Tips & Links for Government Contractors.

Tips for Government Contractors…

Keep it SIMPLE!

There is a time and place for everything, but simplicity and solid execution always makes sense...and works! Keep your chart of accounts and account structure simple. Keep your accounting operations as streamlined as possible. Our experience is that there is a direct relationship between streamlined, straight-forward operations and success. If you must employ creativity, use it to win contracts!

Understand the Rules of the Game.

A good working knowledge of contract types, the basic priniciples and rules of accounting for government contracts, and of the requirements of cost proposal preparation is essential. You don't need to be an expert, but you must understand the fundamentals. When in doubt, don't guess. Stop, get up to speed as fast as you can, and then fire away!

Know your costs and manage them constantly.

Your ability to meet your indirect cost rates is all important. The easiest way to track rate performance is to track and manage your labor utilization rate (the percentage determined by dividing billable labor cost by total labor cost) each pay period and - more importantly - year-to-date. This is because direct labor is the primary driver of your indirect cost rates. A good labor utilization rate might be 85%. You should know yours intimately.

Stick to your costs in pricing...don't buy-in and don't accept a certain loser!

Once you establish a certain pricing structure for your company, it will be very difficult to negotiate a higher one. Remember that later, when you try to negotiate your true (higher) costs, the negotiator you are dealing with will have to explain why, under his or her watch, the cost of your services grew by XX%. Accordingly, if you must lower your costs to win a contract, the best place to achieve the savings is in lower direct costs. This is especially true if you know that your competition's indirect cost load (which is to say their pricing) is similar to yours.

When audited, remember that more generally results in less!

Courteously answer the questions asked and provide the items requested. Resist the temptation to provide more. You have nothing to hide, but the faster the audit is completed the sooner you'll be back to business.

Your auditor or contract negotiator should be an expert in his or her field...

but if something sounds "wrong" to you, it could very well be! Do what you can to buy enough time to check the matter out. If problems arise down the road, it will be of little consequence (and no solace) that you were right, and the "other" party wasn't.

Profit will come from well negotiated fee, but don't forget benefit plans!

Experienced contractors recognize, albeit quietly, that the real rewards in government contracting come not from contract fees, but from above the line profits: those that can be safely taken as allowable costs through various fringe benefit plans. If there ever was a good reason to control other Overhead and G&A costs, being able to contribute more to these plans is one. If you are just starting out, include as many of these benefits in your indirect cost budget as you reasonably can. You'll never regret it!

In moving to a new system, establish a plan for transition...and then execute!

When you decide to move to a new accounting system and purchase new software, it's critical that you get "up-and-running" as soon as possible. While this may seem obvious, in moving to new software numerous obstacles to implementation may emerge. The best approach is get the new software fundamentally operational - and then "fine tune" as may be necessary or desirable. If you have selected the correct software, you will not find yourself "painted into a corner" in following this approach. Instead you'll find that you're capable of just about anything.

Links (to related sites) for Government Contractors

The following links will take you to sites that offer useful information and offer files for free down-
loading. Also see our File Downloads page.

  • Defense Contract Audit Agency (DCAA)

  • DCAA Preaward Survey of Prospective Contractor Accounting System Checklist

  • Small Business Administration (SBA)

  • Commerce Business Daily Home Page

  • GSA's Federal Acquisition Regulations (FAR)