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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I have had several calls this week from small businesses that are interested in doing business with the Federal Government but they obviously don't know how to or where to start. While many of the same basic marketing and selling techniques that are used successfully in commercial companies apply to government contract opportunities, there may be some nuances that are not obvious.
Is it just me or is anyone else getting tired of hearing the Federal Government threaten to shut down? It seems to happen every 3 or 4 months any more. The problem usually boils down to the Democrats and Republicans not being able to get along and play in the same sandbox so they just threaten to "do nothing" so that the government will shut down. "That ought to get a response", just like it did when you were in kindergarten. One side threatens some catastrophic event in order to draw everyone's attention to the issue (or really draw attention to themselves I think). "When the government shuts down, everyone will realize that I was right and we will get our own way"! Well, it rarely works that way in the real world. I find the parallels to today's politics to the politics of kindergarten to be alarming.
The other day I talked about how there could be a lot of funding released in the next 3 months. I think there is some evidence already of this activity beginning. For instance, in the last week the US Army announced they have issued a 5 year multiple award contract totaling up to $7B. There were 8 companies chosen and now each of these companies can compete for task orders under the multiple award agreement. Granted, this is not yet a release of funds (until one of the 8 wins the first task order) but it shows that things are starting to happen. Here is a sample of other announced major awards from the last several weeks:
There has been no shortage of news and writing about Sequestration and how that is affecting Federal Contracts. As the dust begins to settle it is becoming obvious that some of the loudest complaints about Sequestration could have been just political positioning. For instance, Dr. Stephen Fuller of George Mason University indicated last week that the cuts in the 2012 Federal Budget were more severe than the Sequestration cuts of 2013. Certainly things like threatening to shut down air traffic control are done in a grandstanding manner to draw attention to certain areas and create public sympathy for the agency facing budget cuts. There are beginning to be more and more examples of the amount of political positioning that was going on in the name of Sequestration. There also are other consequences from Sequestration that perhaps are less publicized.
I thought with all of the "doom and gloom" news lately that we should focus on some good news for a change. There are still opportunities for small business in the Federal Government contract space. I did just read today that China is increasing their defense budget a modest 10.7% this year. While this seems large compared to the decline in the US defense budget, China's total budget for defense is about 1/6th the US budget, even after Sequestration. As they are the 2nd largest defense spender world-wide, and growing, this will serve as a "caution" flag for continued reductions by Congress of the US budget. In contrast, India's defense budget has steadily seen smaller and smaller increases over the last 3 years from 17.6% two years ago, to 11.6% last year to 5.3% this year. Clearly they are seeing a slowing in defense spending too. Clearly there is a world-wide trend to spend less on defense budgets.
Sequestration is set to take effect one week from today, Friday March 1, 2013. Meanwhile, congress is on vacation. Even if they come back ready to work next week, there are no current proposals being negotiated and it seems highly unlikely that a resolution will be reached before the magic date. Meanwhile various departments within the government continue to make plans for the worst scenario. Yesterday, Defense Under Secretary for Acquisition Frank Kendall released a memo authorizing Defense Department personnel to start talking to industry about implementing $46Billion in additional cuts over the next 7 months. Meanwhile, on Wednesday, Under Secretary of Defense and Chief Financial Officer Robert F. Hale and acting Under Secretary of Defense for Personnel and Readiness Jessica Lynn Wright held a press briefing related to plans for furlough planning. Under Secretary Hale indicated that the furloughs would only account for about $5B of the $46B in cuts required by Sequestration. Combine this with protecting the war-fighters in Afghanistan and some areas of the Defense budget will come under more pressure for higher than expected cuts.