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 by
total labor) 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!
When moving to a new system, establish your 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.