Many times a small business may be working on a government contract and they may not realize they are working on a government contract since they are not contracting directly with the government. This situation is called a second tier government contract, or a case where the company is a subcontractor (or sometimes a supplier) to a Prime contractor. In this situation, the company is not completely relieved of all the government’s rules and regulations. Almost all government contracts have what is called “Flow-Down” requirements. This is a case where the Federal Government gives mandatory flow down clauses in their contract to the prime and then requires that the Prime contractor pass this requirement along to all of their subcontractors (& sometimes to suppliers) and many times these must be passed on down the chain.
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Running a small business is a challenge. I saw a statistic the other day that less than half of small businesses survive to see their 5th birthday. If it isn't enough facing challenges of cash flow, business development and infrastructure to confront the new business owner there can be other obstacles like compliance with government regulations. Government regulations take many forms and meanings to the small business, depending on your business line and even your customer list. A "standard" small business must concern itself with loans (bank, SBA, Angel funding, etc), taxes, municipal regulations, rent, lines of credit, equal employment regulations, minimum wage guidelines, vacation time, mandatory sick leave, cash flow, health care for employees, insurance and a myriad of other complex situations. For instance, if you are a government contractor, you open yourself up to a lot more regulations. When your customer is the US Government, there are regulations to go around that make things more complex. Things like the Federal Acquisition Regulations (FAR), the Code of Federal Regulations (CFR), the Office of Management and Budget (OMB) directives, Agency directives, Defense Contract Audit Agency (DCAA) regulations and Defense Contract Management Agency (DCMA) to name a few can add layers of complexity on the small business.
What a great feeling it is to find a $20 bill in your jacket pocket. It’s a happy surprise many of our clients have come to experience, only the cash they find lingering in the corner of their contracts could be amount to tens of thousands of dollars.
The Directorate of Defense Procurement and Acquisition Policy (DPAP) has requested input on the statutes and regulations that govern the purchasing process. Originally the DPAP requested all comments 30 days from the announcement on February 12th. Many industry organizations, including the National Defense Industry Association (NDIA), pushed back and the DPAP office has granted another month to solicit opinions. The new deadline for comments to the DPAP office is April 23rd. The DPAP office is looking primarily for:
Late last year the Federal Government changed the Federal Acquisition Regulations (FAR) to make mandatory accelerated payments to small business, especially from certain agencies. This began with policy directives by the Office of Management and Budget (OMB) Memoranda M-12-16, dated July 11, 2012, and M-13-15, dated July 11, 2013. These policies were incorporated into the FAR on November 25th, 2013. The new rule requires prime contractors to make accelerated payments to subcontractors and is found in the following FAR clauses:
Many small businesses are looking to the Federal Government for either a solid first market or a market expansion for their business. I think the Federal Government is a good customer to have, as long as you understand the pros and cons of doing business with this customer (in other words, the risks).
In the past we have talked about DCAA compliance on Federal Contractors and focused mainly on the accounting system. Many times some of the auxiliary systems get either "swept under the rug" or assumed that they are not a big issue. These auxiliary systems include timekeeping, invoicing, subcontracting among others. Obviously these systems utilize the accounting system and data but they also have regulations and must be done properly in order to maintain compliance. Today I would like to focus just on the Invoicing part.