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Monday, September 20, 2021
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.
Tuesday, September 14, 2021
Monday, September 13, 2021
Most small enterprises must undertake some form of business process augmentation when entering federal government contracting.
The natural inclination for small business is to immediately jump to buying computer software tools or services in an effort to expedite the business system growth process. That propensity is often enhanced by suppliers who maintain their product or service 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 or services 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, for 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, software package or services 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 or services 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.
What Is A Small Business Federal Government Contractor?
Pricing Small Business Federal Government Contracts
Small Business Job Cost Accounting Basics
Small Business Federal Government Contracting Business System Development
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 keep the following 5 rules of thumb in mind:
1. An electronic computer software package or service is not a system. One cannot acquire a system by acquiring them.
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 can prudently choose tools to assist in running the system. The adequacy of a computer tool or service 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 service or let the tools 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 or services. If you do not you will be pigeon-holing your company into becoming a slave to the company that owns the software source code or service. If you want anything changed it costs a big buck.
Thursday, September 9, 2021
We are pleased to offer this supplementary material free of charge to small business.
The basic guidebook has been available as a free download at this site and will remain so as a service to small business.
The supplement offers 19 additional topics.
Like the basic book, the supplement is a free download from the BOX cube in the right margin of this site.
Supplement topics are annotated in RED on the table of contents at the above illustration.
Although both the basic book and the supplement have been on the web for some time, the live links in both documents lead to the latest information on a given topic at this site.
Monday, September 6, 2021
SETA contractors often target incumbent work forces where an agency plans to offer a small business the opportunity to assume an existing services program formerly run by a larger firm or a small business that has grown beyond the size limit designated for the procurement.
In these instances the winner will have solid plans for recruiting and retaining the existing work force executing a transition plan and insuring that the government does not encounter an interruption in services.
Contingent hire agreements and sophisticated human resources processes are necessary to position the company during the proposal effort and as the contract proceeds. Contingent personnel are well aware of their market value among the SETA contractors competing for the work.
As budgets become tighter, the government agencies will be looking for solid performance at the lowest possible price, stability in performance and contractors adept at learning government processes and systems as well as working with the agency to improve them.
Find opportunities well in advance of their being formally solicited on FEDBIZOPPS. Look for existing services and support contracts in their last year or self-market a services contract to an agency whose mission requires your expertise.
Propose and price to win using the following guidance:
You should target for SETA exploration only those agencies to which you do not intend to market other services.
Consider SETA contracting if your marketing plan contains elements of support and assistance that an agency may be willing to outsource. If you hold small business designations, seek marketing opportunities to foster government set aside procurements for the designations you hold and understand that SETA contract will be the only programs you will hold with that agency due to OCI restrictions.
Monday, August 30, 2021
One of the biggest challenges for a small business in government contracting is achieving that first major contract. A small business entering the field does not have a government contract past performance record to include in proposals to federal agencies. At the onset, the only qualifications that can be referenced are commercial successes and the individual expertise and qualifications of the owner (s), employees and management.
Past Performance Challenge
Here are seven small business management techniques to assist in achieving that first government contract:
A contingent hire agreement is one way to approach an experienced employee with the prospect of joining your firm at a later time when the business base is there to permit professional advancement. Under such an agreement the prospective employee agrees to contribute time and effort on a proposal for a new contract and is assured on paper by your company of a position on the project when it is awarded to your firm.
Such arrangements are generally recognized by the government as a credible way for new or start-up businesses to grow and agencies will accept resumes of experienced professionals in proposals from small business contractors with signed contingent hire agreements even though the personnel may not yet be on the company payroll.
Prospective employees of this type are often available from the retired or downsized ranks of prime contractors. Be aware that government procurement integrity regulations apply. Individuals should not be considered who have a potential conflict of interest in the project you are bidding due to a former association with the buying agency in a source selection authority role as specified in FAR Section 3.104.
You can download a recommended draft shell for a contingent hire agreement from the right margin of this site at the BOX "References" cube or at the following link: Contingent Hire Agreement
2. Seek government solicitations for taking over incumbent work forces. In some cases the government designates base operations contracts, system support contracts and other service contracts at military installations or federal agency locations as small business set-asides. In certain of these contracts the services may have been performed until now by a large corporation which is no longer eligible to compete due to the small business designation of the current procurement. The employees of this large company become available for recruitment since they will lose their jobs at the location if they do not join the winning company. These individuals have built-in technical expertise on the project and government contracting backgrounds. Acquiring an Incumbent Work Force
4. Team with large business contractors who have experience in the government contracting field. As part of such teaming arrangements they may be willing to trade-off their expertise and assistance for your particular technical skills and your small business participation as a subcontractor on new contracts. Remember large government contracting businesses are required to submit and perform to annual plans or buying from small business to the government. Failure to do so can jeopardize their current government contracts or place in danger the award of a project where a small business plan is required.
You have motivated large business prospective partners available to you in the government contracting community. Protect yourself with proprietary data agreements and insure that your company's work scope for a given project is well defined in a thorough written teaming agreement. Large businesses will respect you for your professionalism when you demand a formal business approach. Teaming in Government Contracting
If you are a small business with no other set-aside designations, seek teaming arrangements as a subcontractor with minority-owned, veteran-owned or women-owned businesses. 51% of a project (work scope, dollars and hours) must go to such designated businesses under such arrangements, but your part of the program is still significant and earns past performance credit. Your team members will not usually be your direct competitors but will be involved in lines of work that usually complement your business and enable the team to fulfill a scope that is larger than any single member could undertake alone. Teaming arrangements can result in winning larger jobs that can span a number of years in duration and mean good, solid cash flow for all participants.
7. Self-market to federal agencies with your capabilities statement and ideas for government programs. If you are a Minority-owned 8(a) or a Hub Zone-located small business, a government agency can sole source a procurement to you without competition under the Federal Acquisition Regulation (FAR). Even if you are not an 8(a) or Hub Zone firm, self-marketing has tremendous potential. There are over 50 federal government agencies with facilities, bases, locations and offices housing contracting officers and buyers all over the United States. Find the nearest locations to you via the agency search filters at SAM Contract Opportunities and send them a capabilities statement with a request for a meeting with their small business liaison officer. Your Capability Statemenr
Federal agencies are required by statute to meet with you. Once you are there find out the names and contact information of their technical management authorities who define requirements for acquisitions. Determine what the agency needs through research with the technical decision makers and on the web. Most agencies forecast their long range plans at sites available to the public. Define a creative project in terms of meeting your client's needs and offer it to the agency points of contact as a prospective set-aside contract.
If the agency posts your self-marketed project for competition, you will still be in the driver's seat during the proposal stage, having developed the concept and positioned yourself well ahead of your prospective competitors in terms of a solution with your customer. You may well have convinced the agency to set the program aside for a small business category in which you qualify Small Business :Set-aside :Designations . That leg up cannot be achieved after a solicitation has been posted to SAM Contract Opportunities.
Try combining a well written business plan with an aggressive marketing campaign and the seven approaches outlined above. Your Government Contracting Business Plan .
Entering government contracting as a small businesses is indeed a challenging time, but there are many opportunities awaiting you. Capitalize on those opportunities and win your first federal government contract.
Monday, August 23, 2021
RIGHTS IN TECHNICAL DATA AND SOFTWARE
The Defense Federal Acquisition Regulation (DFAR) contains the most widely used provisions by a federal agency that allow a contractor, subcontractor or supplier under government contracts to assert ownership or protective rights for specific technical data and software. Keep in mind that the more a company has invested in a technology, a product or a system the higher the level of protection available under the DFAR. If the government has or will invest in the technical data and software then the level of protection that can be asserted diminishes and the government begins to assume ownership and attendant control of the related intellectual property.
It is important during the solicitation and proposal stage to assert rights in technical data and software so the business relationship is clearly understood by all parties and appropriate protective markings, licensing and related measures can be covered in the contractual documentation. The following information in the DFAR should be studied to ascertain how to appropriately assert rights during proposals to the government and to prime contactors:
The government does not sign agreements to protect specific data, abiding instead by the DFAR-specified assertions regarding ownership and use of technical data and computer software as they are negotiated in contracts. The government will comply with specific marking and identification of proprietary data. Details on these markings are provided at the conclusion of this article.
NON-DISCLOSURE AGREEMENTS BETWEEN COMPANIES
When two companies begin an exchange of information that may lead to a mutually exclusive business arrangement under a government contract, a Non-Disclosure Agreement (NDA) is generally signed to protect proprietary data.
The first page of such an agreement is on the left in the illustration below. The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.
TEAMING AGREEMENTS BETWEEN COMPANIES
When two companies agree to form a mutually exclusive agreement to prepare a proposal as a team to a government agency a teaming agreement is generally executed. The first page of such an agreement is on the right in the illustration below . The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.
A teaming agreement remains in force until it is replaced by a subcontract from the lead company to the following company upon award of the prime contract. In the case of a joint venture, the prime contract award results in two contracts from the joint venture contract level to the respective participating company levels.
PLEASE CLICK ON ILLUSTRATION OR DOWNLOAD TO ENLARGE
PROTECTING RATE INFORMATION BETWEEN COMPANIES
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.
Assuming everyone pays a generally similar labor rate on the market to retain employees and that fringe costs about the same for everyone, then overhead and G&A are what wins and loses jobs and specific, company internal overhead rates are very closely held.
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 other’s 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.
DCAA or federal agency pricing analysts perform detail audits of subcontractor rate information but prime contractors are not provided the result. An audit statement by the government that the subcontractor detail rate support is acceptable or not acceptable is all that is provided to the prime contractor.
Government auditors do not make value judgments or negotiate; they review the logic and support for rates, check the math and provide a report to the government contracting officer who will conduct the negotiations, if any.
PROTECTIVE MARKINGS FOR PROPRIETARY DATA SUBMITTED TO THE GOVERNMENT AND TO A PRIME CONTRACTOR
Your proposal data may contain rate information, proprietary data or strategic technical solutions that you would not want to fall into the hands of a competitor. The government does not sign Proprietary Data Agreements (PDA's). Examples of the government's obligation to protect your information are covered under the DFAR rights in technical data and software assertions discussed above and in the following FAR clause that requires protective markings by you on the title page of your document and on each subsequent page.FAR 15.509 Limited use of data:
(a) A proposal may include data that the offeror does not want disclosed for any purpose other than evaluation. If the offeror wishes to restrict the proposal, the title page must be marked with the following legend:
"The data in this proposal shall not be disclosed outside the Government and shall not be duplicated, used, or disclosed in whole or in part for any purpose other than to evaluate the proposal; provided, that if a contract is awarded to this offeror as a result of or in connection with the submission of these data, the Government shall have the right to duplicate, use, or disclose the data to the extent provided in the contract. This restriction does not limit the Government's right to use information contained in the data if it is obtainable from another source without restriction."
(b) The offeror shall also mark each restricted sheet with the following legend:
"Use or disclosure of proposal data is subject to the restriction on the title page of this Proposal."
(c) The coordinating office shall return to the offeror any unsolicited proposal marked with a legend different from that provided in 15.509(a). The return letter will state that the proposal cannot be considered because it is impracticable for the Government to comply with the legend and that the agency will consider the proposal if it is resubmitted with the proper legend.
Thursday, August 19, 2021
Part 1, Section C, is where the technical specifications and statement of work are located in your government contract. It is vitally important to manage these documents with your agency customers.
Without a well written Statement of Work (SOW) and associated supplies and services specifications there is unacceptable risk in your contract.
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 in the contract SOW offered in Part 1, Section C or your contract, offer a revision to the document during negotiations that represents a version to which your company will commit. Signing off on a poorly written SOW results in a difficult contract to manage and a high probability for disputes during the performance period.
Saturday, August 14, 2021
As the federal fiscal year draws to a close and the new year opens on 1 October, an astute contractor will have examined the funding status of all government contracts for risk.
Limitation of funds and funding exposure must be a vital topic for every government contractor.
THE FUNDING CHALLENGE
Many federal contracts are funded incrementally, usually based on the government fiscal year that runs from 1 October to 30 September. Although the government may negotiate dollar price ceilings for cost plus and time and materials contracts or firm, fixed total price arrangements, the contracts themselves may be incrementally funded, particularly if they extend over multiple government fiscal years. A contract may contain negotiated prices or a cost ceiling but also specify an incremental funding value.
The contractor is required to inform the government when actual costs incurred plus obligations to suppliers or payroll on a specific contract reach certain thresholds of the current incremental funding specified in the contract (usually 80%). The government is then obligated to further fund the contract.
In the event the contract is not funded further, the contractor has the right to stop work before he exceeds the incremental funding. Some contractors choose to operate on "risk," continuing to perform on a contract while exceeding the incremental funding in booked cost and obligations.
The government is under no obligation to reimburse the contractor for invoiced amounts exceeding incremental funding. Nearing the end of a government fiscal year, a contractor may find delays in funding reaching all the way to congress. This situation must be managed with the government contracting officer. Limitation of Funds and Funding Exposure
STOP WORK ORDER
Contractors may receive stop work orders from agencies unless their contracts were fully funded in the previous fiscal year. The government reserves the right to
de-obligate funding on contracts, which can effectively bring them to a halt.
Applicable charge numbers in the accounting system must be closed until the stop work order is lifted and any effected suppliers and subcontractors must be notified to do the same.
To the degree the government has not paid anything on the contract or delivery order they have no ownership rights to the physical product and you are free to complete it and sell it to another customer (commercial or government that has not stopped work). If the government recommences the order, quote a new price and delivery from ground zero.
At the bottom line a stop work is blunt and to the point. Treat it as if you will never hear from this customer again to manage the risk.
To the degree you do hear from the Contracting Officer again and he or she has the funding to recommence work, be prepared to submit a proposal for what it will take to start the effort and a realistic delivery schedule to complete it, but do not build any retroactive costs incurred during the stop work period into your logic and expect to bill them; they may not come to payment fruition.
Wednesday, August 11, 2021
The following are the major small business set-aside designations in federal government contracting:
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 right margin of this web site for further information). Federal contract solicitations have a NAICS Code assigned to them when they are registered at the below web site:
System for Award Managment (SAM)
2. Minority Business Enterprise (MBE) - A good interim designation while an 8(a) application is in process for minority-owned companies:
National Minority Supplier Development Council MBE Information
3. Woman-Owned Business - Applicable to Women-Owned Businesses only:
SBA Woman-Owned Business Information and Application Site
4. Veteran-Owned Business - Applicable to Veteran-Owned Businesses only
SBA Veteran-Owned Business Program Information
5. Service Disabled Veteran-Owned Business - Applicable to Service Disabled Veteran-Owned Businesses only
SBA Service Disabled Veteran-Owned Business Information
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:
SBA 8(a) Information and Application Site
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:
Hub Zone Information and Application Site
QUALIFICATIONS, REGISTRATION, CERTIFICATIONS AND REPRESENTATIONS
To qualify as a small business for a given solicitation an enterprise must have registered at the System for Award Management Web Site under the applicable NAICS code for the procurement and meet the SBA eligibility size standards for that code.
A small business certifying under the above must have individuals qualifying for the designations 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 on the articles of incorporation with the state and by % of ownership in an operating agreement or similar document.
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 applicable HUB Zone.
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.