Tips On Getting Started With Government Contracting
Mar 09, 2009
It might be surprising to some that in the midst of the current recession, there is a construction boom going on in the military bases around San Diego. The San Diego Business Journal recently reported that just one base, the Marine Corps Base at Camp Pendleton, plans to spend $2.1 billion on construction in the three fiscal years ending with 2010. Architecture, Engineering, Construction and many related firms that learned to serve the needs of this Department of Defense (DoD) client, and prepared themselves ahead of time, are enjoying relative prosperity.
The recent passage of the $787 billion American Recovery and Reinvestment Act of 2009 promises to further help companies that serve public agencies, in that it includes about $130 billion for highways, buildings and other public works. With the prospects of this stimulus funding being released to a range of Federal, State and Local government agencies, business owners who have not served these clients before are considering how to prepare to take advantage of the opportunities that will follow. The learning curve may seem daunting, but it is well worth the reward, and mastering it is not beyond the means of smaller firms.
The suggestions and observations that follow are based on my experience in working with several firms that together served over 300 public agency clients across the U.S.
· Each public agency is unique. Contracting requirements, bid and selection procedures, and billing practices vary by agency, and often by program within an agency. It is best to identify a few specific programs and start with mastering those.
· It is most efficient to start with agencies that have a contracting office nearby. For example, a Municipality or a local branch of a State or Federal agency.
· Contracting offices will typically sponsor workshops or seminars to educate companies on qualifications and requirements. They will often have initiatives to promote specific programs for small businesses and minority or woman-owned enterprises. Firms are advised to learn if they qualify to participate in these programs.
· Depending on the nature and size of the contract opportunity and your specific services, consider acting as a sub-contractor to another company before pursuing a contract directly. Since awards are usually a matter of public record, ask the program’s Contracting Officer which firms have recently won contracts. These firms may then be reached to arrange to partner on future opportunities.
· Federal agencies, and many Municipal, State and Regional agencies that receive Federal funding, typically incorporate the Federal Acquisition Regulations (FAR), and sometimes the Cost Accounting Standards (CAS) as well, into their contract requirements in addition to their own specific requirements.
· If the program requires compliance with FAR (and CAS, if applicable), companies may be required to follow certain prescribed accounting and cost collection practices. These are in addition to what is required for normal financial reporting in accordance with Generally Accepted Accounting Principals (GAAP) for bank purposes.
· The practices required by the FAR govern both how a company develops its bids and how it is reimbursed (i.e. how the government agency is billed by the contractor) for work performed.
· In general, the FAR cover what is considered a “direct cost” that can be allocated to a contract and be reimbursed, what costs are eligible for reimbursement as a “benefit” cost or an “overhead” cost, the reasonableness of these costs, and an allowance for profit.
· Many government agencies conduct “pre-award audits” that cover how submitted bids were developed and to validate that the company’s accounting systems, policies, financial management practices and personnel are adequate to comply with the cost accounting, billing, and audit requirements in the contract. On larger contracts, sub-contractors often have to go through some level of audit, not just the prime contractor.
· It is important to know what costs are “allowable” under the contract requirements, and what costs the company can substantiate, at the time bids are submitted. This is necessary to minimize the likelihood that bids will be adjusted downward during the negotiation phase, or worse, for certain contact types, at the end of the contract following a “post contract audit”.
· Remember that as in all business, good relationships are key to successful government contracting. Get to know the Contracting Officer and other key individuals involved in the programs you target.
· To learn more about getting started with Government Contracting, the Defense Logistic Agency sponsors the Procurement Technical Assistance Program and has 90-some offices around the country whose job is to help small businesses understand the mechanics of selling products or services to the government. This program covers not only Federal work, but also a number of State and Local agencies as well. You can find a list of the offices at this address: http://www.dla.mil/db/procurem.htm
An experienced CFO Partner from B2B CFO® can help your company move quickly up the Government Contractor learning curve, implement the necessary systems and practices, and position you for success in this growing segment of our economy. Contact Jon Rodriguez at 760.297.0744