Archive for January, 2010

Who’s Capturing the Largest Share of Army Dollars? Underlying Subsidiaries Bring in Big Dollars.

Friday, January 29th, 2010

We all know the names of the largest prime contractors doing business with the federal government, but seldom do we get to analyze the market share of separate reporting units of those large organizations. To get such an idea, we separated out large prime contractors such as Lockheed, SAIC, Northrop Grumman, and Raytheon (to name a few) by their individual reporting units.

The Fedmine report we prepared (Top 100 Individual Prime Contracting Entities by Market Share at the Dept of Army) compares single whole corporations or the individual subsidiaries / reporting units of large parent organizations (as indicated by distinct DUNS numbers; aggregate parent entities were not included). The report covers a 7 year period at the Department of the Army, including the current fiscal year as of January 26, 2010. The top contractor may come as a shock, because it is an entity not among the large organizations named above. This top contractor is not entirely unknown, but it is a name one might use as a “lifeline” to “phone a friend” in a quiz contest such as “Who Wants To Be A Millionaire”. (more…)

The Verdict is in; More Awards are Protested but Less Protests are Sustained

Thursday, January 28th, 2010

According to the statistics recently released by the General Accounting Office (GAO), 1,989 protests were filed in calendar year 2009, a 20% increase over 2008.  Some have conjectured that the economy has motivated more losing bidders to file protests.  However a significant part of the increase is due to changes in the regulations which allow different types of procurements to be protested to GAO.  Protests involving task order awards, A-76 outsourcing decisions, and Transportation Security Administration procurements accounted for a large percentage of the increase.

Though the number of protests are up, the percentage of protests sustained by GAO actually decreased.  GAO decided 18% of the protests in favor of the protested, compared to 21% in 2008.   This is a sign the increase in protests is not attributable to an increase in poorly conducted procurements.  Of course, a protest can be beneficial to contractors even if they don’t technically win.  Often incumbent contractors protest and are able to continue work on their contract while the protest is being decided.  That can result in months of additional revenue and profit even if they ultimately lose the protest.

DC Announces Joint and Married Filing Separately Options for Domestic Partners and Same-sex Spouses

Wednesday, January 27th, 2010

On January 12, 2010 the District of Columbia’s Office of Tax and Revenue (DC OTR) announced that individuals who are registered domestic partners in the District or are in similar relationships from other jurisdictions or will be able to file jointly, or married filing separately, on a combined return for the tax year 2009. Further, subject to approval by the U.S. Congress, expected by March 2, 2010, same-sex individuals who were married in other jurisdictions will be able to file jointly, or married filing separately, on a combined form for the tax year 2009. To avoid having to file amended returns later, same-sex spouses are advised to defer filing their DC personal income returns until after March 2, 2010 . (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.

Government Contractors, Pay Your Taxes or Else!

Friday, January 22nd, 2010

President Obama continues to target tax delinquent Government contractors.  In December 2008 the FAR was modified to require offerors to certify whether or not they owed any delinquent taxes.  See FAR 52.209-5.  On January 20, 2010, the President ordered the IRS to review the contractor tax payment certifications for accuracy.  The IRS and OMB as well as other Federal agencies were further tasked to develop a mechanism to prevent tax delinquent contractors from receiving federal contracts.  Contractors can already be debarred or suspended for failure to pay taxes.  See FAR 9.406-2 (b) (5) (v).  To improve both compliance and enforcement, the President wants the IRS to be able to share tax information with other Federal agencies, perhaps in a shared database.

The bottom line is that if you dance to the music, you should pay the piper.  It seems axiomatic to say that if you make your living off of tax payer dollars, you should pay your own taxes.  And definitely don’t certify that you have paid your taxes if in fact you have not.

If you have delinquent taxes or tax return filings, it is important to get them current before it costs you your contract. For help in these matters, please contact Aronson & Company’s Tax Group directly: Mark Gossart, Officer: (301) 231-6278.

Important Tax Updates! 2010 Federal Estate Tax and Roth IRA

Thursday, January 21st, 2010

Aronson & Company’s Tax Services Group is pleased to share with you these two important tax alerts to help you remain informed and up-to-date!

The Temporary 2010 Federal Estate Tax Repeal
Do you need to make changes to your existing estate plan? Thanks to delays in Congress, the temporary federal estate tax repeal for 2010 has actually happened, at least for now. The failure of Congress to act in a timely manner has created an unprecedented uncertainty in the world of estate planning. Although many believe that Congress will reinstate the estate tax in early 2010 and make it retroactive to January 1, 2010, nothing is definite.

New Roth IRA Conversion Opportunities
Many individuals will have a significant new retirement and estate planning opportunity beginning in 2010. Previously, individuals with modified adjustable gross income of more than $100,000 were not permitted to make Roth IRA conversions. The May of 2006, Tax Increase Prevention and Reconciliation Act (TIPRA), however, changed the Roth IRA conversion rules. (more…)

DOD Contractor Compliance Crackdown! Payments Could Be Withheld Up to 50%

Tuesday, January 19th, 2010

A proposed rule released by the Department of Defense (DoD) on January 15, 2010 will provide contracting officers the authority to withhold payments on cost reimbursable type and time and materials type contracts as a response to address business system deficiencies.  The draft rule adds a clause to contracts requiring contractors to certify that they have no major defects in their contractor business systems defined as: accounting systems, estimating systems, purchasing systems (CPS), earned value management systems (EVMS), material management and accounting systems (MMAS), and property management systems. This DoD’s proposal to amend the Defense Federal Acquisition Regulation Supplement (DFARS), continues the crack-down on contractors increasing regulations and potential penalties for contractors with deficient business systems.

The draft rule identifies contractor business systems and internal controls as the first line of defense against waste, fraud, and abuse of tax dollars. The objective of the rule is to improve the effectiveness of Defense Contract Management Agency (DCMA) and Defense Contract Audit Agency (DCAA) oversight of contractor business systems. The requirements of the rule will apply to entities contractually required to maintain one or more of the defined contractor business systems listed above. If deficiencies are identified in the systems and the contractor does not implement corrective action within 45 days, the proposed rule allows contracting officers to withhold up to 10% of each of the Contractor’s payments on cost reimbursement, time and materials, and labor hour type contracts for each system up to a maximum of 50%. (more…)

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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Laid Off Employees Catch a Break; COBRA 65% Premium Subsidy Extended

Monday, January 18th, 2010

President Obama recently signed a new law extending the COBRA subsidy that was previously enacted by the American Recovery and Reinvestment Act of 2009.  Under ARRA, employees that are involuntarily terminated and lose employer-sponsored health insurance between September 1, 2008, and December 31, 2009, are eligible for the subsidy. Employees that are involuntarily terminated for gross misconduct are not eligible for the subsidy. Subsidy eligible employees are responsible for only 35% of their COBRA premiums. Employers are initially responsible for the remaining 65%, but have these amounts refunded as a credit when payroll taxes are remitted.

The new law extends the cut-off date by two months until February 28, 2010, and extends the eligibility period from nine months to fifteen months.  Employers will be responsible for providing notices to laid-off workers. This includes workers that previously lost the subsidy who will now have additional time to pay the reduced premium.  For additional information or assistance please contact Mark Flanagan of Aronson & Company’s Benefit Plan Services Group via email or at 301-231-6257.

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…)