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The FAR is Not Far Away for Small Businesses

We get it. You are a small shop, and the Federal Acquisition Regulations (FAR) is just another acronym in this hectic GovCon space. You are busy drumming up business, and who has time to think about FAR compliance? You might think the FAR is far, far away from you since you are a small business. Wrong! The applicability of the FAR to you as a government contractor (or subcontractor supporting a government contract) is not based on your business size.

Why?  Well, it all comes down to public policy.

In a recent case, the 9th Circuit summarized:

that the Federal Acquisition Regulation (FAR) provisions “while undoubtedly extensive, permit the government to maintain fairly uniform contracting standards in the many contracts it enters into with parties located in the United States and around the world…To allow contractors and subcontractors, foreign or domestic, to evade the FAR provisions because a subcontractor was too unsophisticated or inexperienced to fully understand them would potentially cripple the government’s ability to contract with private entities and would violate controlling federal law.” Aspic Engineering and Construction Company v. ECC Centcom Constructors LLC; ECC International LLC, No. 17-16510, D.C. No. 4:17-cv-00224-YGR, 13 (9th Cir. Jan. 28, 2019) (“Aspic”).

In short, public policy wins.

The government needs to be able to buy with a level of risk mitigation in place. Do you want your tax dollars going to a deal that turns bad because the guys building the new facility failed to follow their FAR flow downs? Not really.

Yes, it is challenging to compete in the GovCon space, but there is a sense of serving the public that makes the challenge worth it. However, that means you have to play by Uncle Sam’s rules. Even the one-man-bands building souped-up servers with robots attached to them in their garages have flow downs to contend with if they are going to sell to the federal government under traditional acquisition mechanisms.*

In the name of public policy, even if certain FAR clauses are not “flowed” into your contract, a judge will find them applicable to your contract “by operation of law.” G.L. Christian & Assoc. v. United States, 160 Cl. Ct. 1 (Cl. Ct. 1965). The famous Christian Doctrine was applied to Federal subcontractors in UPMC Braddock et al., v. Harris, No. 1:09-cv-01210 (D.D.C. Mar. 30, 2013) (“UPMC”).

One of the traditional avenues for small businesses to gain a foothold in the GovCon space is through subcontracting, often thinking it is easier because they do not have to follow all the same rules as their prime contractor counterparts. However, based on UPMC, following the FAR, is required no matter what. There is no free pass for small businesses.

Even though we just threw a whole lot of legal ease at you, we don’t want you to be stressed about FAR compliance. If you need a plan to get your act in gear, BOOST LLC has experience setting small businesses up for success in the lean-and-mean style.

*There are Other Transactions Authorities that exist purposely to allow the federal government to pursue non-standard government contractors without the application of the FAR. There is good news! We know a great OTA Consortium Management group.

 

 

Post-Proposal | After Action Review

Does your company know what happened?

The proposal was finally submitted, the team has finally gotten a night’s rest, (some having nightmares of missed compliance items and some cherishing the eventual win party)!  Either way, a lot of mental focus is disbanded after a successful proposal submission.  One of the things that many companies benefit from, but fail to do often, is an After Action Review or Lessons Learned review.  We recommend doing this often, and quickly, after the proposal is submitted.  It doesn’t have to be conducted in a formal manner, with meetings or papers.  It can be a simple non-formal format such as a survey or questionnaire to the key players of the proposal.  It should involve your proposal manager, your key subcontractors, any consultants you may have had, and most importantly your pricing lead.  Most companies forget to include lessons learned from a pricing/cost volume preparation perspective.  There are many lessons to be learned on this front, here are some basic questions to get you started:

1. Were you able to coordinate and manage your subcontractor pricing and its impacts to your proposal in a timely fashion? 

2. Was your C-level team allowed to make last-minute changes (hint: Gold team is NOT meant for changing levers such as fee/teaming ratios/labor rates) that absolutely caused a ripple effect and chaos across multiple volumes?

3. Was there enough emphasis on compliance in the Cost volume?

4. Was there enough time built in for cause and effect from pricing to other volumes?

5. Did you prepare with enough data/intelligence when it comes to deciding on wrap rates/labor rates?

 

Once the proposal is submitted it’s too late to make changes (unless errors are identified that you must inform the government about, but that’s a topic for another day).  What this does is get your proposal team ready to bid smartly and accurately for the next ones.  Making the same mistakes is a fool’s errand in this business, it’s costly and redundant.  Don’t be that team! BOOST can help you to conduct After Action Reviews or even better, get your pricing on the right track the first time. Let’s talk: [email protected]

Bidding SCA Contracts – Is It Worth It?

As we ebb and flow through the proposal season, there are numerous types of RFPs that will drop which you might consider bidding on.  Some might even have the Service Contract Act (SCA) clause 52.222-41 buried in the document.  If you decide an RFP with the SCA clause is worth the bid, there are some things to take into consideration throughout the process.  Here are a few items to consider:

• SCA clause is in the RFP, but not the Wage Determination (WD).
It is always a good idea to ask during the Q&A process if SCA does apply.  If it does, then the government should provide the WDs.  If the government does not, it is up to you to find the applicable WD on the Department of Labor (DOL) website.  This is especially important when developing pricing as you will want to be sure that you have the most up to date data in order to develop your fringe pools and understand the hourly pay rates.

• The prior contract should have had the SCA clause incorporated into the contract.
If it has become apparent that the SCA provision did apply to the prior contract, the DOL may require retroactive application of the SCA. If you are the incumbent, you must make the employees as whole as possible when complying with the SCA.
You will need to ensure that the employees were:

• afforded the correct Health & Welfare (H&W) dollars,
• mapped to the appropriate labor category,
• considered with employee seniority on the contract when afforded vacation benefits, and,
• if the sick leave Executive Order is applicable, the employees will need to have sick time calculated based on hours worked.

If you are not the incumbent, you will still want to consider all of these options to develop your rates as they will be applicable going forward on the new contract.

•Benefits must comply with the Affordable Care Act (ACA).
In the past, organizations have attempted to reduce their pricing by trying to gut the benefits offered.  Benefits must still comply with ACA’s minimum essential coverage and cost requirements.  Just because the H&W is employer money to be used to purchase insurance on behalf of the employee, it still must meet the maximum cost threshold set by the government each year.  Generally, benefit costs to the employee should not be more than approximately 9.5% of the lowest waged household income.  Unfortunately, employers are not privy to an employee’s household income so it is a recommended best practice to take the lowest wage earner in the company and determine the maximum amount the medical benefit should cost that employee when determining cost allocations.

• SCA applies to all non-exempt employees on the contract.
Do not overlook part-time employees.  Part-time employees are entitled to all SCA benefits, with the exception of health insurance benefits.  You will want to be sure to incorporate costs for vacation and sick leave in your rates.

• Subcontractors’ compliance is a common issue/pitfall.
A good practice tip is to draft a form that calls out the requirements of the SCA with emphasis on its exemptions and provide this to your subcontractors.  Train your contracts shop to send out the form to each subcontractor supporting a prime contract that contains the SCA clause in the prime contract. It is best to have documentation that shows your subcontractors’ assertion that it is exempt. And yes, the FAR clause does flow down to your subcontractors, they need to be aware and compliant, the Prime is on the hook for subcontractor compliance with the prime contract requirements.

• When bidding on IDIQs, make sure to check the master IDIQ contract vehicle.
It is common that the SCA clause is at the master IDIQ level but may not be incorporated into the task order.  It is up to you, the contractor, to be sure that the SCA clause is adhered to even if it is not included in the task order.

• There is a Collective Bargaining Agreement (CBA) in place.
Just because there is a CBA in place, does not mean that the SCA provision does not apply. Yes, the CBA takes precedence over the SCA as it pertains to wages, H&W rates, and benefits; however, as an employer, you would still be required to adhere to the provisions of the SCA.  When bidding, ask for a copy of the CBA so that your rates incorporate their requirements for wages, H&W, and benefits.  Too often, employers will bid without understanding the CBA and find that they will need to adjust pay and benefits. Despite this required adjustment, the employer may not be able to go back to the government and request an equitable adjustment on your rates. You may have leverage in renegotiating the CBA if the SCA offers conflicting guidance.  Always work with your legal team to ensure all the risks on both items.

• If you do not comply with SCA, the repercussions are harsh.
It is imperative that you know what you are getting yourself into when bidding and working on an SCA contract.  The government will not accept that you did not know.  It is up to you to make sure that you comply.  If it is found that you did not comply, the government sanctions and fines can be harsh, and you could open yourself up for a DOL Wage & Hour audit.  Government sanctions and an audit could include fines, penalties, back pay, punitive damages paid to the government and to the affected employee, debarment, and contract termination.  It is in your best interest to be sure to comply with all applicable FAR clauses under the SCA.

Luckily for BOOST clients, we have the knowledge required to help keep you compliant. If you’re wondering if a bid is worth the SCA headache, let’s talk and set some strategic pricing plans in motion. Email [email protected] to learn more.

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BOOST Contracts

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BOOST Accounting

 

Connect with BOOST to discuss how we can help with your accounting initiatives. [email protected]

Introducing BOOST LLC

BOOST was founded to support GovCons as they get to the next level. After reinventing the wheel many times and banging our heads against numerous walls, we have learned what works and what doesn’t. We love working with executives who want to see their organization grow and who value advice from those who have “been there, done that.” We want our small clients to outgrow us. We want our large clients to use us when they need us and then call us back for the next project. We want you to sell your business for the multiplier you want. We want you to be successful.

www.boostllc.net

SCA and ACA…. WTH?

For our readers who have SCA (Service Contract Act) contracts, please keep reading…there’s a whole other level of compliance we’ve gotta get smart on.  For those of you who don’t have SCA contracts, thank your lucky stars, vow that you won’t go after this work without serious soul searching, and move on (Take this as our warning to you!).

Okay, everyone still with us?  As you know, SCA compliance is tedious and painful.  That’s our baseline.  Let’s now talk compliance with ACA (Affordable Care Act).  One thing to remember – ACA applies to all employers, not just those with 50+ employees.

First, SCA dictates that a certain dollar amount, now $4.54 effective July 5, is the new bona fide health and welfare (H&W) rate for all covered contracts executed or bid on after the effective date.

This means:

• If a contract has a new option year, the new H&W rate may be applicable.

• For any new work bid on, the updated H&W rate must be included.

• For those contracts covered by the sick leave EO 13706, the new rate is $4.22/hour.

• Companies will want to contact their Contracting Officer for each SCA contract requesting the timing of the updated H&W rates for the specific contracts

• Remember to ask whether a modification to the contract will be issued (yes!!) or if the H&W rate will be updated at contract renewal/option year (boo!).

Secondly, in regulation with ACA, employers are required to offer minimal essential coverage with their benefit offerings, just like employers with non-SCA staff or pay a fee to the IRS.

• H&W by design was implemented in order to require employers to provide benefits instead of cash in lieu (CIL).

• Technically, not offering benefits could be non-compliant with SCA.

• DOL has provided guidance saying that under ACA, employers will no longer be able to pay all cash (ARE YOU HEARING THIS CIL FOLKS?) in lieu of offering benefits.

 

Finally, with this information come certain risks under ACA and SCA.  Some key elements to consider:

• Offering CIL payments in lieu of benefits does not meet the ACA requirement.

• Employees can potentially waive benefits to receive the CIL and still not have benefit coverage under another qualifying plan.

•Not having a waiver on file could make the employer non-compliant with the ACA mandate.   So yes, insist on the documentation, regardless of what story the employee may tell you.  No documentation = considered not otherwise covered in the eyes of the employer, IRS, and DOL.

• Not offering an ACA compliant plan that meets minimal essential value or minimal essential coverage could put the company at risk.

 

Along with these stormy clouds. We bring you some sunshine in the form of how to combat these risks:

• Offer benefits that are ACA compliant and follow SCA definition of a bona fide fringe benefit.

• Ensure each plan meets minimal essential value and minimal essential coverage.

• Work with brokers and other SCA/ACA experts on the outside if there isn’t someone at the company who understands the SCA complexities.

• Be sure to obtain waivers (proof of insurance) from employees who waive benefits.  Unfortunately, you just can’t take their word for it.  If you’re audited and no documents on file means you’re paying fines.

 

If you’ve made it this far you deserve another cup of coffee (or something stronger depending on where you are in the process). BOOST can help with that too! BOOST LLC is sponsoring the September 25th govmates Institute that will focus on how you can CYA in SCA. (Breakfast and lunch with beer are included! We told you we had you covered.) Register for the govmates institute or contact BOOST for more information, [email protected]

What is a CPSR and Why Should You Care?

We recently told you about the Contractor Purchasing System Review (CPSR) process, and today we will (attempt to) convince you to care about this mega-compliance hurdle. If you want to read more about a CPSR, check out our white paper here.

There appears to be a trend in government evaluations looking for CPSR compliant contractors. CPSR compliance was an extra 500 points for the recent OASIS bid.  Many of our competitors will happily sell you a CPSR package without blinking at the cost or whether you actually needed it.

Who needs CPSR?
First, the main factor we tell our clients is to assess how much subcontracting work they do.  If your business weighs heavily on issuing a myriad of subcontracts or large procurements in support of your prime contract awards, then you have checked the first box to “needing” a CPSR compliance plan.  The remaining boxes are comprehensive.

Second, if a majority of your work is with the DoD, you may want to consider checking out DFARS 252. 252.244-7001, the regulatory birth of what a CPSR compliant system looks like. Finally, if your contract says you have to be CPSR compliant – we hope you already have systems in place to pass an audit before signing the dotted line.

Finally, most organizations do not like or want a CPSR compliance plan because of the heavy administrative burden it places on corporate processes.  Think about the last time you waited for a large GovCon to issue you a subcontract that was allegedly “on fire.”  In most cases, the subcontractor is issued a letter subcontract or works at-risk with an authorization to proceed (also part of the CPSR compliant program) before the “real” subcontract is issued.  This is because nearly all GovCons with CPSR compliance programs have to take several steps to coordinate awarding a procurement.  These steps were put in place to comply with CPSR requirements.

If we have not talked you out of it and you are ready to start the box-checking, administrative hurdles of CPSR land, consider an organization like BOOST that will tailor a compliance plan to fit your organization. We will not open a canned manual and serve it to you on a platter. We exist to add value. We can provide a customized CPSR plan; if you need it.

Using Surge Support to Fill the Gaps and Save Money

Summer is busy for many different reasons in the GovCon community; proposal season, approaching fourth quarter, vacations, summer Fridays, and the list continues. Even though the rest of the world seems to be “summering” it’s go-time for GovCons and things can’t be allowed to slip. Your back office needs to stay on track. If you put important tasks on the back burner, there will be an impact on your bottom line at the end of the year.

 

Surge support is a great way to help with managing these times during the year.  Surge support can be used during busy times, large contract ramp ups (always a good problem to have), extended staff leaves and maybe just because your staff is maxed out and needs temporary support. Surge support can help in several areas; accounting, contracts, Pricing, HR, Recruiting and more.

 

We know your first concern about surge support is budget. We understand. Prior experience shows that surge support can be cost-effective  When you consider the impact of NOT having tasks completed, the shock can be larger than simply paying for additional staff time.

 

Another concern may be ramp up time for surge support staff.  This is where your policies and procedures come into play.  If your house is in order, bringing on surge support will be easier. Even if this is not the case, the time spent to bring a new person up to speed will be worth it.

 

We know, asking for help can be a challenge. Reaching out to a qualified firm who knows government contracting is the best first step for surge support. Sometimes you might not even know exactly what you need, but a good firm will help you. A qualified firm will guide you in structuring tasks and identifying the most effective way to quickly ramp up staff and get the most for your money.

 

BOOST can help with surge support requirements for your back office and get you the help you need, quickly. Email us for help at [email protected].