With the budget crisis and Sequestration grabbing all the news headlines, people may not notice some changes in the rules of the game for government contracts.
Last Thursday the Defense Department announced a temporary (hopefully) policy to slow payments to prime contractors to try and preserve their cash flow. The budget is so large in the DoD that by slowing payment only a few days could result in adding about $1B to the available cash in the department. That is actually a sound business decision. We have all seen corporations that increase their A/P cycle and reduce their A/R cycle to increase their cash flow. That is really all this is doing. The problem is that traditionally the government was slow to pay in the first place. That had changed somewhat in the last year or so with the Government's Quick Pay initiative. This initiative originally was designed to pay small business faster (as fast as 15 days from submittal of a properly prepared invoice) and was installed as a temporary 1 year program. The Policy announced last week seemingly cancels out that initiative.
In a related action, the Under Secretary of Defense for Acquisition, Technology and Logistics announced that Accelerated Payment to Small Business Subcontractors is rescinded (Clause 52.232-99).
The Homeland Security Department is proposing to amend their Acquisition Regulations to require time and material or labor hour contracts to include separate labor rates for subcontractors and change the method used to record labor hours for both contractors and subcontractors.
The Defense department is looking at two new changes:
- Requiring vendors to safeguard unclassified information on their systems
- Creating a checklist for contractors to complete under solicitations that require the submission of certified cost or pricing data.
In addition, there are numerous proposed changes in the FAR right now:
- Performance of inherently governmental and critical functions.
- Organizational Conflict of Interestas required under the 2009 Defense Authorization Act.
- Privacy training for vendors to ensure they meet the requirements to handle and protect personally identifiable information (PII).
- To safeguard contractor information systems that contain government or other public information.
- Additional guidance for when agencies should raise the ceiling price or change the scope of work for T&M or labor hour contracts.
There are always changes in the landscape of Federal Government Contracting. Most small businesses need help staying current with this. Use ReliAscent as your experts in this area.