Redstone Government Consulting Blog | Redstone Team (16)

For government contractors your indirect rate structure is critical to your competitiveness, perhaps more so than any other element of the proposal.  In today’s LPTA environment, most offerors are going to be very similar when it comes to technical capabilities and past performance, so almost always award decisions come down to cost.  For the select few companies that have a technical edge or a differentiator in the way of performance that outweighs the cost to your government customer you can stop reading now.  The vast majority of companies working with the federal government don’t have this luxury, so what are they doing to set themselves apart when it comes to developing their indirect rates and overall wrap rates (wrap rates are a function of total direct and indirect costs for a labor hour divided by the direct labor hourly rate); hence, a lower wrap rate is perceived to be a more competitive overall cost structure)?

In each of the past four years, the Justice Department has recovered more than $3.5 billion dollars from cases that involve the False Claims Act (FCA). Although the FY2015 recoveries are a substantial decline from FY2014’s $5.7 billion, these are still extraordinary amounts of money that are being recovered based upon fraud allegations. It should be noted that the DOJ FY2015 Summary Media Release mentions a number of settlements by name (i.e. specific identification of the individual or company which allegedly violated the FCA); however, this DOJ Media Release masks the fact that many of these involve mere allegations with no finding of liability (a statement included at the very end of each individual settlement media release). Of note, the government contracting world we live in represents the second largest piece of the recovery pie; according to the Department of Justice’s release, the government contracting slice was $1.1 billion over the last fiscal year. Something of a “wow moment” even though FCA recoveries from health related services continue to lead the pack.

In today’s budgets constrained environment U.S. Government contracting officers are seeking every opportunity to obtain discounted or reduced prices for services and materials, and as a tax payer that should make us all happy. However, for those of us who work in the government contracting industry the sight of LPTA solicitations, and enhanced scrutiny of proposals does make work life more challenging. One of the areas that we see challenged by contracting officers either during the proposal process or after award is the application of G&A on direct travel associated with the contract. This might be a solicitation provision, a Government expectation for contractor concessions during negotiations or a Government interpretation after contract award.

“Help! We received a letter from our ACO informing us that they will be conducting a Contractor Purchasing System Review (CPSR) three months from now – can you help us?” This is a scenario we hear all too frequently these days. As promised, DCMA has ramped-up their efforts to ensure contractors purchasing systems are being reviewed and assessed for adequacy.

DFARS 252.242-7006(c)(8) specifically requires management reviews or internal audits of the system to ensure compliance with the contractor’s established policies, procedures.

One of the first things a DCAA auditor looks at when auditing a contractor’s accounting system is its policies and procedures. Policies and procedures represent control activities that are essential for an adequate system of internal controls. Good policies and procedures help ensure consistent operations in accordance with management objectives. DCAA cites policy and procedure inadequacies or the failure to comply with policies and procedures in virtually every deficiency report it issues related to internal controls.

A question we are frequently asked is “Do small contractors really need written policies and procedures in place to pass....”   This is finished with many types of audit - pre-award accounting system, post award accounting system, or even purchasing system?

Just a follow-up to our July 13, 2015 blog and a reminder that effective October 1, 2015 a number of FAR dollar-thresholds will be updated in accordance with 41 U.S.C. Section 1908, which requires the inflation adjustment of dollar thresholds every five years. The upcoming changes were posted in July within Federal Register Vol. 80 No. 127; however, the impact of these changes is minimal with most commonly used dollar thresholds being increased around 6-7%. A detailed list of the most frequently used thresholds and their changes are noted below.

On June 30, 2015, the U.S. Department of Labor (DOL) increased the McNamara-O’Hara Service Contract Act (SCA) Health & Welfare benefits from $4.02 to $4.27. A notice is not sent directly to contractors and unfortunately for them the importance of this change lies with timing. For those contractors that are currently working diligently on preparing cost proposals, this increase will directly affect you. According to the DOL memorandum that put this change into effect, “all invitation for bids opened, or other service contracts awarded on or after June 30, 2015, must include an updated SCA WD issued in accordance with the regulatory health and welfare (H&W) fringe benefit determination methodology.” So if you have recently submitted a proposal subject to the SCA, we suggest that you ensure that your H&W meets the SCA H&W requirement of $4.27.

The judgments rendered by the ASBCA in the Raytheon Co., Space & Airborne Sys, ASBCA Nos. 57801, 57803, 58068 resulted in the resolution of a number of issues concerning CAS (Cost Accounting Standards) cost impacts associated with unilateral changes in a contractor’s cost accounting practices. There were five basic issues; the Government prevailed on three, the contractor prevailed on one, and one was undecided (to be decided in the actual trial given that the current decisions were in reference to the parties’ cross-motions for summary judgment).

Over the past few months Redstone GCI has made several significant investments in our software services practice. For many years we have supported our clients with Deltek solutions, as well as many of our small business clients with QuickBooks assistance. In July, we added a new staff member to our ranks to better support our Deltek clients. Jimmy Baker will be leading our Costpoint and GCS support services, and we are excited to introduce him to our existing clients. Jimmy has been working with Costpoint for over 20 years decades, and has a great deal of experience working with larger system implementations, as well as new implementation and design for smaller companies utilizing Costpoint. He most recently assisted a very large government contractor with worldwide integration and conversion to Deltek Costpoint.