There are many stories out there about contractors that feel they were either bullied or treated unfairly by the government. Certainly, government contracting is not for everyone and a special set of rules apply. We heard a story recently about a client of ours that had a very bad experience with the government. It seems that in closing out a contract that the DCMA issued a directive for the client to refund $91,000 to the government. Refunds and cost overruns are always difficult for contractors to deal with but in this case the contractor only received $30,321.77 of revenue on the contract in question! The reasons are not yet clear but it does put a tremendous burden on the small business to prove their case. In this example (see the blog titled "In the Middle...." dated April 7, 2011), it seems that common sense should prevent excessive legal fees from being spent. So how can you avoid this type of scenario from happening to your company? Certainly one issue is to make sure your accounting system is in complete compliance with the DCAA and government requirements. The next most important lesson is to make sure that you actively "manage" your indirect rates during the course of the contract. This is a technique that is very specialized but very necessary to avoid this type of situation.
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