describe the imageAlthough the details are yet to be determined, there is no question that Republican control of both the Senate and the House could significantly impact government contracting. 

For the record, the purpose of this blog is to share my personal thoughts on how the latest election results are likely to impact government contractors.  For purposes of full disclosure, I consider myself to be a moderate republican; however, my goal is not to make value judgments regarding the likely impact of election results to be as apolitical as possible.  In 2012, under a legislative liaison program with DCAA (Defense Contract Audit Agency), I had the privilege to be assigned to U.S. Senate Committee for Homeland Security and Governmental Affairs, serving as a subject matter expert on federal contract and grant matters for Senator Susan Collins.  Although, I believe the experience provided me with some valuable insight, I am clearly neither an expert on the legislative process nor on the political process.  Below are my personal opinions on the likely impact on various government contracting issues.

It appears that Senator John McCain will become the chairman of the Senate Armed Services Committee and Senator Ron Johnson will be the Senate Homeland Security and Governmental Affairs Committee Chair.  These new appointments should provide positive results for our government contracting customers.

Budget/Sequester

I would expect Republicans to push for an increase in defense spending and potentially  bipartisan support because of threats or developments involving ISIS, Iraq, Afghanistan, Russia, and North Korea.  The larger question may be what will happen with the sequester?  Although, total elimination may be too much to ask for, I think there is real interest in modifying some of the strictest requirements included in the sequester legislation to at least provide more flexibility.  In my opinion, that will go a long way toward reducing some of the current uncertainty holding up many defense contract awards to the benefit of defense contractors.  That said, given the continuing deficit, I would not expect it to start raining federal contract money, defense or otherwise, although this could be impacted by the outcome of the 2016 elections.

Contract Types

Senator McCain has been a long-time critic of cost-type government contracting.  As a result, I would anticipate there will be renewed acquisition reform efforts to reduce the number of cost-type procurements in favor of fixed price.  Senator McCain also has a history of concern regarding what he considers to be inappropriate commercial item determinations.  Accordingly, I would expect Republicans to potentially exert continued pressure on contracting officers regarding commercial item determinations which will result in a continued increase in requirements for FAR 15 compliant proposals.

Oversight

Although Republicans historically have tended to be more supportive of market based procurement practices, Senator McCain has been an outspoken critic of many of the Pentagons major weapons programs and what he considers to be fraud, waste, and abuse related to many of them, including commercial item classifications. 

Based on McCain’s track record and his leadership with the Republican base,I would not anticipate, at least in the short term, any significant reduction in DCAA/DCMA oversight activities.  I also believe there may even be a push for increased congressional oversight activity, particularly with respect to major weapons programs. 

As discussed below, Senator McCain has expressed significant interest in acquisition reform, simplifying the process, and eliminating duplicative regulation.  At least one can hope that those efforts could lead to elimination of some of the more abusive DCAA/DCMA oversight practices we have seen related to withholding threats, overly burdensome documentation requests, internal audit reports, refusal to communicate with the contractor or respond to contractor concerns regarding findings, and the lack of timely audits.

Regulatory Reform

Both Senator McCain and Senator Johnson have expressed interest in reforming the acquisition process and reducing regulatory requirements.  Accordingly, I would anticipate that there will be an increase in initiatives related to those areas.  Unfortunately, historically these types of initiatives have met with limited success.  For whatever reason, it seems to be a lot easier for congress to add a new requirement than to eliminate a requirement.  While it would be wonderful to see a reduction in overly burdensome regulations, particularly small businesses, I am not confident there will be any significant changes particularly in the short term.  That said, I think we may at least see a reduction in efforts to increase legislative/regulatory requirements to further reduce executive compensation, rules related to “inherently governmental” functions, and buy American provisions which have traditionally received less Republican support.  

Veterans Day

Finally, regardless of your political affiliation, please remember the men and women in our armed forces and the veterans who have sacrificed so much to protect our freedom. 

 

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Written by Robert Eldridge

Robert Eldridge Robert (Bob) Eldridge is a Director with Redstone Government Consulting Inc. He provides Government Contract Consulting services to our Government contractors primarily related to compliance with Federal Acquisition Regulations and Cost Accounting Standards, equitable adjustment claims, and business systems. Prior to joining Redstone Government Consulting, Bob served in a number of capacities with DCAA for over 32 years. Upon his retirement, Bob was a Regional Audit Manager with DCAA. Bob began his DCAA career in 1981 as an auditor-trainee with the Pratt & Whitney Resident Office in West Palm Beach, Florida. Bob served two three year tours at the Defense Contract Audit Institute teaching multiple contract audit courses including “Auditing Internal Controls”, “Technical Management of Audits”, and “Advanced Cost Accounting Standards” and writing Agency courses on Cost Accounting Standards and Equitable Adjustment Claims. He returned to the Eastern Region in 1999, holding various audit positions before ultimately becoming a Regional Audit Manager in February 2007. As Chief of the Eastern Region Quality Assurance Division, Bob was heavily involved in developing DCAA guidance related to auditor consideration of internal controls and risk assessment preparation. In 2012, Bob was assigned to the U.S. Senate Committee for Homeland Security and Governmental Affairs, serving as a subject matter expert on a wide range of federal contract and grant matters for Senator Susan Collins. During Bob’s tenure with DCAA, he had overall management responsibility for audits performed by over 200 employees. He was directly involved in conducting or managing a wide variety of compliance audits, including: forward pricing proposals, incurred cost submissions, business system internal controls, Cost Accounting Standards, claims, and defective pricing. Bob was also directly involved in complex quantitative methods applications, particularly regression analysis and improvement curve applications. Bob currently specializes in assisting clients with more complex DCAA audit issues related to business system internal controls and Disclosure Statements and with developing and maintaining government compliant accounting and estimating systems. Bob also provides expert advice on compliance with FAR cost principles and Cost Accounting Standards and assists with the more complex forward pricing proposals and equitable adjustment claims.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Contracts Administration, Defense Contractors