Most small business government contractors and grantees are understandably focused on things like their direct work, avoiding a DCAA audit, or just delivering product &/or CDRL’s. Running a successful, growing business, on the other hand, is more than just your deliverables, or accounting and contract compliance. It takes financial planning, strategic management of your rates, project performance monitoring, and several critical business and financial management skills that most small businesses—and their accounting firms—simply lack.Read More
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ReliAscent® LLC is the only government contract accounting firm that specializes in all aspects of government contracting compliance. From our DCAA compliant accounting services, to monthly government contract accounting for all government agency awards, contract management & administration, and financial services & planning, our goal is to ensure the success of our clients, and all small business government contractors and grantees.
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Small businesses are the cornerstone of innovation in the US Government, and Federal Acquisition Regulation (FAR) Part 19 discusses Small Business Programs. It sets the size standards to be considered a small business, and it also sets the policies, coordination with the Small Business Administration (SBA), Small Business Set-Asides, subcontracting with small businesses, description of special categories of small business, etc.
Small businesses are on the leading edge of innovation. In fact, small businesses invent at a rate faster than large businesses. In a patent study, it was found that the smaller the company, the greater the number of patents per employee. This was found to be true all along the scale; as businesses grow, their patent to employee ratio declines. Small business accounts for 8% of all patents issued, but 24% of all patents in emerging technologies. The government is interested in emerging technologies as that is how they keep their competitive edge.
Because of this, and other factors, Congress has mandated that small businesses receive 23% of all Federal Government contracting dollars, including 5% of prime and subcontracts to Small Disadvantaged Businesses; 5% of prime and subcontracts to Women-Owned Small Businesses; 3% of prime and subcontracts to HUBZone Small Businesses; and 3% of prime and subcontracts to Service-Disabled Veteran-Owned Small Businesses.
There are some very specific programs designed to enhance the role of small business in government contracting. Here are a few of the major key programs:
Small Business Innovative Research (SBIR) Program
The SBIR program was established within the National Science Foundation in 1976 with the first awards issued in 1977. The program was well received and further established in 11 different agencies with the SBIR Development act of 1982. It is designed to enhance the role of small businesses in research and development that has potential for commercialization. The program has not only generated significant innovation in the country but also been recognized as a significant driver in overall job growth in the United States over the last 30 years. The non-dillutive funds have helped many small businesses succeed where they might have otherwise failed early on. Two large success stories from the SBIR program funding are Symantec and Qualcomm.
The SBIR program currently mandates the 11 agencies set aside 3.2% of their R&D budgets for the program. In 2016 this translated into 3,029 awards for a total of $1.35 Billion. The US Small Business Administration (SBA) serves as the coordinating agency for the SBIR program.
Small Business Technology Transfer (STTR) Act
Modeled after the SBIR program, STTR was established in 1992. The goal of the STTR program is to facilitate the transfer of technology developed by a research institution through the entrepreneurship of a small business concern. The program accepts proposals where small businesses partner with universities or research institutes. There are several qualifiers to this program as to the percentage of work performed, employment of the Principle Investigator, etc. In 2016 there were 567 awards for a total of $192 Million.
Federal and State Technology Partnership (FAST) Program
FAST programs are competitive grants programs designed to strengthen the technological competitiveness of small businesses. These funds are issues from the Federal Government to the state level where the program is managed.
The emphasis on using small business concerns doesn’t stop at the SBIR/STTR level. There are several other ways that small businesses can get involved in government contracting. Some contracts are set up specifically for small businesses (we will discuss these opportunities for small business in a special blog near the end of this series).
Federal contracting with small businesses is a win-win. Small businesses get the revenue they need to grow their businesses and create jobs, and the Federal Government gets the opportunity to work with some of America’s most innovative and nimble small businesses, often times with a direct line to the CEO.
- Brian Ormsby, ReliAscent
 Patent Trends among Small and Large Innovative Firms during the 2007-2009 Recession, Anthony Breitzman, PhD. May 2013.
In this first of a 9-part series, ReliAscent's Brian Ormsby, introduces his "Government Contracting 101" blog series. Topics covered range from DCAA and DCMA compliance, to indirect rates, unallowable costs, government contract management, and funding & commercialization. We hope you find this series useful, and come back each week to catch Brian's latest blog!Read More
I saw an article in a Defense E-Brief from NDIA this week entitled “Pentagon Will Demand ‘Fair Prices’ From Commercial Vendors”. The essence of the article is that apparently the Defense Department is starting to ask for cost & pricing data from vendors supplying commercial items. The Defense Department, of course, is saying that this is an exaggeration by industry and they are not doing anything different than they have done in the past. They claim that there are two types of commercial items: “commercial items” and “commercial of a type”. The first type are normally undisputed as these are items that are sold in the open marketplace and the government pays the market price for acquiring these items. The government spent $60 Billion last year on these types of purchases. This might include items like office supplies, commercial computer systems, etc. The issue seems to be with the “commercial of a type” items. These are items that might be similar to commercial items but not sold to the general public. In this case, the government is the only customer, the government wants to make sure they are paying a fair price. Examples of this might be a high tech product developed for the commercial marketplace and then slightly modified to sell into a specific government application. The vendor views this as the product was developed with money from the private sector and therefore a commercial product. The government is contending that the company may be overcharging for the modifications and therefore the government is paying more than they should. The result is the government will ask for cost & pricing data to validate the price in these instances.Another area where this comes into play is when the vendor sells the product only to the government. Even if they have been selling this product to the government for many years, that doesn’t mean that it is commercial pricing when the government is the only customer. In the past, the government may have looked the other way but now that budgets are so tight, the contracting office is looking at the pricing on items that have only been sold to the government to make sure the pricing is fair. Previous pricing levels will not be automatically accepted as fair in these instances and vendors should be prepared to validate their pricing on other basis. For a few vendors, this may prove difficult, especially if they have not used a traditional government pricing model to generate pricing. Using a FAR & DCAA compliant accounting system would help with this effort but is not the only answer. There is a term I have been familiar with in my career called “Basis of Estimate”. This implies a justification, including hard documentation, for the pricing levels. This is very difficult to come up with after the fact. Companies need to be aware of this prior to the first sale. I call it good business practices. If government contractors do this, they would be in a good position in the future to support their pricing and achieve the established price. Contractors that don’t have a solid basis of estimate may be faced with price reductions and/or loss of contracts. Yes, the government may be changing slightly what they are doing but they are not doing anything that has not been a requirement for years. The government contracting arena is changing and in order to play the game, government contractors need to understand and play by the rules.
There are obviously many changes occurring in the Government contracting marketplace over the last couple of years. You don't have to think back too far to remember the threat of canceled contracts due to Sequestration or the Government Shutdown. The military draw down in Iraq and Afghanistan and the mandated reduction in defense spending have had an effect on all government contractors.
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 government shutdown was ended on October 16th by implementation of a continuing resolution to fund the government until January 15, 2014 (H.R. 2775). Everyone breathed a sigh of relief and all federal workers returned to the workplace. That is all well and good but does this mean business as usual? How will this affect the small businesses across the country that are known as government contractors? The question that most small businesses are asking is how it affects them and if it will cause a disruption in either business as they have known it or will it disrupt their cash flow?