Do You Know What Your GSA Contract Requires?

While a GSA Schedule contract can greatly contribute to the bottom line of a company, if not designed and implemented within specific parameters, a GSA program will be the most expensive project your company embarks upon. The following recent settlements with the Department of Justice demonstrate the needs to have a robust GSA compliance system...

Originally reported in our March GCNewsletter, a proposed rule was published in the Federal Register on February 16, 2007 (Federal Register, Vol. 72, No. 32, Pages 7588-7590) that would require any government contractor with an award of more than $5 million to institute an ethics compliance system that would include: (1) a written ethics policy, (2) an ethics training program and (3) the requirements to display Federal agency OIG Fraud Hotline posters on how to reach agency inspectors general to report possible wrongdoings.

Comments on the proposed rule have been extended to May 23, 2007. Written comments are to be submitted to FAR Secretariat via the Federal eRulemaking Portal at www.regulations.gov , via fax at 202-501-4067 or via mail to the General Services Administration, regulatory Secretariat (VIR), 1800 F Street, N.W. , Room 4035, Attn: Laurieann Duarte , Washington , D.C. 20405 . Please reference FAR Case 2005-036.

FAR Case 2005-036 proposes to amend the FAR to revise the definition of “cost or pricing data”; change the term “information other than cost or pricing data” to “data other than certified cost or pricing data”; add a definition of “certified cost or pricing data”; and to clarify the need to obtain data other than certified cost or pricing data when there is no means to determine fair and reasonable pricing during price analysis...

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Increased competition from private equity firms and higher multiples offered by strategic buyers has made it much more difficult for buyers to complete transactions on attractive terms. Sellers can successfully negotiate to provide very limited, if any, indemnification for breaches of representations and warranties and other post-closing items, forcing buyers to retain more risk for unknown items as well as those discovered during due diligence...

A proposed rule has been published under FAR Case 2006-011 requiring offerors to provide certification regarding nonpayment of taxes. Contractors must certify whether or not they have, within a three-year period preceding the offer, been convicted of or had a civil judgment rendered against them for violating any tax law or failing to pay any tax, or been notified of any delinquent taxes for which the liability remains unsatisfied. Offerors must also certify whether or not they have received a notice of tax lien filed against them for which the liability remains unsatisfied or the lien has not been released.

Written comments referencing FAR Case 2006-011 are to be submitted to the FAR Secretariat on or before May 29, 2007 to be considered in the formulation of the final rule.

On April 20, 2007 the Contractor Tax Enforcement Act (H.R. 1870) was introduced that would bar companies that are delinquent on their taxes from receiving federal contracts. GAO studies found that government contractors owe approximately $8 billion in unpaid federal taxes much of which is payroll taxes that have been deducted from employee paychecks but not forwarded to the IRS.

This new bill if passed would provide agencies with the authority to check with the IRS to identify contractors that have outstanding tax delinquencies. Agencies would not be able to deny a contract unless 180 days had passed after final assessment without the company making payment arrangements. Exceptions are granted for disaster relief and national security contracts.

With the 2008 presidential campaign already in full swing it pays for companies to adopt effective compliance programs for their political activities. Those that lack adequate compliance controls risk the loss of hard won contracts, monetary penalties and reputational harm.

One area of concern, particularily at the state level is “Pay to Play”, a practice in which public officials award lucrative no-bid government contracts and grant other favors to individuals, businesses, and organizations in exchange for large political contributions. Incumbent candidates and their political organizations are typically the greatest beneficiaries of pay-to-play. Many seeking to ban or restrict the practice characterize pay-to-play as legalized corruption.

The practice also extends to "soft-money," or money which is donated to an intermediary with a higher contribution limit, which in turn donates money to individual candidates or campaign committees.

The practice has come under scrutiny in many states, and is, for the most part, left as a state issue rather than a federal one. Many agencies have been created to regulate and control campaign contributions. Furthermore, many third-party government "watchdog" groups have formed to monitor campaign donations and make them more transparent. States that now have”pay-to-play” laws include Connecticut, Florida, Kentucky, New Jersey, Ohio, South Carolina and West Virginia. Maryland , Pennsylvania and Rhode Island do not have such laws but impose extensive reporting requirements.

Be aware and be compliant!

An interim rule amending the Defense Federal Acquisition Regulations (DFARS Case 2006-D057) has been issued to ensure that pass-through charges on contracts and subcontracts (or task or delivery orders) that are entered into for or on behalf of DoD are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor.

The interim rule requires offerors and contractors identify the percentage of work that will be subcontracted and, when subcontract costs will exceed 70 percent of the total cost of work to be performed, to provide information on indirect costs and profit and a description of the value added with regard to the subcontract cost.

On fixed-price contracts the Government will be entitled to a price reduction for excessive pass-through costs included in the price. On other contract types the excessive pass-through costs are to be considered unallowable. Access to records is provided for in this rule. It shall not apply to fixed-price contracts awarded with adequate competition or contracts for commercial items.

Comments are due by June 25, 2007. The text of the entire interim rule can be found in the Federal Register, April 26, 2007 (Volume 71, Number 80) Pages 20758-20761.

Our goal is to build a firm of entrepreneurial minded individuals who “partner” with clients to provide creative solutions to achieve the desired goal. Our associates need to be good listeners, responsive, caring, knowledgeable, and committed to our client's success.

Gaffey & Associate's connections and opportunistic outlook enables continued firm growth at twice the industry average. We provide a friendly, collegial, family oriented environment that fosters individual and professional growth.

The Government Contracting Services Group of Gaffey & Associates is looking for individuals interested in becoming a part of our exciting and rapidly growing consulting practice. We need people who are detail-oriented, eager to learn and advance and would be good with clients. A college degree in accounting is required. Experience in government contract cost accounting, the Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS) is a positive. Defense Contract Audit Agency (DCAA) experience a definite plus but not required. Contact Sam Davidson at samuel.davidson@gaffeycpa.com .

The Government Contracting Services Group provides hands-on assistance and business advisory services in most areas of government contracting and government procurement regulation compliance. Areas where our experience, knowledge and innovative thinking puts us ahead of our competition include:

•  Design and preparation of indirect cost rate proposals and cost allocation plans that:

•  Facilitate the management decision making process

•  Maximize cost recovery and improve profitability

•  Improve your competitive position

•  Meet regulatory compliance requirements

•  Preparation, submission and negotiation of Requests for Equitable Adjustment to your contract pricing, schedule or both.

•  Establishment and maintenance of compliant business systems and effective internal controls.

•  Performance of business process analysis and operations improvement reviews to identify and prioritize key business risks.

We also provide specialized assistance in the areas of:

•  Accounting system design and assessment

•  Business system assessment (Labor Recording, Billing, Cost Estimating and etc.)

•  Compliance with the FAR, CAS and the OMB Circular requirements

•  Proposal pricing and “red team” reviews

•  Preparation, submission and negotiation of termination for convenience proposals

•  Subcontract management

•  Training seminars on an open-enrollment or in-house basis

Whatever your government contracting needs contact us and tap into a resource that can help you succeed in a very competitive marketplace.

We can be reached by contacting Sam Davidson at 703-748-5816 or via email at samuel.davidson@gaffeycpa.com