. The misunderstanding stems from advertising on the Internet and other media creating the impression that grants are readily available and that they are "Free Money".

There is no such thing as “Free” small business government grant money. In many instances individuals seeking grants should be looking to direct government contracting; this article will explain why.

DEFINITIONS

Small Business Government Grants

Small Business government grants are a type of contract and involve performance of a statement of work for agencies that are in some socio-economic endeavor serving the public, such as health care, public information, communications, high technology, or similar undertakings. A small business entity receiving a grant from a government agency becomes an extension of the agency mission and obtains funding to enhance that mission while growing as an enterprise.

Small Business Direct Contracts

Small business direct government contracting differs from grants in sheer numbers and regulatory control. Direct contracts are used by all agencies of the federal government to acquire supplies and services. Both for-profit and non-profit organizations compete in direct government contracting. A direct government contract has a very specific work scope, schedule, deliverable items, pricing and in many instances incremental funding. A grant has a more generic functional orientation to funding and may or may not include deliverable items.

There are some programs, such as Mentor/Protege and Small Business Innovative Research (SBIR) that appear to be hybrids of grants and direct government contracting and are often mistaken for grant instruments. They are not grants and are governed under the Federal Acquisition Regulation (FAR) as direct government contracts.

REGISTRATION
Guidance on registering to become eligible for both small business grants and direct contracts is at the following link:

http://smalltofeds.blogspot.com/2006/12/registering-your-small-business-for.html

STRUCTURE AND STRATEGIC PLANNING

Non-Profit Organizations

Most small business government grants go to non-profit organizations because of the nature of the work such entities do.

A non-profit organization operates in much the same way that a for-profit company does except that the founder (s) work for a board of directors that pays them a salary and, upon registration with state and federal governments under IRS provision 501 3 (c) or a similar designation, the business pays no taxes.

What would normally be considered profit in a for-profit company is re-invested back into a non-profit to further its work. Annual reports are required by the IRS to demonstrate the re-investment and maintain a tax-free status.

Non-profit organizations are usually initiated to pursue a religious or socio-economic endeavor serving the public, such as churches, health care, public information, communications, high technology, or similar undertakings.

No one owns a non-profit organization. A board of directors, a charter, articles of organization filed with the state and the IRS designation with the federal government establish it as a public entity. In the event it is discontinued, all proceeds and assets are distributed by the government for public use and no one individual benefits. A non-profit charter must include that provision.

The following link at NOLO provides the chronological process between a state registration and the IRS in applying for non-profit registration and tax-exempt status:

http://www.nolo.com/article.cfm/objectID/EA3D3043-9A88-43F5-8DC869639F0F6E77/111/262/ART/

For-Profit Organizations

A for-profit organization is founded by individuals specifically defined by name as owners in the articles of incorporation with the state and registered with the federal government for tax purposes. There are many different types of for-profit entities (S Corp, Sole Proprietorship, LLC, Partnership, etc.); each type has its own unique tax and operating characteristics.

A for-profit organization exists for the specific purpose of providing a return on investment for the owners. All assets on the books of the company are the property of the company, and although certain types of corporations, such as a Limited Liability Company (LLC) reduce the risk and insulate the owners' private assets to some degree, in general what is invested by an owner in the firm is the property of the firm and subject to business risks and the laws governing such matters. In return the owner or stockholder is entitled to the return on his or her investment as an individual in the form of dividends, direct proceeds after costs or other forms of entitlement (conveying what is commonly known as profit).

GRANTS VS. DIRECT CONTRACTING

Small Business Grant Funding

Small Business Government Grants have the effect of supplying lump sum funding to a non-profit organization for a specific period once the grant is awarded. In general the funding is used to further the stated mission of the business. However, the grant provider may reserve the right to receive reports on how the money was spent and may require deliverable items associated with performance of the work under the grant.

Certain grants take the form of cooperative agreements, whereby the non-profit and the agency commit to supplying mutual funding amounts to a project. Under limited or special circumstances involving 0 profit, a for-profit entity may be eligible for such a cooperative agreement with the federal government.

Federal Government grant regulations are at the following link:
http://fa.statebuy.state.gov/content.asp?content_id=120&menu_id=66

Web sites for researching federal grants as well as additional information on grants in general are at the following sites:

http://www.grants.gov/

http://www.proposalwriter.com/grants.html#Grant%20Resources

Small Business Direct Contract Funding

Federal Government direct contracting regulations are at:
https://www.acquisition.gov/far/

“Small to Feds”, the web site you are reading, was initiated to assist small businesses in understanding the above regulation and direct federal government contracting. Please see the table of contents in the left margin of this site for topics.

As stated in the introduction above, both for-profit and non-profit entities compete for direct federal contracting. A non-profit entity will bid grants and direct contracts at 0 profit. The following links are suggested as an introduction to direct federal government contracting:

http://www.smalltofeds.com/2009/10/introducing-federal-government.html

http://www.smalltofeds.com/2009/06/federal-government-contracting-small.html

http://www.smalltofeds.com/2009/01/should-you-consider-small-business.html

SUMMARY
This article has provided a brief (and admittedly general) overview of the difference between non-profit and for-profit business entities and the small business government grants and direct contracting available to each.

Both small business government grants and direct government contracts are highly competitive. Selecting potential agency sources and submitting winning proposals are acquired skills. For assistance in writing grant and direct contract proposals please see the following links:

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

http://www.proposalwriter.com/

When considering forming an enterprise, please assess in your business plan the potential of both types of entities in direct contracting or grant competitions. Go to the SBA web site that guides you through the business planning process. I suggest you follow the site presentation and note the factors to consider:

http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html

The following site contains samples of business plans:

http://www.bplans.com/sample_business_plans/all_plans.cfm

Look for examples in the above of both for-profit and non-profit organizations at the above link.

Ask yourself some strategic questions, such as what competition you envision and what your marketing plan will be. Addressing these questions may take some research and that is all part of the process of putting in place your plan. It is your road map for the future.

2010 Small Business Federal Government Contracting Guidebook

2009-12-08T14:47:00.014-06:00

PLEASE CLICK ON IMAGE OR DOWNLOAD TO ENLARGE

Please use the "Box Net" cube on the left margin of this site to download a free copy of the 3rd Edition of "Small Business Federal Government Contracting".
The book contains guidance in 7 major areas of the business with 38 articles and two appendices (A and B) on company long range rate forecasting and pricing.
I appreciate the 44 thousand individuals who have visited this site (See Site Meter - also on left margin) and the survey responses which have influenced the content of this book. I have also enjoyed the over 2,800 SCORE clients who have contacted me for assistance. You have helped to keep an old vet intellectually stimulated and professionally fulfilled.
My thanks to you all and Happy Holidays!
Ken Larson

TABLE OF CONTENTS

1. FORWARD
2. SHOULD YOU CONSIDER SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING
CONTRACTOR REGISTRATION REQUIREMENTS
3. SMALL BUSINESS SET ASIDE DESIGNATIONS
4. SERVICE-DISABLED, VETERAN-OWNED BUSINESS EMPHASIS
5. REGISTERING FOR FEDERAL GOVERNMENT CONTRACTING
KNOW YOUR CUSTOMER
6. PROCUREMENT INTEGRITY AND THE LAW
7. CUSTOMER RELATIONS
8. PROTECTING INTELLECTUAL AND PROPRIETARY DATA
ACQUISITION AND CONTRACT TYPES
9. ACQUISITION CATEGORIES
10. CONTRACT TYPES

MARKETING
11. INTRODUCING GOVERNMENT CONTRACTING INTO YOUR COMMERCIAL BUSINESS
12. FEDBIZOPPS - THE FEDERAL BUSINESS OPPORTUNITIES WEB SITE
13. MARKETING IN THE FEDERAL ENVIRONMENT
14. SEVEN MANAGEMENT TECHNIQUES TO ACHIEVE A CONTRACT
15. MULTIPLE FRONT MARKETING
16. TEAMING IN GOVERNMENT CONTRACTING
17. OBTAINING AND UTILIZING A GSA SCHEDULE
18. IMPORT/EXPORT MANAGEMENT
PROPOSALS
19. PROPOSAL PREPARATION
20. THE “PAST PERFORMANCE” CHALLENGE
21. CONTINGENT HIRE AGREEMENT
THE CONTRACT
22. CONTRACT FORMAT
23. CONTRACT LINE ITEMS
24. STATEMENT OF WORK AND TECHNICAL SPECIFICATIONS
25. CONTRACT DATA REQUIREMENTS LIST (CDRL)
26. CONTRACT NEGOTIATION
27. CONTRACT WORK AUTHORIZATION
28. CONTRACT BILLING
29. CONTRACT PROPERTY MANAGEMENT
30. SECURITY CLEARANCES
PRICING, BUSINESS SYSTEMS, FINANCE & ACCOUNTING
31. SMALL BUSINESS SYSTEMS DEVELOPMENT
32. UNALLOWABLE COSTS
33. LIMITATION OF FUNDS AND FUNDING EXPOSURE
34. ESTABLISHING COMPLIANT SMALL BUSINESS SYSTEMS
35. DCAA AUDITS AND JOB COST ACCOUNTING SYSTEMS
36. PROVISIONAL INDIRECT RATES
37. EARNED VALUE MANAGEMENT SYSTEMS
38. CONTRACT BASELINE MANAGEMENT

INTRODUCING FEDERAL GOVERNMENT CONTRACTING INTO YOUR COMMERCIAL SMALL BUSINESS

2009-10-31T10:17:00.002-05:00

INTRODUCTION

As a result of the current economic recession and associated government stimulus programs, many SCORE 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.

FEDERAL GOVERNMENT CONTRACTING SMALL BUSINESS SYSTEMS DEVELOPMENT

2009-09-30T15:17:00.016-05:00

INTRODUCTION

Waiting for a contract award to achieve a government contracting business process is not advisable. A win may not happen at all without addressing the structure and process requirements in your proposal to convince the customer you understand his business environment.

If you are not prepared in advance and you are fortunate enough to win, then in a very short time frame you will have to evolve your business system to perform on your contract and submit a billing

This article will discuss a framework for a small enterprise to develop a business system in service contracting, which is the most frequent venue utilized to enter the government market.

The following diagram depicts the major elements of a suggested integrated template:

(PLEASE CLICK ON IMAGE OR DOWNLOAD TO ENLARGE)

If you are a small startup organization, your process and automation may be quite rudimentary and simple in addressing the above structure and functions. If your company is in a high growth mode with many transactions, projects and details your processes and computerization will be more complex.

The point to remember is the need to overlay the above on your existing company for the unique products and services you provide, and then address how to fit, supplement, or accommodate the necessary adjustments to support contracting to the government.

Please read the following articles on the highlighted topics for details that may assist in evolving your unique business processes to support government contracting:

Long Range Planning

http://www.smalltofeds.com/2009/01/should-you-consider-small-business.html

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

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

http://www.smalltofeds.com/2008/09/protecting-intellectual-property-and.html
Human Resource Planning

http://www.smalltofeds.com/2009/05/generic-contingent-hire-agreement.html

Project Planning

http://www.smalltofeds.com/2008/05/earned-value-management-systems.html

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

Cost Centers, General and Administrative , Operations, Job Cost Records

http://www.smalltofeds.com/2008/07/small-business-government-contracting.html

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

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

Customer Relations
http://www.smalltofeds.com/2009/09/what-small-business-should-know-about.html

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

http://www.smalltofeds.com/2009/06/federal-government-contracting-small.html

SUMMARY
You may wish to download the free book and related documents at the "Box Net" cube in the left margin of this site for further information and live examples.

Remember, small business federal government contracting is not rocket science - it is taking what you do well in the commercial environment and applying it in a slightly different manner from a business perspective to accommodate the way the federal government does business.

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

2009-09-01T10:51:00.004-05:00

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. The site has recently been expanded to include a special section on federal government "Recovery and Re-Investment" Contracts.

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.

CONTRACT BASELINE MANAGEMENT IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

2009-08-01T10:24:00.004-05:00

INTRODUCTION

Government Computer News (GCN) recently carried a story on the difficulties experienced with, "Performance-Based Contracting", which has been made part of the Federal Acquisition Regulation (FAR) in an attempt to pre-establish at contract award those discrete outcomes that determine if and when a contractor will be paid.

Interestingly enough, the article splits the blame for the difficulties right down the middle, stating the government typically has problems defining what it wants as an end product or outcome and looks to contractors to define it for them. More than willing to do so, the contactors detail specific end products or outcomes, set schedule milestones and submit competitive proposals.

The winner is selected based on what the government thinks it needs at the time to fulfill its requirement and a contract is negotiated. Once underway, the government decides it wants something else (usually a management-by-government committee phenomena with a contractor growing his product or service by offering lots of options). The resulting change of contract scope invalidates the original price and schedule, so a whole new round of proposals and negotiations must occur with the winner while the losers watch something totally different evolve than that for which they competed. The clock keeps ticking and the winner keeps getting his monthly bill paid based on incurred cost or progress payments. The link to the GCN article is below:

http://www.gcn.com/online/vol1_no1/42691-1.html

The present state of the economy will not allow the aforementioned to continue. Government agencies are now hard pressed to insure the most "Bang for the Buck". It is in the long term interests of astute contractors to assist in that endeavor. The only way to achieve such an objective is through sound technical, cost and schedule contract definition via an iterative process of baseline management and control. This article will address that process.

SOLICITATION AND STATEMENT OF WORK BASELINE

If you are selling a straight commercial product off the shelf, the problem of baseline management is minimal, assuming your product meets the specifications required and you deliver on time. Is it during development programs for new products or service contracts involving labor supplied to the government that lack of definition and poor communication are high risks. The initial benchmark for managing this risk is in the government solicitation and statement of work.

A wise customer farms the preliminary draft solicitation and statement of work out to prospective bidders and requests comment. A wise supplier is constructive, yet critical in pointing out weaknesses in the document.

Part 1, Section C, is where the technical specifications and statement of work are located in the solicitation and will reside in your negotiated contract.Without a well written Statement of Work (SOW) and associated supplies and services specifications there is unacceptable risk in the future contract and is it exceptionally high risk to bid or contract the job. Both the contractor and the government must come to an understanding regarding the scope of effort to be performed. That understanding is conveyed in the SOW and confirmed in the specifications referenced therein. A good SOW should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract

* A description of the conditions under which the contractor will be required to perform and any related environmental or location factors

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery acceptance

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor.

* A precise description of government furnished material or facilities required and when it will be made available to the contractor.

If your customer does not provide the above, offer a revision to the document during the comments period, during your proposal or during negotiations that represents a version to which your company will commit. Do not let the fact the program is competitive sway you from the facts. Signing off on a poorly written SOW results in a difficult contract to manage, a high probability for disputes during the contracting period and a poor past performance record you will have to deal with in the future on other jobs.

You should also do a complete review of the Contract Line Item (CLIN) Structure in the solicitation and cross foot SOW requirements to insure the scope is covered by the CLIN'S.

Please see the following article on how to perform this analysis:

http://www.smalltofeds.com/2009/03/contract-line-items-heart-of-your.html

NEGOTIATION BASELINE

The following article discusses the standard template for negotiations through which government contracts generally pass:

http://www.smalltofeds.com/2007/03/small-business-federal-government.html

During the audit, fact-finding and subsequent negotiation steps, a growing definition of the contract occurs and a clear understanding between you and your customer evolves. If you find the process slow and unknowns frequently surfacing, that is a barometer of future difficulty unless the issues are resolved. Technical work scope, schedule, cost and terms and conditions regarding inspection and acceptance as well as payment provisions are especially sensitive.

CONTRACT AWARD BASELINE

Signing the contract represents full agreement on the proposal and conclusion of negotiations. Award is the benchmark baseline for contract performance.

BASELINE MAINTENANCE - THE CHANGES CLAUSE

During the period of performance on a development or services contract, effort does not always go as planned. The article on Earned Value Performance Measurement (EVMS) at this site is one technique to control this situation:

http://www.smalltofeds.com/2008/05/earned-value-management-systems.html

Not all programs warrant EVMS or have the funding to perform that type of control. The simple rule of thumb is that the changes clause in your contract allows you to request additional funding and schedule relief, as well as a modification to the SOW if you are being driven by customer directed work scope change events to depart from the baseline to which you committed at contract award.

To the extent you do not remain sensitive to this provision, on a firm fixed price contract you will lose money. On a cost plus and time and materials type contract you will consume funding at a higher rate and faster than the contact baseline anticipated and your customer may or may not be able to provide additional monies when the ceiling amount on the contract is reached. At that point in time it is too late and everyone is disappointed.

The above occurrences are collectively known as "Scope Creep" in project management circles.

THE DIFFERENCE BETWEEN BUDGET AND FUNDING - (Limitation of Funds and Funding Exposure)

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 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.

If a contract is not funded to continue and the contractor has performed to date in accordance with all required terms, the government retains the right to terminate the contract for the convenience of the government. This requires a special notification to the contractor from the government and usually occurs due to changes in government priorities. The contractor may then bill the government for all costs and obligations to date, plus any direct and indirect extraordinary costs associated with business disruption, termination administration, employee layoff cost and the like. Terminations for convenience are very expensive for the government. Nevertheless, limitation of funds and funding exposure must be carefully monitored by an astute small business.

To properly manage incremental funding, the business system must be capable of accounting monthly for all direct and indirect costs on each contract, plus commitments to suppliers and employees in the form of open purchase orders and unpaid or un-posted payroll.

Your internal release document should specify the current incremental funding if your contract is not fully funded at award. Further revisions to your release documentation should convey receipt of contact amendments from the government that supply additional required funding to the contract as performance proceeds. Requests for increases in incremental funding are required when the actual booked cost plus commitments to suppliers reaches 80% of the current funding on the contact.

In the event the contact is not adequately funded incrementally by the government, a revision to your internal release documentation should specify a stop work order after you have notified your customer that you plan to cease performance on the contract due to lack of sufficient funding. Notification should be provided to suppliers under your contract with a stop work to avoid their incurring additional costs for which you are not receiving funding from the government. Be specific with a stop work date to these suppliers.

IN SUMMARY - KNOW WHERE YOUR ARE AND WHEN TO SAY "NO"

"Scope Creep" can kill a contract, a customer relationship and a past performance record, all of which are important to your business. Stay in front of "The Scope Creep" by communicating positively with your customer to control your baseline, keeping cost, schedule and technical performance integrated and synchronous.

Six rules of Thumb to control "Scope Creep":

1. KNOW - The contract value and its ceiling amount

2. KNOW - The incurred cost to date and commitments

3. KNOW - The scope of work and whether or not your current efforts are supporting it or some other objectives

4. KNOW - The estimated cost at completion based on where you are at today

5. KNOW - Your customer and who among the customer population is prone to direct out of scope effort.

6. KNOW - WHEN TO SAY "NO" to "Scope Creep" and say it officially in writing to the contracting officer specified in your contract.

MULTIPLE-FRONT MARKETING IN SMALL BUSINESS FEDERAL GOVERNMENT CONTRACTING

2009-07-01T10:13:00.004-05:00

INTRODUCTION:

Your enterprise must market on several targeted government contracting fronts to be successful. Simply registering as a federal government contractor or acquiring a small business set aside designation does not mean that contracting officers will find you or that larger corporations will seek you out as a teaming partner. A GSA schedule or a multi-year IDIQ umbrella contract, purchase agreement or similar vehicle may look promising, but they are really no more than hunting licenses. The game must still be bagged (targeted sales of specific products or service projects to customers).

With the economy under duress and federal recovery funding finding its way into multiple venues across the country, the prudent small business will target agencies and teaming partners that best fit its products and services, positioning itself to acquire developing information on requirements and displaying capabilities by conveying early solutions to customer decision makers. This article will suggest techniques, approaches and tools to conduct a multi-front, targeted, requirements-driven, marketing campaign for small business federal government contracting.

SELECT YOUR SMALL BUSINESS SET ASIDE DESIGNATIONS CAREFULLY

Your small business designation by North American Industrial Classification System (NAICS) Codes should be thorough and as comprehensive as possible when you register at the Central Contractor Registration (CCR). Make sure your CCR has the maximum number of codes for which you qualify, since the whole federal procurement system rides on those codes. Insure the narrative description of your services is complete as well. Please see the following link for further information on registration:

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html

The sub-categories of small business set-aside certifications should be chosen carefully and based on your company ownership and specific market research into which categories the agency or prime contractor favors, what their small business contracting plan includes in the way of targets and what their track record has been in awarding contracts. Good information on awards can be gleaned from the federal web site on federal government spending at:

http://www.usaspending.gov/

You can also check the SBA small business goaling report at:

http://www.sba.gov/aboutsba/sbaprograms/goals/index.html

For further details on each of the 7 small business set aside designations please see the following link:

http://www.smalltofeds.com/2009/06/federal-government-contracting-small.html

TARGET REQUIREMENTS EARLY

Government agencies, like companies, have long range plans and budget cycles. Keep abreast with the latest developments in trade magazines and journals regarding government contracting trends within agencies to develop and market solutions for anticipated requirements.
Monitor agency web sites and forecasts. Be constantly aware of the annual federal budgeting cycle, its development progress in the executive branch and its approval status in Congress. Agencies push to commit excess funding late in the fiscal year and at the same time forecast their next year needs for submittal to higher authorities. In the 1 October to September 30 fiscal year cycle, July, August and September are prime marketing periods.

Watch FEDBIZOPPS for sources sought notifications, requests for industry comments on draft RFP's and similar early indications of programs taking shape which will later be advertised in full solicitation. Go after them early enough to market and get them set aside for your small business designation and influence the development of the project with constructive input creating a presence in the eyes of the customer and prospective teaming partners.

MAKE PRUDENT BID/NO BID DECISIONS

Develop a good fit in your bid/no bid decisions. The only thing worse than losing a contract bid is winning it and performing poorly, creating negative past performance notations on your record. Know what your company can do and cannot do. Acquire skilled personnel through contingent hire agreements or incumbent work forces as you grow and carefully choose what you bid. For information on bid/no bid decisions and proposal preparation please see the following link:

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

EXPLORE SERVICE CONTRACTING AND TEAMING

Other than FAR Part 12 Commercial Contracting for off-the-shelf items, entry into federal government contracting for small business usually occurs through service contracting direct to an agency or teaming as a subcontractor with another firm for a major program. Even for commercial products, particularly new ones on the market, the best way to introduce your solution to a customer is to become involved in a service contact supporting the client's operations.

With regard to larger government contracting corporations to whom you could subcontract, cover the waterfront. Find out what they are bidding and aggressively market a piece of the action as a small business. Find the locations for the largest government contractors nearest you and register at their supplier business sites. Everything they buy for their facilities, their personnel and their operations counts toward the small business goals required contractually of them by their enormous government contracts.

Research their web sites and locate their small business liaison officers. Make appointments and visit them. While visiting, seek the names and titles of managers internal to their companies who manage prime contracts involving expertise your business can supply. Go after those managers.
Form teaming agreements early with good industry partners and begin to develop a winning message to the customer while he is defining his program. The following article provides further details on teaming:

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

OBTAIN A GSA SCHEDULE

The below link is an article on how to apply for and utilize a GSA schedule:

http://smalltofeds.blogspot.com/2007/05/achieving-and-utilizing-gsa-schedule.html

There are 3 major challenges to going through the GSA schedule application process:

1. Finding an open solicitation that fits your product line

2. Establishing a good working relationship with the GSA Contracting Officer on the schedule solicitation and getting his/her assistance in working the system expediently.

3. Presenting viable, auditable cost history on what you have previously sold your products for to pass the cost/pricing audit portion of the process.

Most companies continue to bid work to the government through FAR Part 12, Commercial Contracting procedures or other contract vehicles discussed this web site while their GSA schedule application is pending. Please examine this site for articles on teaming, marketing, IDIQ contracts, negotiations, subcontracting and many others.

Remember there are thousands of companies out there going through the system, so you will have to be patient. Very few applicants get through it in any less than 6 months. A GSA Schedule is a very valuable item to achieve, but it takes time to do so and there are other forms of government contracting you can use while your application is in process.

DEVELOP A DYNAMIC CAPABILITY STATEMENT

A capability statement (CAPE) is an absolute necessity. It contains the specific information a contracting officer needs to place an order. This information includes such items as your D&B Number, your government registration numbers, your North American Industrial Classification System (NAICS) codes and the like. These items are selected or provided by you or determined by the system when you register your company for government contracting.

Your electronic capability statement (CAPE) for government contracts should be short and hard-hitting. It should be 1or 2 pages and should highlight the salient points of your products and offerings, your personnel and your qualifications. Please see the following link for an example of a capability statement:

http://www.smalltofeds.com/2007/01/seven-management-techniques-to-assist.html

WRITE RESPONSIVE PROPOSALS

Writing a winning proposal is an art form. It takes practice and the more proposals you prepare and submit the more artful you will be. You will find yourself utilizing the same materials over again on successive proposals. Management approaches, personnel profiles, win strategies and other major components of a good submission will fill your library and extend your CAPE to specific solutions for specific customers.

The following link contains guidance on writing effective proposals:

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

SUMMARY

Your reputation as a reputable performer in the small business federal government contracting community is important. Be selective and high performing. Agencies, past performance data bases and other companies will be observing you, recording your performance and passing the word along to others directly and indirectly.

Then insure your web site, your capability statement and your marketing plans are maintained current alive and dynamically reflective of your successes as you pursue new business and carefully develop your library of past performance records by project with accessible profiles to use in your government proposals.

Please see the following link on meeting the past performance requirements challenge in federal government contracting:

http://wbx.me/l/?u=http%3A%2F%2Fwww.smalltofeds.com%2F2008%2F07%2Fsmall-business-government-contracting.html

FEDERAL GOVERNMENT CONTRACTING SMALL BUSINESS SET ASIDE DESIGNATIONS

2009-06-01T10:32:00.013-05:00

Many questions have recently been received at the "Linked In" and "SCORE" web sites regarding federal government contracting small business set aside designations. This article will explain the designation types and suggest the best ways to establish and use them in your business planning.

There are 7 major, small business set-aside designations in federal government contracting. Below is a listing of these designations, divided into two groups, Self-Certifying at the Central Contractor Registration (CCR) and those where government certification is required.

SELF CERTIFYING

1. Small Business - Established by North American Industry Classification (NAICS) Code for all categories of government business (Please download the "SBA Small Business Size Standards" at the "Box Net" Cubicle on the left margin of this web site for further information). Every federal procurement has a NAICS Code assigned to it and is registered on the below web site if it exceeds $25k:

http://www.fedbizopps.gov/

2. Minority Business Enterprise (MBE) - Self-Certifying at CCR and a good interim designation while an 8(a) application is in process for minority-owned companies

3. Woman-Owned Business - Applicable to Women-Owned Businesses only:

http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses http://www.sba.gov/content/contracting-opportunities-women-owned-small-businesses

4. Veteran-Owned Business - Applicable to Veteran-Owned Businesses only

5. Disabled Veteran-Owned Business - Applicable to Disabled Veteran-Owned Businesses only

GOVERNMENT CERTIFICATION REQUIRED

6. Small/Disadvantaged Business SBA 8(a) Program - Requires 2 years in business and a lengthy application process with the SBA at the following web site:

https://sba8a.symplicity.com/applicants/guide

7. Historically Under-Utilized Business (HUB) Zone Located - Pertains to small businesses located in geographic areas with a historical record of low government contracting. This designation requires application at the following HUB Zone Site Web Site:

https://eweb1sp.sba.gov/hubzone/internet/index.cfm

QUALIFICATIONS, REGISTRATION, CERTIFICATIONS AND REPRESENTATIONS

To qualify as a small business for a given solicitation an enterprise must have registered at the CCR under the applicable NAICS code for the procurement and meet the SBA eligibility size standards for that code.

A small business also certifying under items 2-5 and 6 above must have individuals qualifying for the designation with at least 51% ownership interest and an operating role in the company. 60% is recommended to avoid the appearance of a front. Silent partners and investors without qualifying status or an operating role in the firm do not count toward the designation. It is suggested that ownership interest be specified by name in the articles of incorporation with the state and by % of ownership in an operating agreement.

To qualify as a HUB Zone Enterprise the business must be located in a HUB Zone and a qualifying percentage of the members (owners or employees) of the business must also live in the appliable HUB Zone.

The CCR Registration Web site is at:

http://www.ccr.gov/

For instructions on registration at the CCR please see the following link:

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html

The Annual On-line Certifications and Representations (ORCA) form must also be completed at the following link to bid federal government jobs:

https://orca.bpn.gov/

Your latest ORCA Certification should be printed out, signed and included with all federal government contract proposals.

SUMMARY

Carefully select your small business designations when preparing your business and marketing plans for federal government contracting. Keep in mind that self-certifications are verified through records checks and site visits by contracting officers, DCMAO and Source Selection Boards for federal procurements before contract awards are made.

A small business set-aside designation can be a valuable tool if adequately documented, registered, certified and prudently used for bidding work that your enterprise is capable of performing successfully.

Generic Contingent Hire Agreement

2009-05-16T07:10:00.001-05:00

By Popular Demand

Generic Contingent Hire Agreement.doc