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Considerations and Resources for Approaching SF 1408

We’ve mapped out the requirements of SF 1408, and we’ve distinguished the pre-award survey from other accounting-related reviews, but we’d like to offer some key considerations and resources for navigating SF 1408. There are basic questions to ask to find out where your business is, and there are some great resources you can use to move forward once you know your position.

Questions to Ask Before an SF 1408 Pre-Award Survey

When you have definite, concrete answers to the following questions, you’ll know that your business is ready to undergo the survey; if not, you’ll be better positioned to set a plan on the areas you need to improve.

  • Have we completely aligned our accounting records and accounting procedures with the principles outlined in the GAAP (Generally Accepted Accounting Principles)?
  • Are all indirect costs separated from direct costs in our ledgers? Do we have additional segregation between unallowable costs and indirect/direct costs?
  • Have we set up a timekeeping system that abides by DCAA standards and has proven to be operable and accurate? Can it pass an audit in theory and practice?
  • Are our employees prepared to pass a DCAA floor check audit?
  • Have we set up our timekeeping system accordingly? Do our employee time cards match up with specific job cost summaries, paycheck details, and the billing invoice?
  • When it comes to travel expenses and documentation, have my employees been abiding by the JTR (Joint Travel Regulations) guidelines?
  • Have we done a thorough job of outlining all company policies and procedures? Are our employees following them? Does each employee have a genuine understanding of policies external to our organization (i.e., FAR)?

If you can’t answer a definitive “yes” to any of these, then you’ll want to focus on that area and bring it up to code. Although failing a pre-award survey isn’t the end of the world, it doesn’t make your job any more manageable, and it can hinder your company’s ability to carry out vital wins and contracting projects.

Some Resources to Help with SF 1408

Most government contractors preparing for an SF 1408 are new to the industry, and they often don’t know where to access the right documents to help them prepare. So, before starting a survey, businesses can use the following documents to help set their agenda and direct their efforts.

  • The Pre-Award Accounting System Adequacy Checklist: This checklist covers everything your business needs to do to pass an SF 1408 survey. Whether you’re new to government contracting, new to cost-reimbursement contracts, or receiving progress payments, this document covers it all.
  • The Incurred Cost Submission Adequacy Checklist: To guarantee compliance under the FAR contract requirements, you need accurate documentation of incurred costs (direct/indirect). This checklist will help you assess those needs and address any necessary improvements.

These resources will give you a better understanding of what’s needed for a proper accounting system in government contracting and how to maintain continuous compliance. If there’s an area you’re not quite sure about, you can always reach out to your administrative contracting officer (ACO) for help.

One of the best actions you can take to prepare your business for a pre-award survey, an accounting system review, or any other type of audit is implementing a technology to do the heavy lifting for you. When you move your accounting, HR, timekeeping, and resource planning to Microsoft Dynamics 365 for Government Contractors, you can expect a new level of safety when it comes to these processes. Because the software can be designed to match all government contractors’ requirements, the pressure of audits and reviews is lifted, and you can operate soundly without having to worry when the DCAA or DCMA comes knocking.

If your company is thinking of migrating its internal systems to a more effective and transparent software, reach out to GovCon365 today. If you have any comments or questions, don’t hesitate to ask them in the comments below. We’re always here to help.


Checking In On Contracting Purchasing System Reviews

The requirements for an approved Contractor Purchasing System (CPS) have become increasingly important, with many contractors being the focus of reviews from the Defense Contract Management Agency (DCMA). In light of this emphasis, GovCon365 wants to give an overview of these reviews, their regulations, how they’re conducted, and resources for contractors, including how Microsoft Dynamics can remedy many of the hardships behind CPSRs.

What is a Contracting Purchasing System Review (CPSR)?

At its base, the aim of a CPSR is twofold; first, it allows government officials to review how contractors are spending government funds, and second, confirm that they’re abiding by government policy around subcontracting. Once the review has been finalized, it presents the materials for the DCMA to evaluate purchasing systems and offer their recommendations on necessary improvements where they’re appropriate. Ultimately, an administrative contracting officer (ACO) will review an organization’s operations to determine whether a purchasing system gets approved or not.

What Regulations Govern CPSRs?

There are five regulations under DFARS and FAR governing CPSRs, each intended to evaluate and satisfy purchasing system criteria.

  1. FAR, Part 44.302
    • Requirements for CPSR Initiation: When sales to the federal government are projected to exceed $50 million within 12 months, an ACO will give a review to determine the possibility of a full CPSR.
  2. FAR, Part 44.3
    • Review and Consent: The ACO can inform other contractors/subcontractors of the approval status of contractors they are either in partnership with or on a job with, and prior consent is required. This helps promote transparency and accountability during the review process.
  3. FAR, 52.244-2
    • Subcontracting Clause: In most cases, consent to work with subcontractors after approval is not required; however, there are cases under this regulation that do need consent.
  4. DFARS, 252.244-7001
    • CPS Administration and criteria: DFARS has a 24-item list of criteria for reviewing purchasing systems, which the DCMA goes through during their review and provides the ACO with dedicated responsibilities.
  5. DFARS, 252.242-7005
    • Finalization: As one of the primary business systems for contractors, CPSs that do not get approval are subject to financial withholdings, prominent administration fees, and potential fines. The exact details of a negative review determine the extent of withholdings and so on.

How Does the Government Conduct a Review?

Depending on the complexity and timeframe outlined by the DCMA — and the DCAA if their services are requested — there’s a six-step process for CPSRs.

  1. Obtain and review procedure documents/files, as well as examine price competition.
  2. Obtain sales data, pricing policies, pricing techniques, and other related documentation.
  3. Once the necessary documentation and filing have been obtained, the DCMA will conduct an entrance briefing.
  4. They will then begin reviewing purchase order subcontracts at the contractor’s planning, their various award levels, subcontract management, flow-down clauses, types of contracts used, procedures for subcontractor responsibilities, and any other methods and policies for their engagement with small business subcontractors.
  5. During this time, they will schedule daily reviews with personnel and divulge any important findings.
  6. Finally, the DCMA will perform an exit briefing and create the final report.

The final report will denote the severity of recommended improvements from the DCMA, which typically aim at enhancing the efficiency of the CPS. Post-review, the DCMA will continue to check in with the contractor to evaluate their performance and make sure they’re taking the corrective actions to ensure approval.

How Does a Company Prepare for a CPSR?

In another blog, we’ll be doing a more in-depth dive into the processes of preparing for a CPSR. However, for the time being, we’d like to emphasize two main points:

  • Every contractor undergoing a CPSR ought to review the criteria for CPSRs outlined by DFARS (24 requirements) and the DCMA (40 requirements). A best practice would be to format these requirements into a checklist and run through them piece by piece. A thoroughly evaluated purchasing system will lend itself to approval.
  • Understanding the extent of all government contracting purchasing areas is also a great way to judge your company’s current CPS status. Thankfully, to help contractors gain a better understanding of the purchasing areas, the DCMA has provided a thorough guide on purchasing areas, requirements for their maintenance, and more.

Leveraging Microsoft Dynamics to Unload the Burden?

When you evaluate your needs in light of a CPSR, there’s only one system that can provide your team with overarching support and compliance: Microsoft Dynamics 365 for Government Contractors. Below are a few ways it can give your business the upper hand when it comes to CPSRs:

  1. Utilize requisitions to request purchase prior to issuing a PO
  2. Utilize Workflow setups. This allows the purchaser to send the PO to another user who has authorization to approve the PO. Once the PO has been approved, then the purchaser can proceed with placing the order. Dynamics captures a log of steps the document has gone through. The workflow also allows for the following:
    • User A can process a PO up to $5,000.
    • Once the PO is over $5,000, the user must request approval from the user (User B) authorized to allow the purchase over $5,000.
    • If User B is unavailable then a delegate or substitute can authorize the PO
  3. Customize report layout to accommodate Terms & Conditions
  4. Trickle-down FAR clauses

Hopefully, this article has helped shine some light on CPSRs, the regulations/criteria that guide the process, and the best software you can use when dealing with one. In our next blog on CPSR, we’ll be covering ten essential steps to prepare for a purchasing system review and the best ways to ensure approval during the first evaluation.

For more information on federal regulations for government contractors, contractor compliance, and all things government contracting, feel free to reach out to us here or via the comments below.


Government Contracting in the Wake of COVID-19

As the COVID-19 pandemic progresses, the challenges facing government contractors are presenting unique changes in operations. While those changes haven’t all looked the same, there are a few commonalities that we’ve seen from client to client and how they’ve handled them. At the same time, some of the changes are here to stay, and we’d like to highlight what they are and how they’ll impact the government contracting industry in the long term.

What changes have already taken the industry by storm?

  • Contract Negotiations: Government contractors are having to proceed cautiously with all contracts, especially when negotiating fixed-price contracts. For the most part, cost-reimbursement contracts don’t present huge risks because they’re considerate of situations like the COVID-19 pandemic when many contracts are on hold.
    On the other hand, fixed-price contracts and subcontracts don’t necessarily have the same flexibility. The risk is on the seller, not the government agency employing them. When you’re negotiating contracts in today’s climate, be precise and be sure to consider the contract/subcontract type and the risk involved before moving forward.
  • Remote Work: Obviously, this isn’t specific to government contractors, but remote work has made the day-to-day operations for many people much trickier, requiring succinct planning and reliable communication among employees and partners. Not only is direct access to staff and customers hindered, but the closure of many buildings and work sites has placed significant restrictions on project progression.
    Additionally, remote work requires IT tools, strategies, and cybersecurity measures that allow a business to continue working safely; however, many companies are finding their current infrastructure doesn’t support remote work. Shopping for the right IT services to match your business needs has always been time-consuming, and current events aren’t making it any easier.
  • Project Delays: One of the biggest challenges facing government contracting during the pandemic is the massive surge in project delays and postponements. For many government contractors, project delays have affected more than half of their overall contracts, and postponement continues to trend in current jobs and bids. Other delays are happening because of increased costs; for instance, the threshold for purchases in defense of the virus have risen from $10k to $20k around micro-purchases and required documentation.

The effects we’ve already seen have paused the progress of contracts and wins. Still, the best course of action right now is to do four things: give timely notice, prioritize documentation, continue performing when possible, and remain positive. This last one is tough: we’ve all heard it in difficult times, but the constraints of our new normal are making positive forecasting for our businesses a tricky mindset to grasp. Nonetheless, it’s essential for progressing through the new boundaries COVID-19 has set in government contracting (and every other industry, for that matter). Govcon365 We Can Help

What does the future hold for Government Contracting?

We can’t say for sure how things will look when the situation allows us to “go back” to non-distancing lifestyles, but we have some sound predictions we believe will change Government Contracting for years to come.

Remote work isn’t going anywhere:

Finding the right software to support remote work may be difficult, but many government contractors are figuring it out. And, while adjusting to their new day-to-day operations, people are realizing there’s opportunity to maintain remote workforces permanently. Of course, onsite workers can’t do this, but the home office may very well be a permanent location for employees in accounting, HR, and corporate positions.

U.S.-based manufacturing will take the lead:

The shutdown of international imports has revealed the need to reassess domestic manufacturing opportunities and the overall supply chain of industrial products for government contractors. This has been in the works for a while, but the pandemic has revitalized interest in U.S.-based manufacturing. The least we can say is that many companies will dissolve current deals with international manufacturers and begin negotiations solely with U.S.-based companies.

Enhanced regulations around technology:

From data localization to cybersecurity, the regulations and requirements around business technologies will be significantly enhanced in the coming years. The initiatives to tighten up these regulations have been in play for quite some time now — e.g., the Cybersecurity Maturity Model Certification (CMMC) and the California Consumer Privacy Act — but there is going to be revitalized vitality around creating safer technology. With cloud-based technology being the major tech shift right now, the drive to make it safe and accessible at every level is in full force.

Moving Forward With Optimism

A lot has changed in the past few months, but again, keeping an eye out for every potential flare of positivity during this pandemic is a best practice for everyone. Keeping your government contracting business aligned with current changes and making room for changes to come might provide your company with a bright future.

Additionally, making sure your clients know that you’re a trustworthy and reliable partner is one of the most important things you can do — the value in being confident in our partnerships is never unappreciated. Finally, if one thing is for sure, it’s that we cannot hoard our knowledge or expertise to gain a competitive advantage; sharing what we know is vital to securing a successful business and economy post-COVID-19.

At GovCon365, we’re hosting a webinar series to address our industry’s current state to help our clients and our peers navigate the issues we’re all facing. As the situation continues to evolve, the topics we cover progress following the most pertinent information to benefit all attendees.

Visit our webinar/video resource page here to watch previous webinars, and if you’re interested in joining us for our next webinar, reach out to us here.


Differences Between the SF 1408 Pre-Award Survey and Accounting System Reviews

In a previous blog, we gave an overview of the SF 1408 Pre-Award Survey and offered our opinions on best practices, as well as essential criteria when approaching this survey. One thing we noted was that SF 1408 is not an audit, nor is it an Accounting System Review (ASR); however, we didn’t offer a full explanation of the difference between them. In this blog, we’d like to flush out some of the significant differences between the two.

First of all, it’s essential to understand that although they serve different purposes, pre-award surveys and ASRs are used to make sure that government contractors are operating their accounting and financial systems appropriately. When a government agency opts to review your accounting systems, they aren’t doing it to give you a hard time. The purpose is to make sure government funds are being used correctly and that companies are conducting themselves accordingly.

Ultimately, the purpose of both is to confirm that a business has an approved accounting system. With an approved accounting system, government contractors gain the advantage over competitors bidding on RFPs that have the requirements included in either SF 1408 or an ASR.

The Difference Between SF 1408 and an ASR

More often than not, companies handling an SF 1408 pre-award survey are either new to government contracting or beginning to deal with cost-reimbursement contracts when they previously hadn’t. Although the DCAA evaluates the general design of a company’s accounting system during this survey, they don’t test complete functionality (i.e., running test transactions). If your business has a reliable accounting system design, then they’ll give you the go-ahead to use it. If the design appears to be faulty, the DCAA will offer recommendations on how to improve it and get it up to standards.

On the other hand, ASRs include thorough testing of accounting systems to ensure that the accounting system is fully functional and able to handle various types of transactions. All standards follow criteria mapped out in DFARS clause 252.242-7006. The extensiveness of an ASR is another significant difference; in essence, most of these reviews require a considerable amount of time and attention, often lasting one to two months. Typically, the administrative contracting officer (ACO) takes the reins on deciding whether the system is sufficient; so long as the organization doesn’t make significant changes to the system, the ACO’s determination will hold for up to three years.

Best Practices for SF 1408 and ASRs

Our blog on SF 1408 lays out a few best practices for government contractors to follow, and we think a few of them apply to ASRs as well. For instance, keeping accurate documentation of your system no matter what survey, review, or audit is making its way toward your business is essential. And, in the case that it does, always stay in close contact with your ACO and other contracting officers. It never hurts to ask them questions or request some guidance.

Finally, no matter what type of contract is looming in the future, stay on top of requirements, whether those requirements are outlined in an RFP, or the DCAA enforces them. Things change rapidly in government contracting, so understanding essential details and conditions will always give your business the upper-hand.

Hopefully, this blog has cleared some of the fog around the differences between the SF 1408 pre-award survey and ASRs. Government contracting is inundated with audits, reviews, surveys, and other accounting system inspections, which is why so many new government contracting businesses find it difficult to prepare all the necessary documents and processes. If you’re a new government contractor and need help preparing your organization for an SF 1408 pre-award survey, an ASR, or any other DCAA/DCMA review, feel free to reach out to GovCon365! Each member of our team is an expert on government contracting regulations, and our Microsoft Dynamics 365 for Government Contractors solution is designed to support your business in any review, survey, or audit scenario.


Outlining Criteria for SF 1408

Accounting system standards seem to always bubble up in conversation with government contractors. Whether we’re talking about meeting agency regulations, audits, or discussing timekeeping best practices, accounting is at the heart of every government contractor’s success. It’s also at the heart of a lot of confusion, especially for new government contractors.

For many of clients that are new to the industry, we often get questions revolving around an important pre-award survey, Standard Form (SF) 1408. “What is an SF 1408?” “Is it an audit?” “What is the DCAA looking for?” We’d like to address these questions and offer some vital knowledge for approaching pre-award surveys like SF 1408.

What is SF 1408?

For any new government contractor — or contractors without experience in cost-reimbursement contracts — with a potential contract in the works, the SF 1408 will more than likely be their first interaction with the DCAA. As a pre-award survey, SF 1408 is used to evaluate a contractor’s accounting system and confirm that it’s an acceptable, DCAA-conforming system for cost accumulation. It’s important to understand that an SF 1408 is not an audit, though many new organizations suspect this. On the contrary, SF 1408 is a helpful tool that gives your contract administration office a view into your accounting system to gauge whether you’re prepared to undertake specific projects.

The main point is to demonstrate that your business’s accounting system is up to standards and can handle the demands of a contract, even if you haven’t necessarily used the system before. When a contract is on the horizon for new contractors, the DCAA needs to know they can follow through with the type of cost information the contract requires.

Essential Criteria for SF 1408 Completion

No two accounting systems are the same, which is why pre-award surveys are vital for assuring federal agencies that the accounting systems of their prospective partner meet the following criteria.

1) Timekeeping Systems

At GovCon365, we talk a lot about timekeeping. As we’ve said before, “timekeeping has the biggest potential for fraud — sometimes costing companies up to $18.5 million,” which is why surveying new timekeeping systems is an integral part of SF 1408.

The timekeeping system you employ needs to easily track the hours of employees and link those hours to their respective projects. There are many discrepancies within this process; the cost objective generally aligns with whatever contract employees are clocking in; however, there are also R&D developments, indirect charges, bid/proposal efforts, and so on. Thus, an SF 1408 will help guarantee your system can allocate hours among appropriate projects.

2) Transaction Controls

As we mentioned above, whether or not you’ve used your system before, you need to have transaction controls available before “direct charging of indirect expenses and vice versa.” What we recommend to new government contractors is to create an outline of their expense transactions to gain a clear vision of purchase orders, transactions, receiving documents, vendor invoices (whenever you receive them), and so forth.

3) Cost Groupings

Making sure indirect costs are accurately gathered in appropriate groupings is as helpful to your business as they are to passing the SF 1408 survey. Additionally, the DCAA suggests that organizations document the logistics of said groupings, as well as displaying up-to-date balances.

4) Cost Ledger

No accounting system would be complete without an operational ledger that provides actual costs of the looming contract; with an SF 1408, it’s a mandatory requirement. Meeting the direct cost requirement means having a ledger that includes the preceding expenses of the project, as well as the cost accumulated throughout the project/task order.

Although those four criteria are essential parts of the pre-award survey, there are several other aspects of your accounting system to keep in mind, including cost segregations, limitations on funding, labor distribution, progress billing, and more. For the most part, your contract administration office will help your organization navigate an SF 1408. However, if you’re looking for additional assistance with building your accounting system, feel free to reach out in the comments below or contact us here. GovCon365 has helped numerous government contractors build fully operational accounting systems that exceed the expectations of the DCAA, and we’d love to help you!


Defining SCA Requirements and Compliance Best Practices

Government contracting is one of the most heavily regulated industries in the country; an assortment of laws and acts accompany every single project. An important and frequently misunderstood set of regulations are those laid out by the Service Contract Act (SCA), also known as the Service Contract Labor Standards (SCLS).

As professionals with decades of experience in the government contracting field, experts at GovCon365 have helped numerous organizations navigate SCA regulations. Here are some frequently asked questions that will help you and your organization gain a more comprehensive understanding of the SCA, its rules, and some best practices to avoid violations.

What Is SCA?

The SCA is a federal regulation that sets the standard for the minimum wage that government contractors and their subcontractors are required to pay their employees. The SCA also outlines the requirements for fringe benefits (company vehicles, company cars, subsidized meals, insurance, etc.) offered to employees working on awarded contracts. The primary motive behind the act is to eradicate worker wages as factors in competitive bidding when applying for contracts. Additionally, it also guarantees wages and benefits protection for government contractor employees.

SCA aims to help safeguard both government contractor companies and their employees by offering a level playing field for companies that enter into specific contracts. Determining whether or not the SCA applies to your business is the next topic of our discussion.

When does the SCA apply to your business?

When your firm enters into a contract agreement with any federal agency, government entity, or the District of Columbia, it’s essential to take into consideration the SCA. The contract must exceed the minimum $2,500 and be performed within the U.S. (or its territories) by service employees, and they must be paid the minimum wage provided in section 6(a)(1) of the Fair Labor Standards Act (FLSA). So, for the most part, the necessary contract details are pretty broad, and the SCA applies several projects, but it doesn’t apply to all government contract work.

In general, there are ten types of contracting jobs won’t fall under the jurisdiction of the SCA, which are contracts that include the following:

  1. Construction, alteration, or repair of public buildings/infrastructure
  2. Direct services to Federal agencies and departments
  3. Freight transportation via airplane, bus, truck, express, railway line, or oil/gas pipeline where tariff rates are published and in effect
  4. Leasing of any space or property
  5. Services by radio, telephone, or cable companies (under the Communications Act of 1934)
  6. Public utility services (i.e., electricity, power, gas, water, and steam)
  7. For postal contract stations operations
  8. Any services performed outside of the geographical scope
  9. Projects that are under the jurisdiction of the Walsh-Healey Public Contracts Act (WHPCA)
  10. Ongoing maintenance of IT and office equipment (including repair, calibration, etc.)

Although those are the primary exemptions from SCA, there are additional exceptions outlined in the Code of Federal Regulations, which can be found here.

What are the repercussions of noncompliance?

Depending on the severity of the violation, failing to comply with SCA regulations can result in a few different scenarios:

  • The SCA, as enforced by the Department of Labor (DOL), has the authority to withhold any funds procured through the contract to reimburse underpaid employees.
  • The contract can be terminated, dissolving all negotiations and any projected income.
  • The contractor can be held liable for costs to the government.
  • The SCA can debar the contractor from participating in any contracting bids for up to three years.

In extreme cases, there is the potential for the SCA to exercise all four options, which is why maintaining SCA compliance is a necessary part of government contracting.

A Few Best Practices for SCA Compliance

Always Review Contracts

  • We’ve talked about the importance of reviewing proposals in previous blogs, and it’s just as crucial for contracts. Maintaining compliance with any government contracting regulation, be it SCA, DCAA, or DCMA, requires keen observation of contract details and adherence to their contents. By dedicating sincere review and evaluation to every contract will always guarantee smooth project execution, as well as contract fulfillment.

Keep Your Eyes on Fringe Rates

  • As government contractors, we know that regulations are anything but stagnant, especially when it comes to wages and fringe rates. We recommend your team consistently review the current state of health/welfare benefits, vacation benefits, and other fringe benefits. By staying on top fringe benefits, you can proactively make changes to your wages and systems to ensure SCA compliance.

Prepare Wage Determinations

  • Wage determinations (WDs) outline the minimum wages and benefits regarding job classifications for specific regions under the SCA. For each locality (odd and even-numbered), the DOL issues two standard WDs, which generally have the same designations, wages, fringe benefits, etc. Preparing precise WDs based on geographical location, job classification, and employment status not only provide equality among government contracting employees, but it also safeguards your business against SCA violations. Keeping track of multiple pay rates, seasonal positions, and numerous benefits costs throughout the year is vital.

We hope the information we’ve provided here not only gives your team a better understanding of what the SCA is and how it applies to specific contracts, but also offers a roadmap to compliance. For more information on the SCA, you can find a detailed directory from the DOL here, or you can reach out to one of GovCon365’s many SCA compliance experts.


Accounting Challenges Facing Government Contractors – Part 2

In the previous blog, we looked at primary challenges government contractors face when addressing internal accounting requirements and compliance. In Part 2, we want to cover the spectrum of duties for government contracting accounting teams and a few best practices.

As an experienced partner for government contractors, professionals at GovCon365 have dealt with numerous accounting systems. Though having an optimal and robust system, like Dynamics 365 for Government Contractors, is a considerable advantage, government contractors also need appropriately trained accountants. As we described in Part 1, government contracting accountants run into a catalog of challenges, and they need the necessary skills to navigate through those challenges.

There are particular skill sets and necessary background knowledge for efficient operations in government contracting accounting. For instance, accountants need to understand forms/formats of pricing proposals, direct/indirect cost rate submissions, general cost principles, allocation, reasonableness under specific regulations (i.e., FAR and CAS), and more. They need to adhere to accounting systems requirements, the types of contracts and their impact, government billing, handling auditors, and so on. Additionally, all accountants should have a basic understanding of the following duties:

  • Analyze conditions of the federal marketplace, the acquisition lifecycle, and relevant statutes
  • Understand key terms and definitions
  • Recognize contract types
  • Accounting differences in acquisition contracts
  • Identify general-to-specific commercial item differences
  • Define allowable, cost reasonableness, and credits
  • Apply basic CAS principles and limits
  • Understand the Truth In Negotiation Act (TINA), as well as Cost & Price Data
  • Determine basic indirect rates
  • Recognize change orders and pricing methodologies
  • Understand the audit process

Best Practices for Government Contracting Accounting

1) Find the Right Software

One of the most vital aspects of exceptional accounting processes is having the right system and technology for your business. The time of spreadsheets is over, and the age of digital efficiency has quickly taken the government contracting industry by storm. That means the market is flowing with accounting systems and ERPs that match the requirements of government contractors and adhere to the regulations that manage them. Your accounting team needs to find a flexible, DCAA-compliant software that fits into your budget, meets your needs, and provides your accounting team with a user-friendly interface for efficiency and productivity.

2) Understand Changes in Contracts

As your team starts winning bigger bids, the details of your contracts and accounting systems evolve to match the regulations appropriate to that growth. For example, when a contractor wins a deal for a $7.5 – $50 million bid, there are four additional requirements under CAS that now apply to those contracts. When you exceed the $50 million threshold, you’re required to comply with all 19 requirements of CAS, which is why staying on top of business changes for these wins is paramount for proper accounting. Knowing how changes in contract size affect operations and requirements is vital to compliance and accounting best practices.

3) Be Vigilant With Record Keeping

When we talk about “record-keeping,” there are so many topics we should be considering: timekeeping records, company-wide ledgers, subcontractor forms/invoices, etc., and keeping detailed documentation on all of them takes vigilance and attention to detail. Fortunately, the effort is worth the time: accurate record-keeping results in better business insights, increased customer satisfaction, and if an auditor just so happens to knock on your door, you’ll be ready with all the necessary materials.

4) Always Be Audit-Ready

Everything we’ve discussed up to this point boils down to being audit-ready around the clock. In addition to the audit process costing time and money, if you fail to pass, the cost is tenfold. Thus, government contracting accountants should run a tight ship and make sure that at any moment, they’re ready for an audit, whether it be DCAA, FAR, CAS, or any other federal review. Always be prepared!

Accounting procedures for government contractors are a central aspect of the business requiring persistence, dedication, and thoroughness. The duties can accrue demanding challenges, but overcoming them produces excellent results, strengthens an organization by providing a safeguard against fraud and noncompliance.

If your business is looking to evaluate its accounting software or procedures, feel free to reach out to us via the comments below or contact us here. Experts at GovCon365 have an overarching knowledge of accounting systems, methods, requirements, and compliance to help government contractors build a better business. Whether its accounting or ERP, we can deliver exceptional solutions to any problem you face.


Contract Proposal Best Practices

A lot happens between the Request for Proposal (RFP) and the submission of contract proposals. For seasoned government contractors, the process is always time-consuming, complex, and intricate, even more so for companies new to the industry. To help remedy the dense world of contract proposal development — and to give newcomers some much-needed advice — we’ve pulled together some best practices to boost proposal efficiency and literacy.

1: Assess Business Capabilities and Pricing/Accounting Models

  • An essential aspect of coming up with contract proposals is having a complete and accurate estimation of your company’s capabilities. Any embellishment around the competency of your team will not only lose potential bids, but it can hurt the credibility of your business. Thus, thoroughly evaluating your business capabilities with realistic projections is key to composing winning contract proposals.
  • Once your team has a concrete estimation of its expertise, you can start evaluating the price points, pricing practices, and accounting standards to project costs (with consideration of federal regulation). The accounting standards your business must meet (whether that be in the jurisdiction of CAS or GAAP) need to be accompanied by an accounting system, like Dynamics 365 for Government Contractors by GovCon365, that can abide by the regulations and calculate required figures (for instance, indirect cost rates).

2: Evaluate the Industry (Customers, Competitors, and Partners)

  • Assessing the industry is not only a best practice for contract proposal but every area of government contracting. Understanding the methodologies, talents, and interests of your competition, your customers, and your business partners will help you develop specialized services and custom proposal procedures. 
  • In-depth analysis of your industry gives you the tools to write exceptional narratives in your proposals that display why your business offers better service than any other.
  • Finally, having a network of reliable partners will promise flexibility to master numerous sectors of government contracting.

3: Review RFP and Contract Documents

  • Though it can be the most tedious aspect of writing proposals, evaluating and giving thoughtful consideration to your RFPs — and other contract documentation — is crucial. Winning proposals show detailed knowledge of RFPs and the needs of your client, so read them carefully.
  • Start by looking into the sections that offer the most pertinent information for contract proposals, i.e., description/scope of the job, instruction to offers, and the evaluation factors. If these line up with your company’s abilities and timeframe, then it’s worth giving the full RFP thoughtful analysis. Similarly, any relevant contract documents deserve the same consideration when a potential proposal is worth the company’s efforts.

4: Develop Strategy and Decide on the Pursuit

  • Any business action needs a well-planned, thought-out strategy, and creating winning proposals requires the same approach. After you’ve analyzed the request documents and your business capabilities, you need to think strategically about how and why your business should win that bid. What makes you the best choice? How will your solution overcast what your competitors can do? These are just a few of the questions your team needs to answer before drafting a proposal. The answers will help articulate your offer in a way that exemplifies genuine understanding of the requirements and confidence in your team’s abilities.
  • The next step is deciding on whether to pursue a proposal for that contract or look for another. Sometimes a contract might not be the best pursuit for your business. Take a step back and think about the proposal’s effect on the various facets of your organization. If it turns out the bid is worth it, pursue it. If not, look for a new one.

5: Proposal: Prepare and Review

  • Now that you’ve decided to move forward with a proposal, the formal process begins. There’s a lot you need to do, but following some of these best practices will make it quick, painless, and rewarding.
    • Schedule out each part of the proposal, including volume preparation, packaging, reviews, pricing, writing, etc. Get the schedule down on paper and stick to it.
    • Whatever the format of the RFP prescribes, follow that same style. There’s no need to get overly creative. Follow the RFPs style guide and address all the necessary points.
    • The language of your proposal should be easily understood and exemplify proficiency regarding the topic at hand. Keep each section precise and easily detachable, relate strategic answers to their needs, and address all requirements referenced in the RFP.
    • Review the document to the fullest extent. Whether you have a single professional looking over the proposal or team of compliance/request reviewers, every nook and cranny of the bid needs to be reviewed. If there’s something that needs changing, handle it immediately. If a proposal is rejected for a given cause, use that as an opportunity to learn and make the next bid stronger.

Winning bids with finely tuned contract proposals comes down to understanding the request inside and out, understanding your business capabilities, tailoring your proposal to match the needs of the client, and learning from the process. Following these best practices will get your team closer to becoming a well-oiled proposal machine, winning bids left and right.


Accounting Challenges Facing Government Contractors – Part 1

Business accounting on its own has a variety of complexities, but accounting for government contractors puts a whole new meaning to the role of business accounting. Government contractors are not only under the dominion of regular accounting practices, but their industry is riddled with accounting regulations, requirements, and at times, numerous challenges.

In the first part of this blog series, we’d like to cover a few common challenges regarding accounting for government contractors. For instance, what are the biggest challenges facing government contractors? How should government contractors avoid them? And, what are some general best practices when it comes to accounting for government contractors and system compliance? These are questions that GovCon365’s experts know very well. Here are our two cents on accounting challenges and best practices.

Constant Change in Government Requirements

  • The accounting requirements for government contractors are much denser than those set out for commercial businesses. Not only are the requirements and regulations more complicated, but they’re also more erratic, as many of the rules and specifications can change rapidly. For the most part, the Financial Accounting Standards Board (FASB) lays down the laws in the standards set out by the Financial Accounting Standards Board (FASB), including the Cast Accounting Standards (CAS) and Federal Acquisition Regulations (FAR).
    • The best thing government contractors can do, whether they’re new t the industry or seasoned professionals, is to keep an eye on the standards and regulations. It’s essential that accountants know what requirements have changed, and be fully aware of what auditors, like the Defense Contract Audit Agency (DCAA), are looking for during their review.

Maintaining Documentation Regarding Regulation Changes

  • As we mentioned above, accounting requirements for government contractors are constantly changing, making it hard to always be aware of new statutes. Even more challenging is making sure that company documentation, policies, procedures, and systems align with the changing standards. Many new government contractors often find themselves at a loss in this area and are unable to keep up with the constant flow of alterations.
    • Vigilance is key to staying on track with government requirements. Not only should your business anticipate the changes — specifically, keeping an eye on federal laws for transparency, finances, and the economy — but it should also be flexible to make way for modifications and adjustments around current operations and documentation.

Fully Preparing for Audits

  • Audits are detrimental to making sure government contractors are maintaining compliant systems and ethical financial operations. Unfortunately, they can come at any time, and whether your business is subject to the review of the DCAA or DCMA, your company needs to be prepared at a moment’s notice. And, when government contractors are knocked for noncompliance, it costs them time, labor, contracts, and other opportunities.
    • The best thing government contractors can do is operate with the expectation that, at any time, an auditor could come knocking on the door. Keep procedures concise and consistently inspect your systems/documentation to confirm compliance.

Gaining DCAA Approval

  • Whether you’re dealing with timekeeping, direct/indirect cost segregation, invoice clauses, or one of the various other DCAA/DCMA requirements, gaining approval from either agency is no walk in the park. Without the proper infrastructure and human resources, many government contractors have trouble keeping up and gaining approval for their accounting systems.
    • In this realm, it is vital to have someone who is dedicated to completely understanding all accounting requirements and reviewing your accounting system. If you don’t have the internal resources to do this, partnering with an experienced expert like GovCon365 can help you implement a system like Dynamics 365 for Government Contractors to automate the process and help guarantee DCAA/DCMA approval of financial systems.

There’s a lot of challenges facing government contracting accountants and accounting systems. However, with the right actions, preparation, and system, your business can attain compliant accounting systems and practices, gain approval, and be ready for the long haul in government contracting. In Part 2 of this blog series, we’ll be looking at the spectrum of duties for government contracting accountants and best practices for them, and the company as a whole.

If your business is facing any of these accounting issues or has questions about how to best move forward with a fully compliant accounting system, feel free to engage with us in the comments below or reach out to us here.