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Where construction contractors are most likely to exceed the budget

August 22, 2019 By Andrew Smith

Budget structures vary by the type of construction a contractor performs.  For example, subcontractors typically have a significant amount of their costs allocated to direct labor and materials while general contractors’ budgets are likely to have more subcontracted work on their books.

However, despite the differences in where the budget is weighted, every contractor, no matter its specialty, is vulnerable to cost overruns.

Weather delays

When serious rain, snow or other weather events keep contractors from making progress on their jobs, it’s not uncommon that both subs and GCs have those lost days tacked onto their schedules.  But what about the extra costs?

“If we get a rain day, it’s not like we can send the superintendent home and not pay him,” said Chuck Taylor, director of operations for Englewood Construction in Illinois.  “If we have a construction trailer, it’s not like we can tell the rental company, ‘Hey, it rained today, so we’re not going to pay for the rental on the trailer.’ It doesn’t work that way.”

Additional costs, which also include items like water remediation, wrapping an exposed building in protective material or bringing in expensive heaters, are often compounded by having to spend even more money on extra labor to make up lost time.  That could mean paying for additional crews or paying workers overtime.

This is an area of contract or subcontract negotiations that deserves attention, and it never hurts to ask the owner or GC for reimbursement beyond just adding time to the schedule.

Joe McLaughlin, chief financial officer of Austin Industries in Dallas, said contractors need to take into consideration where they’re building and factor in potential weather issues.  But, he said, it all goes back to what’s in the contract, so it benefits contractors to try to make the terms as flexible as possible.

Continue reading at:  Construction Dive

Filed Under: Contracting Tips Tagged With: budget, construction, costs, direct and indirect costs

GTPAC to host Cost/Price Proposal Workshop on April 24th

April 3, 2019 By Andrew Smith

One of the most important skills government contractors must learn is how to prepare a quality cost/price proposal, and how to analyze their cost/price competitiveness through market research.  In order to help Georgia businesses learn this skill, the Georgia Tech Procurement Assistance Center (“GTPAC”), with support from The Contracting Education Academy at Georgia Tech will be hosting a day-long workshop to provide instruction to businesses on cost/price proposal preparation and cost/price analysis.  Attendees will receive training and materials on topics such as: cost estimating, direct and indirect costs, cost realism and how to do price related market research, among others.

Date:  4/24/2019

Time:  9:00 AM to 3:00 PM (EDT)

Location:  The Global Learning Center, 84 5th Street NW, Atlanta, Georgia 30308

Presenters:  Alexis Kirksey, Nancy Cleveland, Andrew Smith

Admission is free, but pre-registration is required as seating is limited. 

Registration:  Go to https://gtpac.ecenterdirect.com/events/8683 and click “Sign Up”

If you have any questions, call Alexis Kirksey at (404) 894-6109

Filed Under: GTPAC News Tagged With: bid proposal, cost and price, cost estimating, direct and indirect costs, government contract training, proposal preparation

Waiting for the final government audit may be too late

July 23, 2018 By Andrew Smith

In a case of first impression, a Court of Appeals has held that a government subcontractor’s claim for reimbursement of its actual indirect costs was time-barred.

Fluor Fed’l Solns. LLC v. PAE Applied Techs, LLC, No. 17-1468, 2018 WL 1768233 (4th Cir. Apr. 12, 2018) (per curiam) (unpublished).  It is the first case to directly address the interplay between the Allowable Cost and Payment Clause of the Federal Acquisition Regulation (FAR), 48 C.F.R. § 52.216-7, and a statute of limitations.  It highlights the risks government subcontractors face when they choose to wait for a Government audit rather than litigate promptly after a payment dispute arises.

This case involved a long-term subcontract and a long-delayed government audit.  In 2002, Fluor and PAE entered into a federal government subcontract that ultimately spanned a 15-year performance period. The subcontract incorporated, with minor changes, the FAR Allowable Cost and Payment Clause, 48 C.F.R. § 52.216-7, found in most cost-reimbursable federal government contracts and subcontracts. That clause requires the Government (or, in this case, the prime contractor, PAE), to pay Fluor’s “anticipated final” indirect rates in accordance with the contract terms, subject to retroactive adjustments once a government audit establishes the subcontractor’s final indirect rates applicable to the contract. 48 C.F.R. § 52.216-7(e)–7(g).

Keep reading this article at: https://www.insidegovernmentcontracts.com/2018/07/waiting-final-government-audit-may-late/

Filed Under: Contracting Tips Tagged With: allowability, allowable costs, audit, direct and indirect costs, FAR, indirect rate, payments, subcontracting, unallowable costs

Cost realism: Using offeror’s actual rates was unobjectionable

October 21, 2016 By Andrew Smith

GAO-GovernmentAccountabilityOffice-SealIn conducting a cost realism evaluation, an agency was entitled to use an offeror’s historic approved indirect rates and current incumbent direct labor rates to upwardly adjust the offeror’s evaluated cost, in a case where the offeror’s proposed rates were significantly lower.

The Government Accountability Office (GAO) recently held that an agency did not err by adjusting a protester’s rates to better align with the protester’s historic indirect rates and current direct rates, where the agency was unable to determine that the protester’s significantly lower proposed rates were realistic.

In AM Pierce & Associates Inc., B-413128 et al. (Aug. 22, 2016), GAO considered a protest by a disappointed offeror challenging the Navy’s evaluation under a solicitation seeking program management support services for the H-60 Helicopter Program Office. The solicitation was completely set-aside for EDWOSBs. The resulting contract was to be awarded on a cost-plus-fixed-fee basis, under a best-value evaluation.

DCAA_EmblemThe solicitation said that offerors’ proposed costs would be evaluated for realism, to determine whether the overall costs were realistic for the work to be performed, reflective of the offeror’s understanding of the requirements, and/or consistent with the technical proposal. To facilitate the evaluation, the RFP required offerors to substantiate their proposed direct and indirect labor rates through payroll verification, contingent offer letters, Defense Contract Audit Agency (DCAA) rate verification or approval letters, or other detailed justification methods. The cost realism analysis would then involve a calculation of each offeror’s evaluated costs, to reflect the estimated most probable costs. This determination would include an evaluation of the offeror’s cost information — including its substantiated labor rates.

Keep reading this article at: http://smallgovcon.com/gaobidprotests/cost-realism-using-offerors-actual-rates-was-unobjectionable/

Filed Under: Contracting Tips Tagged With: cost realist, DCAA, direct and indirect costs, EDWOSB, GAO, set-aside

5 things you must do after winning a contract

September 26, 2016 By Andrew Smith

DCAA_EmblemThe recent limitation imposed on the Defense Contract Audit Agency to perform audits means private sector accounting firms now have the opportunity to work more closely with federal agencies to help assess proposals, indirect rates, and business systems of qualifying government contractors.

This change has elevated the need for accountants specializing in government contracting who fully understand the criteria federal agencies use to select and retain contractors.

Compliance and efficiency are paramount to not only achieving the government’s goals, but also for contractors to maximize their own opportunities afforded by a federal contract.  With that in mind, we’ve identified the top five areas government contractors need to shore up to ensure their services are efficient and profitable.

Keep reading this article at: https://washingtontechnology.com/articles/2016/09/12/insights-williamson-after-winning.aspx

Filed Under: Contracting Tips Tagged With: audit, contract administration, DCAA, direct and indirect costs, indirect rate, proposal

How to work with government contract consultants

November 17, 2010 By ei2admin

In tough economic times, competition for government contracts heats up. Here’s how working with a consultant can give you an advantage to land a huge deal.

What makes a good client? A firm that’s established, has deep pockets, and will be around for a long time, right?

Right. So it’s hard to argue—regardless of your personal politics—that the federal government isn’t one of the biggest (and best) potential clients for your business. For many, the federal government isn’t just a source for political debate or theoretical discourse—it’s a significant source of income.

“As you know, federal government is one of the few potential clients that are spending money,” says Bill Lennett, the CEO of Government Contract Associates, a government-contract consulting firm based in California. “So as you can imagine, everybody wants to do business with the government.”

Dig Deeper: Two Ways to Win More Federal Contracts

Working With Government Contract Consultants: Why Work With a Consultant?

Unfortunately, working for the federal government is not always that simple. With an aggressive audit system, many small businesses seek out government contract consultants to aid in the federal procurement process. These consultants assist in registering a small business as a contractor, help it write the proposal, and most of all, assist with the accounting processes that are vital to winning bids. While this guide is meant to give you some insight into what government contract consultants can offer, you should know that there are alternatives, too.

If you’re not interested in working with a consultant or you don’t have the cash on hand, you can visit a Procurement Technical Assistance Center (PTAC), which are located throughout the country. The centers help businesses market their services or products to the government, by matching a firm’s strengths and offers with procurement opportunities.

The first step to obtaining a federal contract, according to Dean Koppel, the Assistant Director for Policy and Research at the U.S. Small Business Administration, is to consult the local chapter of the Small Business Administrator.  “Any small business that wants to do business with the federal government either as a prime or subcontractor should look at the SBA contracting offices,” he says. The office will supply a business with information to get you started, as well as give  more information about current solicitations for contracts.  

Dig Deeper: 4 Tips for Bidding on Your First Government Contract

Working With Government Contract Consultants: Starting Out

Last year, the federal government purchased nearly $100 billion worth of goods and services from small businesses through prime contracting procurements, according to the Small Business Administration. That’s nearly 25 percent of the $400 billion overall federal marketplace. Thousands of small businesses across the country have been winning contracts for years. 

It’s especially a great time to be a technology or service company. “The trends [of federal procurement] have been towards services rather than hardware,” says Mike Steen, a senior managing consultant at Beason & Nalley, a consulting group in Huntsville, Alabama, that specializes in government contract consulting. “The federal government has really flip-flopped in terms of what they’re buying. They’re not buying airplanes as much as they’re buying services, and IT fits into that very heavily.”

Before you hire a consultant, though, to become a federal contractor, you’ll need to register your firm in the Central Contractor Registration (CCR) database. While the government contract consultant can assist you in this process, it’s easy enough to do on your own. The CCR is a portal that gives businesses a chance to market their goods and services to the federal government.

Then, you must renew your registration every 12 months from the date you initially registered. An invalid registration will diminish your chances to receive contract awards or payments, so it’s important to stay up to date.

Dig Deeper: How to Become a Government Contractor

Working With Government Contract Consultants: Accounting, Costs, Proposals

  • Accounting:

When you’re doing business with the federal government you have to submit proposals and invoice the government using adequate accounting practices, says Linnett: “My area of specialty is a knowledge of specific accounting requirements, and helping contractors prepare proposals and make sure their accountings proposals are consistent with those requirements.”

Having what the government calls ‘adequate accounting’ practices is essential. Many small businesses have accounting methods that are outdated or non-existent. This won’t fly with the federal government. “A company needs to have an accounting system that’s operational,” Steen says. “It can’t be sitting in a box somewhere on a shelf that’ll be implemented if they get the contract.” In other words, you have to be able to prove to the government that your accounting practices are consistent with general ledger accounting.

“It becomes very difficult to get government contracts where billing and proposals are based on costs,” says Linnett. “So if they can show the government that ‘hey our accounting practices are adequate rather than inadequate, that gives them a significant competitive advantage over most companies that don’t. That’s when they contact somebody like me to say ‘Hey, help us make sure that our accounting practices are considered adequate.'”

In general, a consultant will review your practices and recommend certain changes to make sure you get positive feedback from your audit.

  • Costs:

What can you charge to the government? What can’t you charge? These are the questions you’ll be working with a consultant to determine. The government puts forth certain requirements that distinguish between “allowable” and “unallowable” costs in your proposal. If you try to get reimbursed for unallowable costs, it could cost you the job, or you could face penalty charges or interest.

Categorically, they’re called ‘cost principles,’ says Steen. “Those cost principles take selected elements of cost such as advertising and interest expense, etc., and tells the government contractor which is allowed,” Steen says. Essentially, it’s a government regulation that defines unallowable costs.

So for example, a consultant will help a business distinguish between direct and indirect costs, remove any unallowable costs, implement processes for compensation and labor charges, and analyze even the small details on a financial statements, like uncompensated overtime.

You’re allowed to charge the government both direct and indirect costs, says Linnet, but there are rules to follow. This is where a consultant like Linnnett might be able to give your company a competitive advantage. “My ability is to be able to structure the way they charge indirect costs to be consistent with their pricing strategy,” he says. “If they’re a sole source and there’s not a lot of competition for their services, they may want to maximize the amount of costs. More often, they’re in a competitive market and so they want to minimize costs charged to the government but still be consistent with the rules.”

  • Proposals:

First, you have to determine the style or the format, says Robert Horejsh, a government contract consultant and owner of Federal Contract Consultants, LLC, which is based in Wisconsin. “Just about every contract officer has a little different style. Sometimes they tell you exactly what they want and you have to follow their outline.” Other times, there are no guidelines at all.

The government uses the proposals to filter out a lot of potential contractors, Horejsh notes. “If they get something that doesn’t look quite right, they might throw it away. I have heard stories of contract officers throwing away proposals because of an unwritten rule that proposals are not supposed to be stapled.”

Dig Deeper: Winning a Government Contract

How to Work with Government Contract Consultants: The value of patience

Government contracting is not going to happen over night, says Jorejsh. “I tell my clients that I’m not sure if it will take three weeks, three months, or three years,” he says. But the value of consultant is clear: They are working on your behalf to ensure you have the best opportunity to grab a lucrative federal contract. “A consultant hangs in there and looks at what your chances are of actually getting the contract,” he says.

Dig Deeper: Big Corp’s Snatch Small-Business Contracts

— By Eric Markowitz | Nov 12, 2010 – Inc. magazine – Copyright © 2010 Mansueto Ventures LLC. All rights reserved. Inc.com, 7 World Trade Center, New York, NY 10007-2195.

Filed Under: Contracting Tips Tagged With: accounting, allowable costs, CCR, cost principles, direct and indirect costs, government contracting, pricing, PTAC, SBA, unallowable costs

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