Redstone Government Consulting Blog (58)

What is the Service Contract Labor Standards (SCLS)?

The McNamara-O’Hara Service Contract Act (41 U.S.C. §§ 351-358) (SCA) requires contractors and subcontractors performing services on prime contracts in excess of $2,500 to provide service employees certain minimum wage and fringe benefits when performing work on those awarded federal service contracts. The Department of Labor is responsible for enforcing SCLS.

Client success stories are a huge part of our consulting efforts. Unfortunately, in many cases, due to the nature of the work we do, we can’t always congratulate our clients publicly on their successes. However, when the opportunity arises and we can offer good news about our clients, we appreciate the chance to publicly share those accomplishments, with their permission.

Our client, Main Sail, LLC is a veteran-owned small business certified in ISO 9001:2008 that helps its customers evaluate business needs, as well as develop and implement solutions in the areas of business process management, program and project management, enterprise resource planning, systems engineering and integration and staff augmentation. They provide these services to a variety of federal sector clients including the Department of Defense and related agencies (DLA, DFAS, NAVSEA, et. al) as well as many non-defense related agencies like the DOE, DOI, USDA and GSA.

Although FAR 42.202(e)(2) states that prime contractors are responsible for managing subcontracts, DCAA has launched or relaunched a strategy which presumes that prime contractors are responsible for “auditing” subcontractors.   Unfortunately, DCMA seems to have embraced this concept with respect to closing out cost-type subcontracts. Specifically DCMA Instruction 135, section 3.2.3.2 states that prime contractors are responsible for auditing subcontracts and closing subcontract using procedures similar to those used by the government.

Outsourcing certain administration functions within an organization has become a trending practice among government contractors. In fact, we have seen a noticeable uptick in outsourced accounting, human resources and contracts administration functions over the past year.

Whether a company chooses to outsource a certain administrative function to fill a temporary void or a permanent one, looking to subcontractors for help makes sense for a number of reasons.

2015 was an eventful year for our company.  We increased the scope and depth of our service offerings to our customers in 2015 while also adding additional talent and expertise in many key areas of our firm.

2016 NDAA (National Defense Authorization Act)

As reported in our December 3, 2015 blog,2016 Defense Authorization Act Section 893, the 2016 National Defense Authorization Act (NDAA) includes a requirement, ostensibly for improved DCAA auditing, but more narrowly focused on the so-called incurred cost audit backlog (contractor indirect cost rate proposals (ICPs), submitted annually as required by FAR 52.216-7(d)).   Section 893 prohibits DCAA from providing “audit support” for non-defense agencies (e.g. NASA) unless DOD certifies that DCAA is current on the ICP backlog.  “Current” is defined as 18 months of incurred cost inventory, further defined as “the level of contractor incurred cost proposals in inventory from prior years that are currently being audited by DCAA”. 

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.

Our partnership with Unanet has benefited a lot of our clients in a multitude of different ways. Not only are our consultants trained and certified to implement the software for our clients, we can also provide a variety of other types of Unanet software support to add value to the software system, accounting environment, and project management. Below are a few examples.

As if you haven’t noticed, this year has been the year of bid proposals for government contractors. My team at Redstone Government Consulting has been working the last six months straight supporting various government contractors in the development and pricing of cost volume proposals. Fortunately for us, we have a team of consultants that can provide support for cost volume proposals and are 100% dedicated to the effort, without the distraction of other projects or responsibilities. Most small business contractors, however, do not have that luxury and the employees working the bid proposal efforts must also continue to complete their daily responsibilities associated with their already busy, “day” job.