For over a decade I’ve had the opportunity to work with many contractors pursuing their first government contract. In my role as the VP of Special Projects at Redstone GCI many companies that I routinely assist are in the process of acquiring their first contract or in the very early stages of contract performance. While I do work with small businesses going through the process of initial contract pursuit and mature government contractors, most companies that I work with are larger commercial or international companies. I like to think of the role that our team provides as a voice of reason providing a measured approach to compliance to ensure the costs for barriers to entry (e.g. DFARS Business Systems) into the U.S. federal market are recoverable by the company.
We’re almost through October and 2019 will be here before we know it. This is a great time to review your company’s year-end and new year checklists for compliance. Want to be sure those frightful DOL ghosts and OFCCP goblins don’t come after you? Keep these checklist items in mind:
We have recently had to deal with issues related to DCAA applying DFARS business system rules in DFARS 252.242-7006 Accounting System Administration in its evaluation of small business client accounting systems. The DFARS business system rules were never intended to be applied to small businesses. Further, the limited resources of a small business make it very difficult for a small business to fully comply with all 18 of the specific criteria contained in the business system rules. DFARS 252.242-7005 regarding the applicability of the business system rules states:
Quite often, in practice, we see contractors classifying too much cost as IR&D or more commonly, B&P expense. In a proposal setting, experts from across your company support the development of a compliant proposal. The question we see frequently is: “Who should be charging to B&P Projects?” While a business may want to capture the total cost of a proposal effort, including administrative support from G&A staff, it is not wise to have these personnel charge to a B&P project where their labor will absorb overhead.
Organizational Conflicts of interest have increasingly gained attention from the Government and Government contractors. Organizational Conflicts of Interest (OCI) are discussed in the Federal Acquisition Regulation (FAR) subpart 9.5. OCI rules are meant to prevent conflicting roles or unfair competitive advantage in government contracting. Assessment of OCI is very fact specific, and mitigations should be sculpted to fit your contracts and situation.
We have received a number of inquiries from clients related to cost allowability for Employee Stock Ownership Plans (ESOPs). In this Part II, we focus on the cost allowability rules and regulations for government contractors (Part I provided a more general description of ESOPs).
Many small and medium sized companies wonder if having an Employee Stock Ownership Plan (ESOP) is right for their company’s compensation and ownership structure. Studies show that employee-owned companies benefit from higher worker productivity and certain tax advantages which ultimately result in improved cash flow. These and other potential advantages could apply to government contractors; however, if you are considering implementing an ESOP, consider engaging someone (or an entity) familiar with ESOPs, as well as someone familiar with the cost allowability (regulations) and DCAA interpretations.
As we (Redstone Government Consulting, Inc.) began to plan our September 21, 2017 Redstone Edge, we sought out speakers and potential attendees from government agencies, including those from DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency). In both cases, their potential speakers had a list of questions which seemed to be unnecessary, but related to OGE (Office of Government Ethics) regulations and interpretations, to identify and otherwise prohibit anything which might be an illegal (or at least unethical) gratuity. Although we might not be a “government contractor”, for those who are, there is another regulation in play; FAR 52.203-3 prohibits government contractors from offering gratuities to government employees.
Companies that incur significant costs for training and education of their workforce should have formal policies and procedures in place to ensure reimbursement on their government contracts and subcontracts. As with all types of costs, there are three major components to consider: allowability, allocability and reasonableness.
Wage Determination Fact Finding
In ASBCA Case No. 61040, 61101, Sonoran Technology appeals their claim for an equitable adjustment due to an increase in the Service Contract Act Wage Determination after contract award. The solicitation that controlled this contract award included a SCA wage determination and a Collective Bargaining Agreement (CBA). The bidders were required to use the current SCA wage determination (at the time of the bid) in the formulation of their proposals submitted to the Government. For future increases in SCA wages and/or benefits, the FAR and the contract have provisions/clauses which cover a contract price change for a wage determination for a multi-year contract. The issue here whether a new wage determination, incorporated into the contract, prompted a responsibility for the government to adjust the contract price to compensate Sonoran for a corollary increase in its state gross receipts taxes.