Meeting Government-Owned Property Management Contract Requirements

For small businesses involved in development and manufacturing efforts under government contracts, or those who are pursing research and development involving large scale systems, the government property topic often arises.

In general, government contractors are required to provide all that is necessary to fulfill the scope of work on a government contract. However, under time and materials and cost plus contracts where the acquiring agency has made substantial investment in manufacturing aids, special test equipment or apparatus, title to such items will fall to the government.

Title falls to the contractor on firm, fixed price contracts where the cost is base lined at contract award and is assumed to include all that is required to produce the end item when it was bid.

Government property must be stored separately from contractor property when not in use, identified in the facility inventory system as government owned and have government property tags.

Rent – Free Use of government property accountable under one contract must be requested on a non-interference basis from the owning contracting officer before use on another contact and the using contract must reference the approval.

The government may elect to charge rent for use of government property under commercial or foreign contracts. The process for calculating and paying rent is specified in FAR 52.245-9.

The principal FAR Clauses for government Property are 52.245-1 and 52.245-2. If you are undertaking a contract involving government property please read these FAR Clauses. Within these clauses are requirements for inventory, disposal and disposition of government property.

FAR - Government Property Clauses

Government property may be furnished by the acquiring agency with a contract award and may be placed in the care of the contractor. In those cases accountability for the items, together with associated maintenance may be assigned to the contract and reassignment of the property must occur before the contract can be closed out at completion.

Business Ethics Feed Government Records of Past Performance

Previous discussions at this site have emphasized the importance of maintaining a solid past performance rating to meet award criteria used by every federal agency when granting small business contracts.

Your Past Performance Record

We have also highlighted the importance of maintaining solid ethical business practices in dealing with customers and industry partners.

Maintaining an Ethical Company Image

This article will discuss the practical aspects of achieving the above, the associated challenges and how not meeting them can jeopardize your industry reputation and business success.  

IGNORANCE ON POLICY AND REGULATORY MATTERS IS NOT AN EXCUSE

The small business faces a front-end-loaded and ongoing learning challenge in understanding the Federal Acquisition Regulation (FAR), Cost Accounting Standards (CAS), Unallowable Costs, Organization Conflict of Interest (OCI) many other similar policies the federal government invokes. 

A continuous learning process must include evaluating the impact of these requirements, developing consistent processes and systems to meet and maintain them or risk poor ratings on proposals, audits and performance; even the denial of an invoice payment.

In short, the government has the right to audit, examine and approve your internal operations for conformance to the law before granting a contract or paying a bill.  These are not preferences by contracting officers.  They are federal contracting laws.

The astute small business learns the law and incorporates compliance in its business practices.

CONTRACTING PERSONNEL IN ACQUISITION ROLES HAVE VARYING LEVELS OF KNOWLEDGE & PROFESSIONALISM

The US Government and its prime contractor cadre form a massive professional base.  Although they conduct training in policy and regulation to their acquisition professionals, these professionals are rotated frequently and/or encounter contracting authority as only one role among many in their principal professional endeavors.

Government Contracting Roles

Small business systems are unique to a company.  Documenting them and conveying their compliance to regulations in a clear, lucid way to auditors, agency buyers/contracting officers and other government customers is a vital part of avoiding misunderstandings regarding compliance issues.  

An additional concern with prime contractors is protecting intellectual and proprietary data, such as rates and factors, while participating in the assist audit process used by the government to avoid risk of undesirable disclosure from one firm to another.

If, during the course of marketing, proposing and negotiating government contracts with government and prime contractor personnel, a small business encounters lack of professionalism, misunderstanding of the regulations or defiance of them, the occurrence must be escalated to higher authority with tact, judgment and the long term objective of not only obtaining new business, but staying in business. 

Managing Government Teaming Relationships

DISCLOSURES ARE MANDATORY

Federal Acquisition Regulation (FAR)  52.203-13 in 2008 made mandatory that contractors must disclose past, present or pending violations of contract law to the government.   Not adhering to this requirement can be costly in terms of poor past performance records, legal expenses and financial judgments.

FAR 52.203-13 (3) - Mandatory Disclosure

The Truth in Negotiations Act

TRAINING IN GOVERNMENT REGULATIONS IS A GOOD INVESTMENT

As fast as things move these days if we don't train and communicate effectively we are running very high risks.  The modern era in which we live demands that training be sophisticated, interactive and responsive to changing times. It should evolve out of core company processes and contain feedback mechanisms.

Some training will be global, such as policy, corporate ethics and human relations. Other training will be specialized, such as changes in law, company policy or technology by functional areas.

Principal among the topics at the head of the list for generic training in the art of something would be "Communicating Effectively" to employees to customers, to regulators; both orally and in writing.

Small Business Company Trainng

SUMMARY

Small business must evaluate regulations then communicate and enunciate a company ethics policy and processes that insure compliance with laws and regulations, training personnel on them in the process.

In doing so, disclosures will then be positive and the business will not become the subject of negative press releases by a government agency. (Examples below)


Portrait of a Crooked Government Contractor

Star Power And The Military Industrial Complex

Assessing Department of Labor (DOL) Government Contract Wage/Rate Determinations

MANAGING COMPLIANCE WITH THE SERVICE CONTRACT AND DAVIS-BACON ACTS

INTRODUCTION:

When pricing government contracts, in particular service contracts, the small business will encounter government wage determinations under the Service Contract Act and Davis-Bacon Act. These determinations specify the minimum wages and related benefits that must be paid to all hourly employees charging time directly to a federal service contract as part of a total compensation plan.   

The Department of Labor Manages the Wage Determination program.

SAM Wage Determinations

Contractor compliance with Wage Determinations  is subject to audit by the Department of Labor, Defense Contract Audit Agency, or other agency audit procedures. Failure to prove compliance may subject the contractor to debarment from all government contracts for up to three years.

Service Contract Act, as an example, requires minimum wages be paid per labor category as defined in the Directory of Occupations and listed as minimum wages per labor category on the Area Wage Determination incorporated into each contract. The wages are mandatory minimums paid employees for every hour worked on the contract as defined by The Act, both full-time and part-time. A typical Wage Determination is below: (Please Click Image to Enlarge)
                                                                   

MANAGEMENT CONSIDERATIONS:

When bidding a service contract with a requirement containing a Wage Determination, the labor category wages and fringe must conform, as a minimum,to the Wage Determination in the government Request for Proposal (RFP).  The personnel must be paid not less than the wages and fringe benefits specified in the determination when the contract is awarded.   

Due to competitive factors and labor market concerns the company may propose labor and fringe exceeding the Wage Determination, but the bid cannot go beneath the government specified rates.  Below is a typical conformance table for an engineering firm with the Wage Determination information on the right side and the company bid rate on the left side of the table.  (Please Click Image to Enlarge)

The Fringe element of the Wage Determination conformance is usually discussed in the basis of estimate for the fringe rate in the price proposal. A major project in a given location may impact on the company wide-fringe rate if existing fringes in the company do not meet the minimum requirement for the wage determination in the area being bid. This can be a deciding factor in a bid/no bid decision on a prospective project.

 
When conforming a labor category to a government wage determination,  the title of the company job need not be identical to that to which the government wage determination refers, but the company job description must be made available to an auditor for compliance mapping purposed; i.e. the role of the individual and the scope of his or her job description must very closely match the government documents. It is best to use existing company labor categories and descriptions and work any exceptions during the conformance process, conveying the results in the form of a table similar to the above in your proposal.

If a particular wage determination selected by the contracting officer in the RFP appears to be vastly out of sync with the scope of work in the prospective contract, it is best to bring this to the government's attention in the form of a question or a suggestion for improvement during the Q&A or draft RFP comments phase of the bid process.  But remember, your question, its answer and any action taken by the CO will be made available to all competitors. 

In many instances competitive labor rates, and in some cases benefits as well, will be higher than those specified in the government wage determination. Wage determination updates by the government often lag rapidly changing technical labor markets and area economic trends.

Evaluate your initial GSA Schedule and renewals against area wage determinations, since the government may choose to buy off your schedule or you may choose to use your GSA Schedule rates to bid a procurement where a wage determination applies.

Demographics in your company may play a role.  Accumulation of labor cost history driving a pay rate in one geographic location of a company for a given labor category may not meet government wage determinations if that category is used in another geographic area with a different area wage determination in a substantially different labor market.  Many larger firms maintain standard rates across multiple geographic locations to deal with this factor.  

SUMMARY

Regularly review your company labor category rates and fringe benefits for ongoing compliance with DOL Area Wage Determinations. Sample the DOL Wage Determination web site regularly as a normal function of maintaining your labor rates and fringe benefits costs. 

 

Marketing to Achieve a Small Business Set-aside Government Contract

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

Insights to Succeed

Small Business Government Contract Marketing

Customer Relations

Techniques for Product Development

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

GENERAL CONSIDERATIONS

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

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

 

In either sole source or group-designated marketing, an agency making the buy must be convinced that sufficient capability exists in a single company or in the small business designated group community to set a contract aside. The agency must be convinced early – before a formal procurement announcement is published on SAM Contract Opportunities  

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

DESIGNATION                                                         TARGET

Small Business                                           (Group Set Aside Potential)

Small Woman-Owned Business                 (Group Set Aside Potential)

Small Veteran-Owned Business                 (Group Set Aside Potential)

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

Small Hub Zone Business                          (Sole Source and Group Set Aside Potential)

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

Federal government procurement is further classified under the SBA Small Business Size Standards in terms of North American Industrial Classification System (NAICS) Code, number of personnel and/or annual sales. To determine whether a firm qualifies for a given bid, note the NAICS for a given solicitation and download the SBA Small Business Size Standards the Box Net “References” Cube in the right margin of this site.

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

Registering to bid government contacts and establish sole source and group designations may be achieved using guidance in the below articles:

Small Business Set-aside Designations

Registering Your Business For Government Contracting

Hub Zone and Small Disadvantaged Business 8(a) designations are lengthy certification processes. The remaining designations in the above table are self-certifying at the above government contract registration web site, and are verified by site surveys and bid vetting for each solicitation prior to contract award. 

EARLY REQUIREMENT TARGETING IS THE KEY TO SUCCESS IN SET ASIDE MARKETING

Effective set aside marketing reaches the agency decision makers with technical, budget and schedule authority before a synopsis of the requirement is posted on SAM Contract Oportunities. 

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

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

         Your Capability Statement for Government Contracting

• 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 SAM Contract Opportunities, 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 SAM Contract Opportunities "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 SAM Contract Opportunities 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:

         Small Business Government Contract Teaming

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

         Understanding the Past Performance Challenge

• 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 government contracting community, successful marketing of sole source or group-designated business becomes easier, but it is always a challenge due to the need for taking early action in windows of opportunity.  Find those windows and communicate capabilities to the decision makers and industry team members who can help you.  

If you are eligible for any of the designations discussed in this article, make small business set asides or sole source procurement a key element in your marketing plan.