Posts

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.

 

 

Lowering Your Wrap Rate

Did you make it into your desired beach bod state this summer?  Or was time for the gym illusive?  Did you cut back on the dessert or did you enjoy a ton of gelato?

Much like dieting and maintaining good health, government contractors must maintain a “sexy” multiplier/wrap rate.  Even if you are in a less competitive field or have a unique offering for a customer with a ton of funding (if you are, good on you), you must still monitor and maintain your wrap rate.

Companies can sometimes view this exercise as an annual corporate budget, where you occasionally look at how you are doing and often look back and ponder “what were we thinking?”  This is not enough by a long shot.  Best practice is to review your financials each month and include analysis on how you are performing on your wrap rate.  Review monthly, adjust quarterly, consider a complete overhaul semi-annually.

Most companies find that they need to tighten the belt a smidge, especially as we push into the fourth quarter.  For some, it may be too late to rein it in this year, but that doesn’t mean that you shouldn’t start pushing for the 2019 indirect diet.  For others, it may be a great time to lose a few pounds before the year-end festivities.  Here are some suggestions for both year-end and next year:

  • Space – do you really use it; do you need it and what is your company culture? Larger System Integrators are shedding their bloated infrastructure.  Don’t build one unless you’ve got 5-year POP’s with all contractor site rates.  And even then, keep it lean.
  • Wellness – When was the last time you competitively shopped your benefits? Or even your broker?  Don’t get tied up in the same old “we only have a 2-5% increase, so that’s great” mentality.  Depending upon your size, self-funding in some capacity may be of interest.  Does anyone actually use the vision policy?  What about dental?  Have you considered reducing your contribution?  Not always popular but it may lead to new work.
  • Training – with all of the online options these days, does your team really need individualized training or would an online package work? You could offer this benefit to more employees at a lower overall cost.
  • Education – consider reducing the tuition reimbursement if very few people are using it. It’s nice to tout to potential new hires, but in reality, it’s not a deal-breaker.  If it is, bonus the employee out to cover the costs.
  • Business Development – is the team on track to meet their goals this year or has performance been underwhelming? It is time to take stock of what’s working and what isn’t and shed a quarter’s worth of labor costs for non-performers.  Let them go now while the job market is still firing up.  Layoffs or terminations after Veterans Day essentially mean no job until after New Year’s.  Make the hard call now.

Keep working at the wrap rate and make sure it’s as lean as you can survive on.  Not bloated, but not extra thin either – you need a little wiggle room to ensure a healthy company.