DCAA Compliance Blog

Government Contracting News and DCAA Information for Contractors

ReliAscent LLC specializes in FAR compliance, DCAA compliant accounting, and government contract management/administration for Federal Government contractors and grantees.  In our DCAA Blog, we discuss the latest government contracting news from the Federal Government, the DCAA, and DCMA.

While the best way to maintain compliance with government requirements is to hire our experts, we hope our blog gives you some valuable insight into this complex environment.

We hope you will visit and take part in the discussions on our blog on a regular basis. If you ever have any questions or would like to discuss how our experts can help, do not hesitate to contact us at any time!  

To browse our extensive library by topic, use the form to your left and search by tags.

DCAA Compliance & Accounting Services

New ReliAscent White Paper: "An Introduction to Indirect Rates"

Posted by Tyler Link on Thu, Jun 22, 2017 @ 11:11 AM

Indirect Rates White Paper

ReliAscent is proud to announice the release our latest white paper: "An Introduction to Indirect Rates."

This white paper, written by ReliAscent AE Dave Donley, is the fourth in our monthly series on important Federal Government contract administration & management topics, and we encourage contractors to read and share these valuable resources among their colleagues.

From managing your indirect rates, to accurately preparing a cost proposal, our series covers the contract management issues that impact every federal contractor's profitability and success; whether they know it or not!

Get your copy of "An Introduction to Indirect Rates," now!

We hope you find this white paper useful, and please feel free to contact us at any time, should you have questions about our government contract accounting, contract management, or outsourced CFO services for contractors.

Topics: Indirect billing rates, Indirect rates

ReliAscent Releases Our Second Newsletter of 2017

Posted by Tyler Link on Fri, Jun 16, 2017 @ 01:49 PM

DCAA Newsletter - ReliAscent

ReliAscent is happy to announce the release our second newsletter of 2017! In this issue, we feature an article on Fringe Benefits, Deltek® Pulling Support for its GCS Premier® Software, and more.

To download your copy of ReliAscent's latest newsletter, click here now!

As always: if you ever have any questions about FAR & DCAA compliance, our services, or government contracting in general, please do not hesitate to call or email us at any time (and if you haven't joined our newsletter distribution list yet, fill out the form on the left to sign up).

Have a great weekend!

Topics: Deltek, Deltek GCS Premier, newsletter, fringe benefits

Contractor Code of Business Ethics and Conduct

Posted by Mike Anderson on Mon, Jun 12, 2017 @ 01:35 PM

Without getting too political, I thought it might be timely to review a FAR clause that appears in many Federal Contracts but probably doesn't get enough attention. Section 3 of the Federal Acquisition Regulations (FAR), Subpart 10, calls for contractors to "conduct themselves with the highest degree of integrity and honesty".  It also requires a written code of business ethics and conduct be created within the company.  Wouldn't it be nice if politicians were required to abide with FAR 3.10?  This clause is usually brought into the contract when the Contracting Officer inserts FAR 52.203-13 into the terms and conditions of the contract.  This usually only applies when the contract is more than $5.5 Million and has a period of performance of longer than 120 days.  FAR 3.1003 does indicate that the policy of FAR 3.1002 should apply to all Government contractors where the written code may not apply unless the above specified contract thresholds are exceeded.  I also think it is still a good idea to impose this clause upon yourself as a business just as good business practice.   FAR 3.1003 goes on to say that if a contractor knows of a violation of Federal criminal law involving fraud, conflict of interest, bribery or gratuity violations (found in Title 18 of the United States Code or a violation of the civil False Claims Act) that the contractor may be suspended and/or debarred.  This includes failure to report these violations in a timely manner.  You can see that the penalties are serious and not to be taken lightly.  So, why not go ahead and just establish the policy and written programs addressing these issues in the early stages of your business?  it is a good business practice and can ease your transition into larger contracts. This is one of the flowdown requirements that you need to be aware to flow down to subcontractors, when applicable.  Many small business owners just think that these things are common sense and take them for granted.  The government agrees that they should be common sense, but the government doesn't take anything for granted.  I think in today's complex business world, with too many reality shows on TV and a growing attitude that the ends justify the means, these type of programs are more and more necessary.  If you have difficulty deciding where to start, please don't hesitate to reach out to us at ReliAscent. 

Topics: Ethics

Contract Cost Proposals - Setting Yourself Up For Success

Posted by Tyler Link on Thu, Jun 08, 2017 @ 01:45 PM

Government Contract Cost Proposals

In the world of government contracting, one of the most painful—yet easily preventable—mistakes contractors and grantees make, is making critical errors in the cost & pricing section of a proposal.  While putting together a list of estimates for things like time, materials, equipment, and travel may sound easy enough, the unfortunate reality is that many contractors have trouble with this section (or they simply opt for the “safe rates”), and quickly find themselves in a money-losing contract.

In reality, putting together a proper cost proposal is no small task.  There are different rules and rates, pools and bases, awarding agency requirements, and other factors to consider.  There are also certain steps one needs to take when calculating rates, or when estimating your labor hours.  Make a mistake, and even the drastic step of reducing your fee to ZERO means many contractors still end up losing money on a contract!

At ReliAscent, our team of contract management and DCAA compliance experts have over 150 combined years of contract management and cost proposal preparation experience, and we can help to ensure you set yourself up for success from the start. 

To learn more about how ReliAscent can help, download our latest white paper: “Preparing a Government Contract Cost Proposal,” and/or contact us at any time.

Topics: Cost Proposal, contract cost proposals

ReliAscent Releases it's Latest White Paper: "Preparing a Government Contract Cost Proposal."

Posted by Tyler Link on Wed, May 24, 2017 @ 10:54 AM

Cost Proposal White Paper

ReliAscent is happy to announce the release of our latest white paper: Preparing a Government Contract Cost Proposal.  This white paper is the third in our monthly series on important government contract administration & management topics, and we encourage contractors to read and share these valuable resources among their colleagues.


From managing your indirect rates, to contract reviews, terminations and closeouts, our series covers the issues that impact every government contractor's profitability and success; whether they know it or not!

TO DOWNLOAD YOUR COPY, CLICK HERE NOW.

Please feel free to contact us at any time, should you have questions about our government contract accounting, contract management, or outsourced CFO services, and have a great Memorial Day weekend!

Topics: Cost Proposal, preparing a cost proposal

Government Contracting 101 - Part 7: How does the government pay for my research?

Posted by Brian Ormsby on Thu, May 18, 2017 @ 09:28 AM

There are several ways that the government can help fund your research.  The first is through a direct need from the government and direct funding under a grant or contract written specifically for research and/or development.  There are many avenues to assist in this type of funding.  FAR Part 35 discusses Research and Development Contracting.  There are also several programs designed for small businesses that we discussed earlier in this blog series in “Blog 4 – What is the role of small business in Government Contracting?”.   These programs include the Small Business Innovative Research (SBIR), Small Business Technology Transfer (STTR) and Federal and State Technology Partnership (FAST) programs designed specifically for this purpose.  There are also solicitations in the Broad Area Announcements (BAA) for fulfilling government needs and desires for developing new products and technologies.

The government will also indirectly fund contractor research and development efforts under the Independent Research and Development (IR&D) costs pool for almost any government contract, whether it is for R&D or not.  IR&D is a General and Administrative (G&A) costs sub-pool.  IR&D is defined in the FAR as follows:

Per FAR Part 31.001 – “Independent research and development (IR&D) cost” – means the costs of effort which is neither sponsored by a grant nor required in performing a contract, and which falls within any of the following four areas:

  • Basic research
  • Applied research
  • Development, and
  • Systems and other concept formulation studies.

How do you know if you are performing an authorized IR&D function?  Per FAR Part 31.205.18 – IR&D costs are allowable as indirect expenses on contracts to the extent that those costs are allocable and reasonable.  In order for IR&D costs to be allocable, you just have to have an accounting system that is compliant so that IR&D is allocated equally amongst your programs. 

What is the definition of reasonable?  There is some subjective determination on the reasonableness of IR&D costs.  Here are a few rules of thumb:

  • You have some expertise in the area of research. In other words, you aren’t an ASE certified mechanic trying to solve the problems of nuclear waste.
  • You have justification for the costs:
    • Timekeeping to document the amount of efforts
    • Backup documentation for purchasing
    • Statements of Work for Subcontracts
    • Statements of Work for Consultants
  • You have a defined goal that your research is going to achieve
  • You have set measurement criteria for the research to determine if you are advancing

In short, IR&D topics need to be run like any other contract; it is just an internal contract with yourself.  If you are performing any experiment and you don’t have criteria for success or results of measurements, then you aren’t doing research, you are just playing!  The government is not interested in paying for follies of fancy (they want to fund real research, independent or not).

If you have questions about setting up and IR&D project, please contact ReliAscent (303) 999-3802.  We can help you ensure that you are advancing your corporate intellectual property and you can be assured that the costs of that effort will not be disallowed by an auditor in the future.

- Brian Ormsby, ReliAscent

 

 

Topics: Government funding, R&D Funding, Government Funded Research, Getting the Government to Fund Your Research

Government Contracting 101 - Part 6: Agency Differences in Unallowable Costs

Posted by Brian Ormsby on Tue, May 09, 2017 @ 09:05 AM

In the world of Government contracting, the government defines an allowable cost as a cost that they will pay either in full (direct costs) or an allowable portion (allowable indirect costs) of that cost.  An unallowable cost is one that the government has stated that they will not reimburse the contractor for the expense.   All agencies start with the Federal Acquisition Regulation (FAR) Part 31.201-6 to define unallowable costs and discusses how to account for unallowable costs.  FAR Part 31.205 discusses specific costs and discusses whether they are allowed or not (it is not an all-inclusive list, however it is fairly comprehensive).  Each agency can add to this list, however, with agency specific guidelines.   For instance, there are Defense Federal Acquisition Requirements Supplements (DFARS), Department of Energy Acquisition Regulation Supplement (DEARS) as well as similar guidelines for other agencies.  In addition, there are differences in requirements between contracts and grants.  There is further delineation between awards to “For-Profit Organizations” as opposed to “Non-Profit Organizations” or “Educational Institutions” or “State, Local &/or Indian Tribe Governments”.   Here are some examples of other agency restrictions for “For-Profit” Organizations (not all inclusive):

National Institute of Health (NIH) (48 CFR 74.27)

  • All FAR unallowables
  • Limitation on Salary, anything over is unallowable
  • Independent Research and Development (IR&D)
  • Sales and Marketing
  • Business Development, Commercialization costs

National Science Foundation (NSF) (48 CFR 31.201-6 – Contracts & 2 CFR 215.27 - Grants)

  • All FAR unallowables
  • All Patent Costs
  • IR&D
  • Sales and Marketing
  • Business Development

Department of Energy (DOE) (10 CFR 600.317)

  • All FAR unallowables (FAR Part 31)
  • All Patent costs (Phase I SBIR only – Patent prosecution costs for all funding)
  • Foreign Travel

Regardless of which agency you deal with, you must make sure that all the unallowable costs are not billed to the government.  How do you ensure that unallowable costs aren’t billed to the government?  First of all, you must segregate your unallowable costs under general ledger control in your accounting system. You must ensure that all unallowable costs are input into this section and that these costs don’t end up in your direct or your indirect costs that are billed to the government.  When a contractor is dealing with multiple government agencies, this can be a bit tricky as some costs that are unallowable for one agency could be an allowable cost for another agency. 

It is imperative that you handle your unallowable costs correctly.  If you are audited and unallowable costs are found to be in you allowable areas (direct or indirect), they will be disallowed and you will end up owing the government money.  That is not the only implication, generally, your accounting system will also fail the audit based on this finding and you may be debarred from any future Federal Government contracts.

If you have questions about unallowable costs, how to handle them in your accounting system and anything else concerning unallowables, please contact ReliAscent (303) 999-3802.

- Brian Ormsby, ReliAscent

 

 

Topics: Unallowable Cost, DCAA Unallowable cost, unallowable costs

Energy Secretary Rick Perry Halts DoE SBIR/STTR  2017 Ph I Selections Until Further Notice

Posted by Tyler Link on Thu, May 04, 2017 @ 12:52 PM

The Department of Energy’s SBIR/STTR Programs Office just released an important notice to all 2017 DoE SBIR/STTR applicants, that is sure to disappoint a lot of people.

In a recent email sent out to all applicants, the DoE states:

“Our Office was scheduled to issue award notifications for our FY 2017 SBIR/STTR Phase I Release 2 Funding Opportunity on Monday, May 1, 2017.  New DoE Administration officials requested that SBIR/STTR selections be held until Secretary Perry has an opportunity to be briefed on research projects that will take place under his administration.  Award notifications will therefore be delayed until that review has taken place.  At this time, our office has not been provided with a time frame for completion of that review. We will provide periodic updates as more information becomes available.”

We hope that Secretary Perry’s review does not hold up selections for months (or possibly over a year), but the fact that he actively called for the Department of Energy to be abolished for years, and only just announced that he "regretted those remarks" this January, may have a lot of people of very worried…

The “silver lining” in this is that the Department of Energy SBIR funding has been roughly $217M per year (2016 spending increased a little to $228M) distributed over approximately 300 awards per year.   As long as the Department of Energy has an Extramural R&D budget, they must allocate 3.2% of that budget to the SBIR program and 0.45% of that budget to the STTR program.  With the emphasis on renewable energy sources, especially the large Renewable Energy Lab in Golden, CO, it doesn’t look like this will total disappear in the near future. 

Stay tuned: ReliAscent will update our Blog with updates, as we get them.

Update: 5/26/17

It looks like Secretary Perry is moving forward with (at least partial) funding of DoE SBIR grants.  In a news on Wednesday, the Department of Energy announced they will be funding 72 SBIR Ph. II awards, to the tune of $73 million.

To learn more about the various projects announced, and the awardees, visit the DoE's SBIR websiteMore awards from the program may be announced in the coming weeks as the additional appropriated FY 2017 funds become available to both the SBIR/STTR programs.

Topics: DoE SBIR 2017, DoE STTR 2017, Rick Perry halts DoE SBIR/STTR Selections

Protecting Your Business with Government Contract Reviews

Posted by Tyler Link on Fri, Apr 28, 2017 @ 09:30 AM

One of the most thrilling parts of being a small business government contractor, is being awarded a contract.  You’ve poured your time, money, and possibly even a large portion of your professional life to get to this point, so what is the most natural reaction of a contractor or grantee when they receive an award/contract?

Well really, most companies are so thrilled that many will simply want to sign it and get the ball rolling.  The main goal is to start work and eventually start receiving money for the work performed.  After all, that is the whole reason that you wrote the proposal in the first place! 

But what happens when the average small business is handed a contract with dozens to hundreds of pages? Just like your standard Apple iTunes agreement, or the typical mortgage loan package, how many people actually read every page and all the fine print, understand every condition, and are fully aware of exactly what they are signing up for?

Not many…and when your business is accepting a contract from the Federal Government, not knowing the critical details and processes of each element of the contract can spell disaster for any contractor.

This is why it is critical that small businesses perform a thorough government contract review of each and every award. Whether you are comfortable enough to perform this task in-house, or you contract this out to a government contract management and DCMA/DCAA expert like ReliAscent, is up to you. Our experts have over 150 years of contract review experience, and ReliAscent just released our latest white paper: “Government Contract Reviews – Protecting Your Company from Potential Disaster.”

No matter which option you choose, a proper, thorough contract review can mean the difference in staying profitable or losing money on a contract, and even the very future success of your company.

To learn more about ReliAscent’s Government Contract Review services (or any of our contract management or accounting services), please contact us at any time. 

Topics: government contract management, government contract reviews

Government Contracting 101 - Part 5: How Does The Government Make You Pay Your Fair Share of Your Indirect Costs?

Posted by Brian Ormsby on Wed, Apr 26, 2017 @ 11:00 AM

 In a cost reimbursable job, we all know how the government will pay for direct labor and materials.  In these awards, they also pay for a “fair share” of your overhead (or indirect costs).  How does the government determine, and pay for, their “fair share” of your indirect costs?

Let’s start with the basics: when you bid on a contract, you figure out how much it is going to take (cost) to make the program work.  You add all your labor hours, materials, equipment, travel, etc.  These expenses are exclusive to this effort and therefore called “direct expenses”.  These costs can only benefit this one contract or, as the government calls it, a "final cost objective."  There is, however, a lot more that goes into running your business.  You have accounting costs, administration costs, printers, electricity, rent, etc.  These are called indirect costs because they benefit more than one final cost objective.  Where are these costs captured?  More importantly, how does the government determine what their “fair share” of these costs are?

The government determines their fair share by having the contractor calculate Indirect Billing Rates.    From a 30,000-foot level, these are complex calculations, determined by regulation, to allow the government to reimburse the contractor some portion of their overhead expenses.  In our next Blog Topic ‘What is an Indirect Rate?  Why would you have more than 1?’, we will go into the definition of indirect rates and how they are calculated.   This blog, however, is an introduction into the concepts of why we have indirect billing rates.

It is easy to take direct costs that you know you will need to run a program and add them up.  The non-direct or indirect costs can get a little more complicated.  If you have only one program and no other activity, then it would be easy; all your allowable indirect costs would go against your one and only program.  In this scenario, the government would know precisely that they were paying their fair share of your indirect costs because all your indirect costs would be the fair amount (since all efforts of the company support only one job).  But what if you have two, three or ten programs going? What if some of these jobs are commercial in nature?  How does the government determine what is fair from one program to another? 

The only way to do it would be to divide the indirect expenses by a fair, equitable determination of direct expenses in a way that creates a ratio that can be applied back to each program.  This denominator in the ratio is commonly called the “base”.  This process spreads all the indirect costs back into all the programs in a manner that is proportionate to the magnitude of each program, thus providing a fair share of indirect costs for each program.  If this is done correctly, the government can look at any of your programs and determine that the fair share of indirect costs is allocated to each and every program.  This can be a simple one rate structure for a small company (covering all indirect expenses) to a multiple rate system for larger companies, with rates for overhead, G&A, Materials & Subcontracting, On-site, Off-site and other potentially complicating evaluations. 

To follow the logic of the previous paragraph, we have created an example based on a one rate structure, using total direct costs as the basis of calculation and a total company indirect amount of $1,200,000.

  Project 1 Project 2 Project 3 Project 4 Company Total
Total Direct Costs $750,000 $200,000 $150,000 $500,000 $1,600,000
           
Indirect Applied $562,000 $150,000 $112,500 $375,000 $1,200,000
Indirect Rate 75.00% 75.00% 75.00% 75.00% 75.00%
           
Total Contract Cost $1,312,500 $350,000 $262,500 $875,000 $2,800,000


Using the example above, you can take any one of the projects and quickly see that project is assigned its fair share of the total company indirect costs.  So if Project 1 was commercial, Project 2 was a Government Agency A contract, Project 3 was a Government Agency B grant, and Project 4 was a Government Agency C contract, each agency would be able to view and verify that they were being assigned only their fair share of your total indirect costs.

Depending on the agency, there can be several checks that are instituted in your rating system.  Some agencies only allow you to rate current year using last year’s rates, some required forecast budgets to establish a provisional rate and then an end of year rate based on actuals to make adjustments.  Regardless of the system, each agency is attempting to ensure that they are paying the correct amount of indirect expenses that is fair to their contract and only their contract.

Of course, this is just a very simple example.  Most companies will have a more complex set of calculations where the base of the indirect rates is governed by many different regulations.  There are even some overhead expenses (and direct expenses) that are what the government deems “unallowable”.  The government will not reimburse for unallowable expenses of any kind (we will discuss unallowable costs in future blogs, and ReliAscent does have white papers on the subject as well---visit our White Papers and Checklists page for more information).

- Brian Ormsby, ReliAscent

 

 

 

Topics: Indirect Cost, indirect costs