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IN THIS ISSUE:
· More Selling,
Less Overhead
· Virginia Contractors Only
· The FAR Corner
· Cost Accounting Standards
· Dept. of Transportation
· Current Audit Issues
· Upcoming Events
· Thought for the Day
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IMA GovCon Breakfast Meetings
To be held every other month on the second Tuesday of the month at the Tyson’s West Park Hotel.
January 11, 2006
Breakfast featuring Maria Davey, DCAA Reston Branch Manager.
March 14, 2006
Contract Closeouts by Sam Davidson of Gaffey & Associates
One CPE credit is awarded
The CGP 2006 Winter Seminar
The Coalition for Government Procurement is presenting “The Politics of Government Business: Making Sure All of Your Bases Are Covered”
February 7, 2006
Sheraton Crystal City
Arlington, VA
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"Real integrity is doing the right thing, knowing that nobody’s going to know whether you did or not."
Oprah Winfrey |
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Welcome to 2006! We at Gaffey & Associates want to wish all of you a healthy and prosperous new year.
We again invite you to visit our website where you can access previous issues of this bi-monthly GCNewsletter, copies of the periodic GCAlert, our express notification of significant happenings in the government contracting arena of an immediate nature, and White Papers on various subjects of interest. We have just added a White Paper on “Compliance with FAR 31.205-35(b) – Lump-Sum Relocation Cost Reimbursement” that you may find useful.
If you have any questions or comments relative to our website or the articles included in this issue of the Government Contracting Newsletter please contact us.
| MORE SELLING, LESS OVERHEAD |
The Customer Acquisition Methodology
The Government is relying more and more on multiple-award, indefinite quantity contracts (IDIQ). These come in a number of variations, but all have one thing in common. They are merely a hunting license for contractors to find and sell work. For decades, “selling” was a bad term in the Government market. Now, contractors must recognize that selling is a part of their business. Selling is different from classical Business Development. Selling products and services under an IDIQ contract involves finding what the customer needs and creating a business case. It is often involves a short time horizon. While a need for long term Business Development still exists for targeted agencies, contractors must increase day-to-day selling. Smart contractors are using everyone that interacts with customers to sell. Companies must do this in a controlled manner to get the maximum benefit of all the face time that you have with customers. Team selling in the federal marketplace results in more sales with less overhead.
| VIRGINIA CONTRACTORS ONLY! |
This article was provided to us by the Greater Reston Chamber of Commerce Government Contacting Alliance & Interest Group.
Virginia's government contracting and consulting firms face a problem unique to this state. If Virginia's Department of Taxation decides that the "true object" of their overall arrangement with the contracting government entity is providing a service, the contractor owes sales and use tax on all the tangible personal property it buys for the job - including goods bought specifically for and delivered to the government client.
Proposed Acquisition Thresholds Increases
The Civilian Agency Acquisition Council and the Defense Acquisition Council have issued a proposed rule (Federal Register, December 12, 2005, Volume 70, Number 237, Pages 73415-73423) adjusting acquisition-related thresholds for escalation. This proposed rule does not apply to thresholds established by the Davis-Bacon Act, the Service Contract Act, or trade agreements that are based statute.
| COST ACCOUNTING STANDARDS |
Proposed CAS Application and Coverage Threshold Increases
The Cost Accounting Standards Board has issued a proposed rule (Federal Register, December 12, 2005, Volume 70, Number 237, Pages 73423-73426) revising the CAS application and full coverage thresholds for inflation. The full text of this proposed rule can be found here.
Acquisition-related thresholds in statutes that were in effect on October 1, 2000 are subject to five years of Consumer Price Index (CPI) for all-urban consumers (December 1999 to December 2004) which computes at 1.1307.
| DEPARTMENT OF TRANSPORTATION |
Crack Down on Fraud
In November 2004 the Department of Transportation (DOT) Office of Inspector General (OIG) announced an audit of engineering and design firms working on state DOT contracts funded by federal-aid grants. The goal of these audits was to review the accuracy and adequacy of design firms overhead statements prepared by the design firms CPA. The OIG was to also look at executive compensation to establish that it falls within the FAR guidelines and to assess its reasonableness. Initially there were six states participating on a voluntary basis, presently there are forty states involved. Onsite visits by the OIG will include a visit to the firms CPA firm. Up to 100 design and engineering firms are to be selected and are to receive questionnaire letters requesting information and records about overhead rates and senior executive compensation.
OIG’s preliminary work with nine firms suggested multiple issues with unallowable expenses being included in the overhead calculations and a pattern of unreasonable compensation allocations. As pointed out in our September 2005 GCNewsletter, just because an individuals compensation may be below the government’s FAR guideline amount or the amount capped by the state does not mean that it is reasonable and therefore allowable.
A review of recent news articles has revealed the following audit issues:
- Unexplained auto lease (e.g. Porsche Boxster)
- Hiring of relatives of the customer (e.g. wife of agency head)
- 65% of billed subcontractor costs unsupported (e.g. $3.7M unsupported out of $5.7M)
- Renting equipment for costs significantly greater than the purchase price
- Charging higher per-hour labor rates than justified for the lower-level personnel utilized (based on established parameters of education, work experience and etc.)
- Billing subcontractor hours at rates higher than those actually being paid to the subcontractor (DCAA audit guidance)
- Adjusting timesheets to change job and labor categories without adequate explanation
- Significant internal control weaknesses regarding the reliability of recorded labor hours
- Adding job categories beyond the scope of the contract
- Charging for overtime not permitted under the contract
- Excessive or unreasonable compensation amounts (both executive and non-executive level)
- Inclusion of unallowable expenses in billing and pricing rates
If any of these issues sound a familiar note it may be time for a thorough self-assessment of your policies and practices before they are cited by the DCAA or the applicable OIG.
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