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Monday, October 25, 2021


A recent poll revealed that in excess of 40% of the visitors who voted on the topics listed at this site wished to see a feature on government contract billing. Billing under federal government contracts can cause difficulty for small businesses because they often do not recognize that setting up complete contract identification information on the government billing form is vital to smooth invoice processing.

Another major feature not recognized by businesses new to government contracting is the relationship between inspection and acceptance records and invoice approval.

The type of contract also drives invoice preparation and requirements for supporting information.

The below article is an extract from the Navy SBIR site and is one of the most informative discussions I have seen by a government agency on the topic of billing. Following that article below is a special notice from the Defense Finance Accounting Service regarding electronic billing and links to tools insuring that mode is achieved correctly.

1. Instructions for Invoicing and Vouchering are usually included in Section G of the contract. The instructions will include the location where vouchers shall be sent. If the contract requires the contractor to send vouchers to the sponsoring DoD organization for approval, the DoD organization would forward vouchers, after approval, to the appropriate DFAS for payment. The appropriate DFAS will usually appear at block 12 on page one of the contract. It is important for contractors to follow specific instructions contained in Section G of the contract. If there are any questions, they should call the contracting officer. This procedure should reduce the time required to process payments.

2.. Additional information on submission of vouchers is available from the Defense Contract Audit Agency. Contractors may request a copy of a guide entitled "Information for Contractors" (DCAAP 7641-90), August 1996, from Headquarters, Defense Contract Audit Agency, Operating Administrative Office, 8725 John J. Kingman Road, Suite 2135, Fort Belvoir, VA 22060-6219; Telephone No. (703) 767-1066; Telfax No. (703) 767-1061. This is an excellent source of information for contractors and its use is strongly recommended. A contractor may determine its local DCAA office by calling (703) 767-3274.

3. The type of contract will usually impact how, when, and under what circumstances the contractor will receive payments. The contract should be reviewed for payment schedules and procedures prior to signature. The contractor should understand how and under what circumstance each payment will be made. The following information is provided to help contractors better understand the payment process:

If the contract is Fixed-Price, the clause at FAR 52.232-2 will be included in the contract. This clause provides that contractors should be paid promptly as portions of work are completed. In order to provide for payment for a portion of the work, that portion of the work and price must be separately stated in the contract. If this is not done, the contractor will not be able to receive payment for portions of the work. The only other method of receiving interim payments on a fixed-price contract would be through progress payments, which can be authorized by the clause at FAR 52.232-16. Progress payment procedures are more complicated than partial payments and the contractor must have an approved accounting system if the progress payments clause is included in the contract.

If the contract is Cost-Plus-Fixed-Fee,a Cost-Reimbursement type of contract, the clause at FAR 52. 216-7 will be included in the contract. This clause allows for submission of vouchers approximately twice each month for actual costs incurred. The clause also allows a small business to voucher for recorded costs for items or services purchased directly for the contract, even though they have not yet paid for those items or services.

If the contract is incrementally funded (not fully funded at time of award) the contract will require the contractor to notify the contracting officer when additional funds will be required to continue performance.
If a fixed-price contract is incrementally funded, the clause at DFARS 252.232-7007 Limitation of Government’s Obligation will be included in the contract. This clause requires the contractor to notify the contracting officer in writing at least ninety days prior to the date when, in the contractor’s best judgment, the work will reach the point at which the total amount payable by the Government, including any cost for termination for convenience, will approximate 85 percent of the total amount then allotted to the contract. The notification will state the estimated date when that point will be reached and an estimate of additional funding needed to continue performance. This clause also provides that if such additional funds are not to be allotted, the contracting officer will terminate any items for which additional funds have not been allotted. However, the contract may be modified, by mutual agreement of the parties, to change the funding schedule and, if necessary, the period of performance.

If a cost-reimbursement contract is incrementally funded, the clause at FAR 52.232-22 Limitation of Funds will be included in the contract. This clause requires the contractor to notify the contracting officer in writing when costs expected to be incurred within the next sixty (60) days (may be varied from 30 to 90 days) will exceed 75 percent (may be 75 to 85 percent) of the total amount allotted. This notice should state the estimated amount of the additional funds required to continue performance. This clause also provides that if additional funds are not to be allotted by the end of the period specified in the schedule or another agreed-upon date, upon the contractor’s written request, the contracting officer will terminate the contract.

4. The clause at FAR 32-232.25 Prompt Payment is included in most SBIR contracts. The following information applies to prompt payment procedures:

The clause at FAR 32-232.25, among other things, provides that the due date for making an invoice payment by the designated payment office shall be the 30th day after the designated billing office has received a proper invoice from the contractor and/or the 30th day after Government acceptance.

FAR 32.903(a) and (b) requires that the Government NOT make an invoice or contract financing payment earlier than 7 days prior to the due date specified in the contract.

The Defense Federal Acquisition Supplement (DFARS) states, at subparagraph 232.905(2), that "designated payment offices are encouraged to pay small disadvantaged business (SDB) concerns as quickly as possible after invoices are received and before normal payment due dates established in the contract. The restrictions of FAR 32.903 prohibiting early payment do not apply to invoice payments made to SDBs. Contractors shall not, however, be entitled to interest penalties if invoice payments are not made before the normal payment due dates established in the contract."

5. There are a number of things that contractors may do to help decrease the period of time between the submission of an invoice and receipt of payment:

Submit invoices directly to the designated billing office. Call the point of contact at that office to insure that acceptance has been accomplished and that the invoice has been sent to the designated payment office.
Contact the designated payment office to obtain status of invoices. (FAR 32.904(a)(4) states that contractors shall be informed of points of contact within their cognizant payment offices to enable them to obtain status of invoices.) Verify the due date for the invoice with the payment office – what do they consider the due date to be? If the payment office indicates a due date that is more than 30 days after the designated billing office accepted the supplies or services, point out that FAR 32.905(a)(ii) states "In the event that actual acceptance occurs within the constructive acceptance period, the determination of an interest penalty shall be based on the actual date of acceptance." (The "constructive" acceptance period is 7 days.) Therefore, the due date should be 30 days after Government acceptance - commonly at the billing office.

Offer discount for prompt payment. FAR 32.905(g) states: that "when a discount for prompt payment is to be taken, payment will be made as close as possible to, but not later than, the end of the discount period. Payment terms are specified in the clause at 52.232-8, Discounts for Prompt Payment." For example, a discount of "1/2% - 14 days" offered on a $10,000 invoice should result in a payment of $9,950 within 14 days after the date of the invoice. The discount for prompt payment procedure should help in at least two ways. (1) the due date would be computed from the date of the invoice rather than the date of acceptance (Note: acceptance must occur prior to payment and the invoice should be mailed on the date it is submitted), and (2) the "discount for Prompt Payment" offer would overcome the requirement at FAR 32.903(b) that the Government shall not make invoice payments earlier than 7 days prior to the due date specified in the contract. The offer for a discount for prompt payment should appear prominently on the invoice (perhaps underlined). It may be helpful to discuss this with the designated paying office in order to get their recommended format. It is not the intent of DoD to encourage or discourage use of the discount for prompt payment procedure. The purpose of this paragraph is to provide sufficient information for the contractor to make that choice.

WAWF Web-Based Training Site - Go here to learn how to use WAWF via self paced, online training. This training is an excellent place to begin learning about WAWF.

WAWF Training Practice Web Site - Go here to practice using the WAWF

Wide Area Work Flow - Receipts and Acceptance (WAWF-RA) is a Paperless Contracting DoD-wide application designed to eliminate paper from the receipts and acceptance process of the DoD contracting lifecycle. The goal is to enable authorized Defense contractors and DoD personnel the ability to create invoices and receiving reports and access contract related documents.

In the traditional DoD business method, three documents are required to make a payment - the contract, the receiving report and the invoice. Each of these may arrive at the payment office separately - if they are paper. They are processed individually as they arrive. Information is then manually keyed in to the payment system. Using WAWF-RA, electronic documents are shared, eliminating paper and redundant data entry. Data accuracy is increased and the risk of losing a document is greatly reduced.

The contract is available through a seamless interface with an application called Electronic Document Access (EDA). Contractors have electronic options for submitting invoices and receiving documents. They can submit documents on the Web, through FTP, or through EDI.
Authorized DoD personnel receive notification electronically of pending actions and have a virtual folder of documents accessible. Digital signatures are used to authenticate the users and to digitally sign documents. In some cases, user id and password can be used in lieu of a digital signature.

WAWF-RA supports DoD's efforts to reduce unmatched disbursements in the DoD receipt, acceptance, entitlement and payment process through data sharing and electronic processing. The benefits to DoD are global accessibility of documents, reduced need for re-keying, improved data accuracy, real-time processing, and secure transactions with audit capability. For vendors, benefits include the capability to electronically submit invoices, reduction of lost or misplaced documents, and online access to contract payment records.

For security purposes, with WAWF-RA, user identity is assured through the use of digital signatures and certificates or user id and password over an SSL connection. The online data transmissions are protected with encryption.

For additional information, please see the WAWF-RA website at

Tuesday, October 19, 2021

Introducing Federal Government Contracting Into Your Commercial Small Business

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.


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.


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



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

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

Tuesday, October 12, 2021

Security Clearances Federal Government Contracting

Image Source MGN
While exploring the federal government marketplace the small business will encounter programs and potential contracts that involve security clearances. This is common in the Departments of Defense, Energy, Homeland Security and many other agencies.

"FedTeDs" (Federal Technical Data Solutions) is a password-protected, web-based tool designed to safeguard the distribution of sensitive, unclassified, acquisition-related information for all federal agencies. FedTeDS allows Contracting Officers (COs) to use the internet to disseminate sensitive information in a secure way and eliminate the need to create and distribute CDs or paper documents. On some programs access to bid documentation may require a company and/or individual registration to acquire access.

Small business must grow into federal government classified programs. Individual and company clearance designations exist at various levels, depending on the relative risk to national security if unauthorized disclosure occurs. Clearances for key management are necessary to achieve a company clearance and all clearances are expensive. Either your company or a sponsor in the form of a prime contractor or government agency must pay for the process; the higher the security clearance the more costly the clearance. For facility clearances involving housing classified material, a building itself may require modifications for classified storage, communication devices or meeting accommodations (Sensitive Compartmented Information Facility or SCIF).

Becoming involved in the classified contract venue requires that you budget the time, the expense and the processes necessary and that you expense them in your forecasted overhead rate budgets so the costs can be appropriately priced and recovered via government contract billing. You must also carefully research government regulations such as the "National Industrial Security Program" (NISP) which governs the classified environment across all federal agencies:

The US Government security clearance process is based on two major principles:

1. A "Need to Know"

2. A requirement to perform a job on a specific government contract containing classified work.

Initial clearances are obtained by developing a business relationship with an agency or a prime contractor performing classified work and then getting assigned to a contract effort which is classified. Thereafter, clearances at certain lower levels can be carried by your employees or your company to other contracts at the same level of clearance requirement or even to a different agency within certain time constraints. At higher levels of clearances every employee is "Read On" and "Read Off" each and every contract on a singular basis after extensive background checks and in certain instances a polygraph. The process can involve lifetime nondisclosure commitments by an individual.

So you need a sponsor, a prime contractor company or an agency that will process your clearance based on your need to know classified information to participate in classified government contracts. Naturally they must be convinced via your marketing campaign that you can add value to the program involved. If it seems like a "Chicken and Egg" process - it is; but every business working in the venue has to go through the gates discussed in this article and maintain a vigilant program of compliance with associated regulations.

NOTE:  Comments at this post have been maintained from previous discussions on this topic at "Small to feds" in the interest of demonstrating the often complex and confusing nature of the clearances process. 

As one anonymous commentor (not published due to anonymity)  pointed out, some of the published comments are wrong and ill advised.  It pays to read the latest issue of the NISPOM, linked above. 

The anonymous commentor also maintained that clearances no longer cost the company.  I do not agree. The indirect costs of maintaining training programs to keep company and individual clearances is an ongoing tangible cost that must be planned for. The government considers  that cost allowable through the overhead on contracts, much the same way they are now considering a similar allowability for cyber-security certification.  

Wednesday, September 29, 2021

What Small Business Should Know About FAR and CAS

Federal Acquisition Regulation & Cost Accounting Standards

      Rules of the Game
       Developing Your Game Plan

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

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


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

The FAR applies to the full acquisition cycle for all supplies and services the federal agencies buy.  The CAS apply to consistency in estimating, pricing, job cost accounting, billing and closeout of financial data under the contracts for supplies and services regulated by the FAR. 

FAR and CAS are not "Rocket Science" but they are different than the commercial business sector.  


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

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


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

Standard 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs

Standard 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose

Standard 9904.405, Accounting for Unallowable Costs

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

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


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


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

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

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

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


Saturday, September 25, 2021

Pricing Service Contracts With Credibility in Small Business Federal Government Contracting


Assuming a proposal to a government agency has an acceptable technical solution and past performance and management factors that convince the customer it is a viable candidate, then pricing may be the winning element in the source selection equation.

The mechanics of government contract pricing have been discussed previously at this site. The discussion relates how pricing should be a natural outgrowth of the organization structure, market strategy, competitive analysis, business system design and long range planning:

The above article also explains how long and short term pricing factors should be integrated with the management and technical elements of any given proposal and that a total view of the business is best presented by integrating long-term company strategy with short term proposal objectives. 

The purpose of this article is to augment the above discussion with tips on establishing and maintaining credibility in pricing to a government customer.

Certified Cost or Pricing Data

Certified cost or pricing data under the “Truth in Negotiations Act” (10 U.S.C. § 2306a) or TINA statute is proposal pricing, which for procurements greater than $750,000, is certified by the contractor as accurate, complete and current as of the date of agreement on price. (Section 811 of the fiscal year 2018 NDAA includes a provision that increases the threshold up to $2,000,000). 

The absence of a certificate does not eliminate defective pricing liability.

The statement underlined above is a key principle in relationships with the government and its auditors. TINA influences a government auditor’s thinking and it is in the back of the mind of every contract negotiator. They are taught and learn by experience to look for TINA faults.  

Thus, even if your procurement does not meet the above threshold for TINA certification you should price to establish a similar credibility with your customer, even though you may not have to sign a TINA “Certificate of Current Cost or Pricing”. Doing so is simply good risk management in business.

You may read more about cost and pricing data and the negotiation process at the following link:

Remember Historical Data is Precedent Setting

All auditors, negotiators and pricing analysts are preconditioned to utilize historical data. The last or most favorable price offered a customer for a commercial off-the- shelf product is strong support for what is currently being quoted. This is particularly true of GSA Schedule negotiations, product updates or repetitive buying situations.  If you are a commercial supplier, a quantity factor will also enter into play.  In general, orders of higher quantity than historical pricing quantities undergo downward pricing pressure by the buyer unless some other factor such as a non-recurring tooling charge, learning curve interruption, obsolescent material or other upward factors can be offered as support for a higher unit price on a higher quantity buy.

Educate Your Auditor

An auditor who is familiar with your forward pricing rates, your business system and your product lines will understand your proposal cost and pricing data better than one who has not been briefed on the big picture of your company business operation.  Take the time to conduct briefings at that level and acquaint new government personnel with your operations.  Do not assume he or she has read prior audit reports.  They may have done so but a face to face courtesy briefing is much more effective than reading some other auditors view of a specific proposal. 

This factor can be a double edged sword, however. An auditor who knows the operation extremely well can also spot deviations in cost and pricing data and require explanations for anomalies in pricing based on observed trends.

Develop a Comprehensive Basis of Estimate (BOE)

A good BOE should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract and material/subcontract quotes, labor categories and skill sets to perform the effort.

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

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery acceptance so that the cost data has boundaries.

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor so that escalation and price expiration are established. 

* A precise description of government/customer furnished material or facilities required and when it will be made available to the contractor to bound the expectations of the client with respect to elements your company cannot or will not control. 

Insure Compliance with Cost Accounting Standards (CAS) Requirements

Small businesses are generally required to meet modified CAS coverage for service contracts. This requires consistency in the manner in which a small business quotes a proposal and the manner in which costs and billings are accounted after award.  You can read about these requirements at the following link:

Insure your proposal contains no unallowable costs and that your direct labor as well as your overhead and G&A rates are applied in accordance with your latest forward pricing agreement. If you do not have a forward pricing agreement, explain precisely how your rates were developed from a CAS compliant business system perspective:

Utilize Weighted Guidelines as a Check to Prepare Support for the Profit Rate Quoted

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 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.

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

Read more regarding the Weighted Guidelines Method at the following link:


A reputation for defective pricing leads to accusations of waste fraud and abuse in government contracting and is mostly about what a contractor knew regarding company prices at the time a bid was negotiated and what the contractor did not disclose in the supporting data regarding the likely cost outcome of the contract.  

Actions taken by the government and litigation resulting from defective pricing become part of the contractor past performance record and must be disclosed during competition for other programs. 

Avoid defective pricing accusations by establishing credibility with your customer through consistent, regulatory-compliant, cost and pricing in your proposal submissions and negotiations.

Monday, September 20, 2021

Work Authorization Is Key To Your Contract Management Process

The execution of your contract (signing by both parties) is a key benchmark in government contracting. It triggers several events such as the start of the period of performance and the delivery schedule time period. Execution begins a billing period start date, and contractual obligations by the government and the contractor.

You should establish an internal document to your company that contains the pertinent data for the contract and assigns it a unique contract identifier in your business system. This is necessary for billing and cost collection purposes as well as government audits. 

Astute government contractors do not allow effort to proceed or cost to be incurred on a particular contract until such a document is generated, signed, approved and distributed by a company official assigned the duty of releasing the contract for performance. 

Such documents are commonly called "Work Authorizations", "Release Orders" "Production Release Orders" or a similar term to benchmark the new business and begin performance, accounting, and time and materials accumulation on the contract. 

Any cost or supplier commitments prior to a signed contract are considered pre-contract costs by the government under FAR and require special authorization by the PCO under the contract. They cannot be billed until the contract is signed. Incurring pre-contract costs without authorization is high risk for the contractor. 

Any work or supplier commitments outside the scope of the current contract documentation are also high risk without a negotiated contract amendment adding the scope of work to the contract or government authorization for the use of designated management reserve.

Sarbanes Oxley regulations and other recent government laws regarding corporate responsibility have made control of work authorization and record keeping an important factor in recent years. Keep in mind that a small business past performance record is generated when a contract is signed and this record is maintained by the government and is updated as deliveries and performance occur. 

You should begin your internal project management record on each contract by attaching all the necessary information for your performing organizations and support functions to begin doing their jobs. 

A copy of the contract should accompany the internal release to key functions in your enterprise. The master should be filed in your central files. Some companies perform work authorization electronically. The government is moving in the direction of electronic record keeping as well.