Archive for the ‘New Year's Resolutions’ Category

BUDGET CUTS Are Coming … DC-Area Contractors WILL Feel It!

Tuesday, August 10th, 2010

A Department of Defense budget proposal could eliminate more than 6,100 jobs in Virginia.  Defense Secretary Robert M. Gates announced a proposed budget that will close the U. S. Joint Forces Command (JFCOM), a major employer with over 1 million square feet of real estate in Norfolk and Virginia Beach, VA.  As reported by The Washington Post on August 9, 2010, the proposal will also slash the Pentagon’s budget for military contractors over the next three years, significantly impacting the economy of the Washington region. Stephen Fuller, Director of the Center of Regional Analysis at George Mason University commented (more…)

Obama to Announce Discretionary Spending Freeze – Dollars Available to contractors Will Shrink Substantially

Tuesday, January 26th, 2010

President Obama is expected to announce a three-year freeze on non-security, discretionary spending in the State of the Union address this Wednesday, January 26th, according to CNN. The three-year freeze will hold discretionary spending at the current level of $447 billion, about one-sixth of the federal budget, with a goal of creating savings of $250 billion.  The freeze does not include defense, homeland security or the so-called “entitlement” programs such as Medicaid and Social Security.  Congress will be able to shift funding from one program to another within that amount.

Aronson predicted such a drop in discretionary spending in our January 15th, New Year’s Resolution’s post: Resolution #10: We Will Prepare for the Inevitable Government Contracting Economic Crisis. Combined with the federal deficit, a drop in discretionary funding  means an economic crisis in the government contracting industry.  As noted previously, it is critical that you start to develop a contingency plan now as very few areas will be immune from the shrinking pool of money. See the key areas to incorporate in your contingency plan here. Aronson’s Government Contracts Services Group can provide  information and assistance succeeding in these tough times – contact Lexy Kessler, Lead Officer via email or at 301.231.6218.

2010 Resolution Recap

Monday, January 18th, 2010

During the first weeks of 2010 we shared our second annual “New Year’s Resolutions” for government contractors to get on track, get in compliance, and get ahead.  Did you catch it?  If not, don’t worry – you can access the 2010 and 2009 resolutions under Categories: New Year’s Resolutions.  While you’re here, subscribe to our Fed Point RSS Feed – and have the news delivered directly to you! (Click here to learn more about RSS).

Here’s a 2010 resolution recap:

• Resolution #1: We Will Avoid Jeopardizing Contract Awards by Getting Our Accounting System Approval–Ready
• Resolution #2: We Will Complete Required Contract Reporting Accurately and On-Time (Subcontractor/ Stimulus/ VETS100/ eVerify Reporting)
• Resolution #3: We Will Assess Our Tax Risks and Support Our Tax Accounting Positions
• Resolution #4: We Will Review our Pricing Annually to Avoid GSA Schedule Price Reductions Ramifications
• Resolution #5: We Will Ensure our Compliance Program is Robust Enough for Government Work (Code of Business Ethics and Conduct)
• Resolution #6: We Will Eliminate Redundant Work and Erroneous Reporting (Deltek)
• Resolution #7: We Will Stay the Course and Protect Our Most Valuable Assets to Ensure Long-Term Success (Insurance)
• Resolution #8: We Will Finance Our Business More Effectively – Best Practices for Managing Loan Covenants
• Resolution #9: DCAA Hot Button – Bonuses
• Resolution #10: We Will Be Ready for the Inevitable Government Contracting Economic Crisis

Looking for more information or assistance implementing any of these items?  Contact Aronson & Company – Hope Lane, Lead Officer, Government Contract Consulting Practice at 301.231.6266 or Pete O’Neill, Officer, GSA Schedules Group at 301.222.8226.

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Resolution #10: We Will Prepare for the Inevitable Government Contracting Economic Crisis

Friday, January 15th, 2010

By 2013 it is projected that the percent of the Federal budget available for discretionary funding will drop to 31% .  That means out of the entire Federal budget only 31% of the dollars will be available to fund homeland security, the new proposed health care plan and everything else. This combined with an ever growing Federal deficit, highlights that it is a only matter of time before the dollars available to contractors will shrink substantially.

To give some perspective into what this precipitous drop in discretionary funding means, in 1984 45% of the Federal budget was available for discretionary dollars. The Federal budget is a pool of dollars that is broken into two buckets. Mandatory spending which is comprised of social security, Medicare and interest costs and discretionary spending which contains the pool of dollars that is available for everything else including dollars to be awarded to contractors that do business with the federal government. If the pool shrinks, what does that mean to our industry?

What this means to our industry is we will experience our own economic crisis.  A crisis that will not garner the front headlines of the national news, but a crisis that will threaten the livelihood of businesses in which only the fundamently strong will survive. It is critical that you start to develop a contingency plan now as very few areas will be immune from the shrinking pool of money.

Some areas to incorporate in your contingency plan: (more…)

Resolution #9: We Will Document Our Bonus Plans

Thursday, January 14th, 2010

Employee bonuses have always been on DCAA’s radar but even more so under current conditions. Contractors are encouraged to not rely on a long standing history of awarding bonuses as a basis for considering it as an allowable cost.
Written bonus plans where the criteria for award are clearly understood by the employees are the best assurance that a contractor has for acceptance of such payments as allowable cost. Today bonuses are expected to be performance related and therefore not generally considered part of the fringe package as in previous years. There is a place in the fringe pool for spot awards, if defined in the bonus plan, however, generally the expense should follow the person being awarded the bonus. Casual/beneficial guidelines would indicate the overhead pool for direct and full time overhead personnel and G&A for employees that generally charge G&A.

Care must be taken to show that the bonus award is determined by performance. This may be as simple as using annual evaluation rating for the rank and file, but more specific criteria would be used for management personnel, specifically something they have control over such as maintaining direct labor, client feedback on performance, maintaining budgets and resulting indirect rates, etc.

Executive bonuses may be more specific and include maintaining financial ratios, achieving new business goals as well as contractor specific goals. Under no circumstances should profit be an evaluation criteria as it might be seen as a distribution of profits and therefore unallowable. Bonuses for owners of the company must be explicitly measurable so as to be allowable and be reasonable.

Contractors are reminded to periodically review the DCAA Contract Audit Manual for current evaluation and audit procedures for all costs recorded on their books.  Still not sure, Aronson can help. For assistance contact Nicole Mitchell at (301) 222-8231 or nmitchell@aronsoncompany.com.

Resolution #8: We Will Finance Our Business More Effectively

Wednesday, January 13th, 2010

By Timothy J. Duggan, Senior Vice President, SunTrust Bank Technology & Government Division

Managing Loan Covenants – Some Best Practices to Consider

Loan covenants are often an important part of your Bank’s credit agreement. While at one level covenants may seem to be a nuisance, they are frequently a necessary part of the deal that delivers to you inexpensive and relatively flexible access to debt capital. Rather than thinking of them as a nuisance, negotiating covenants can be used to your advantage to build a better relationship with your bank by helping the bank to develop a deeper understanding of your business objectives. For this reason it pays to give some thought to how to manage them from creation through monitoring, reporting and of course compliance.

When negotiating your credit agreement, keep in mind that most bankers use covenants not as litmus tests but as road markers on the path you originally projected your business to take. Take the time to be sure your banker knows what your business objectives are and how the requested credit facilities will help you achieve them. Discuss variables that could impact your Profit & Loss statement and balance sheet during the life of the facility, as well as any resulting impact on covenant levels (sensitivity analysis). Against this background, work proactively with your banker to develop covenants that make sense to both of you (reasonable and achievable for you, meaningful as a risk management tool for the bank). Ask your banker questions: Which covenants are most important to the bank? Why? How would the bank react to a covenant violation? The idea is to create a framework of understanding by both parties about what is important, what variables could affect covenant compliance, and try to develop an understanding of what reactions to expect. (more…)

Resolution #7: We Will Stay the Course and Protect Our Most Valuable Assets to Ensure Long-Term Success

Tuesday, January 12th, 2010

By Joseph “Jody” Buyalos, ACBC, The Insurance Exchange, Inc.

Don’t let a short term gain sacrifice your long term future. Protect the most valuable assets – family, business, employees, health, income, etc. In these tough economic times everyone is looking for ways to trim the budget and all the dollars spent insuring your assets may look tempting. But… insurance is pennies on the dollar.

You probably know people that have had to declare personal bankruptcy because they dropped their health insurance thinking they would save a few bucks and then – wham a major illness out of the blue! Or the business-person that thought they could reduce their costs by going “bare bones” on business insurance and reducing limits to the point of being grossly underinsured (or worse yet dropping a coverage) and then a major fire, lawsuit, or claim forces bankruptcy. Or the major breadwinner drops the disability policy and then a few months later goes out on disability with no paycheck or income replacement. Or a parent drops their long term care policy and then mom or dad needs to go to a nursing home due to a stroke or Alzheimer’s. Or the worst situation, last year our insurance agency had a 43 year old man that was a very successful businessman who ran into some hard times and decided to “temporarily” cancel his life insurance and ended up dying of cancer 4 months later leaving his wife and 3 kids penniless and in debt. We see it all.

This is not time to play Russian Roulette and risk losing everything that you have worked so hard for. Take the time now to evaluate the cost of your insurance and to make smart decisions about getting the best value without sacrificing your coverage.  Contact Joseph “Jody” Buyalos, ACBC (Advanced Chartered Benefit Consultants) at The Insurance Exchange, Inc. (more…)

Resolution #6: We Will Eliminate Redundant Work and Erroneous Reporting

Monday, January 11th, 2010

Although spreadsheets are relatively quick solutions allowing for easy modification and manipulation of data, they are also notoriously known for being loosely linked databases which can lead to erroneous reporting of information. Not to mention, the time spent on keeping them up to date is often overlooked.  How much of your organization’s information ends up being reported using Microsoft Excel? How did the data get there? Chances are that someone has been tasked to manually enter and maintain this data that is already captured in your Deltek GCS Premier or Deltek Costpoint accounting system.

Why not consider a long-term, cost and time efficient solution to publish reports using Cognos Impromptu or Cognos 8 reporting engines.  This will allow information to be pushed to your audience in a variety of formats. A great deal of time can be saved over months by not having to manually enter data into Excel every time a report needs to be distributed.  A small investment of time to learn report writing basics can afford you… (more…)

Resolution #5: We Will Ensure our Compliance Program is Robust Enough for Government Work

Friday, January 8th, 2010

The success of your company may depend on the strength of your compliance programs in this era of increased oversight.  In December of 2007 the FAR was amended to require most Government contractors to adopt a Code of Business Ethics and Conduct, promote compliance with the Code, and implement internal controls designed to detect and prevent unethical behavior.  In December of 2008 the FAR was further amended to require mandatory disclosure of certain “ethical” violations.

Every Government contractor, regardless of size, should review their compliance program to ensure that it meets the new requirements.  Even small Government contractors that are nominally exempt from the FAR requirements should adopt a code of conduct and implement a compliance program commensurate with their size.  Firms that operate without a compliance program are taking a big and unnecessary risk.

Contact Aronson & Company at 301-231-6237 if you have any concerns about implementing your own government contract compliance program.

Resolution #4: We Will Review our Pricing Annually to Avoid GSA Schedule Price Reductions Ramifications

Thursday, January 7th, 2010

Discounts to your pricing may have unintended legal and financial consequences.  Did the 2009 economy lead you to offer discounts to your non-federal customers?  For GSA Schedule contract holders, these discounts may have inadvertently impaired your GSA prices and may potentially result in refunding money to the government.  Clause 552.238-75 Price Reductions in your GSA Schedule contract requires you to maintain a discount relationship, offering GSA the same or better discounts as your Most Favored Customer (MFC).

The economy has caused the price concerns we explained in last year’s resolutions to continue to encouraged businesses to become more streamlined and offer competitive pricing.  As we discussed last year in our resolutions, the short of it is …  if you offered lower pricing to your Most Favored Customer, or established a new Most Favored Customer as a result of new discounted pricing,  you need to give GSA a comparable discount so as to not disturb your GSA price discount relationship.

At this time most people ask where all this price discount relationship information is documented.  (more…)