Society of American Engineers Joint Engineer Training Conference St. Louis, Missouri. Building your Small Business for the Federal Marketplace

Transcription

1 Society of American Engineers Joint Engineer Training Conference St. Louis, Missouri Building your Small Business for the Federal Marketplace Michael Zambrana, FSAME Linda Shapiro, Esq.

2 The Role of Today s Small Federal Contractor: They must be excellent business managers Contractors must be technical experts. Proposal writers Schedules, Safety, Quality IT, CAD, BIM, GPS, GIS, etc Plan writers Must manage Human Resources, Travel and Lodging Bank Collection Agency Claims Specialist Negotiator Systems Manager to track all aspects of project. Accountant Contracts and Subcontracts Do all of these well and you will get paid.

3 Today s Federal Environment Changes mean Less Money, more scrutiny Increased disclosure obligations and transparency Increased Accountability for federal contractors More flow-downs to you and your subcontractors Special requirements for CAS covered contracts There are more and more federal rules!

4 New DFAR Final Rule in Feb Types of Contractor Business Systems 1. Accounting * 2. Estimating 3. Purchasing 4. Earned Value Management 5. Material Management 6. Property Management * Most impact to small business

5 Pangea s Accounting Challenges System Selection and Integration Geographically Diverse Projects WIPP are Hard to ground truth Accessible Database for remote WIPP reporting Many union agreements for payroll Taxes in many states Inconsistent PM methods or understandings for reporting Local and State Govt Impact Bonds on every project Cost Reimbursable work Multiple Cost Pools for Ovhd and G&A Changing Ovhd and G&A DCAA Audits..regularly Increased PM Training Certified Payroll Security Clearances Claims procedure slow

6 Accounting Compliance Regulator: Defense Contract Audit Agency Rules: Cost Accounting Standards Set up your accounting system to comply from the start Your system must track cost to ensure they are: Allocable Allowable Reasonable Consistent

7 Pangea s Accounting Solutions Learn the basics your self Hired an ex-dcaa employee to set up my first system Set up an acceptable software program Hire a CPA that really understands Federal Cost Accounting Standards Set up Cost Pools for G&A and Overhead Set Chart of Accounts that includes Unallowable Costs Set up expense reports and time cards accordingly Train you Project Managers and staff Not Audited? Make your books DCAA Auditable Hire internal CPA who understands Test System Repeat Training

8 Cash is King! JOB Selection/Bid CASH FLOW MANAGEMENT Closely forecast and Monitor Cash This is where most contractors fail!

9 Pangea s Contracting Challenges No Contracts Staff System Selection and Integration Standardized Subcontract Short Form Long Form Purchase Order Lien Law differences per state Notice Provisions Claim Procedures Resolution Dispute Indemnity Payment Terms Enforceability Scope of Work definition All inclusive statements Insurance requirements Shall vs May statements Flow-downs requirements Priority of GCs, Special Conditions, Specs or Plans Is any of this negotiable?

10 Federal Government Illustrations Criminal Statutes Title Statutory Reference Subject Matter / Notes Anti-Kickback Act 41 USC Prohibits payments by subcontractors at any tier to prime contractors or subcontractors to obtain a government contract False Claims Act, Criminal Liabilities 18 USC 287 Applies to any request related the payment of money by the United States, directly or indirectly False Statement Act 18 USC 1001 Includes statements, false entries, oral and unsworn statements. Civil Statutes False Claims Act 31 USC Applies to any request related the payment of money by the United States, directly or indirectly Truth in Negotiations 10 USC 2306a 41 USC 254 Cost or pricing data on negotiated contracts or subcontracts; modifications of contract in excess of $650,000; necessity for certification

11 Samples of Federal Government Rules Title of Provision FAR Reference Basic Subject Matter Covenant Against Contingent Fees FAR Agents engaged to solicit award prohibited Certificate of Current Cost or Pricing Data FAR Requires contractor to certify entitlement and cost appeals of proposal for equitable adjustment Payrolls and Basic Records FAR Certification that Davis Bacon wages fully paid and payroll records form are accurate and complete. Affirmative Action Compliance FAR Affirmative Action Program Status Payments Under Fixed-Price Construction Contracts FAR Amounts requested are only for performance in accordance with specifications, terms, and conditions of contract; payments to subcontractors have been made from previous payments; timely payments to subcontractors will be made; and payment request includes no amount that prime contractor intends to withhold (retain) from a subcontractor or supplier. Disputes FAR Certifications as to validity of claims in excess of $100,000

12 Pangea s Contracting Solutions Read the Contracts completely Standardized Agreements (AIA, AGC Consensusdocs) Understand Claims vs Direct Changes Stop work when SOW changes No verbal change orders Would you take a verbal paycheck? Schedule contract milestones PM to have a copy of contract onsite with all change documents Hire a good lawyer who is a specialist Federal Construction Professional Services Your business hell and salvation are in those contracts

13 Contractual Discipline and Insights Ground Rules Read your contract Understand what you are signing up for Seek clarification Pay attention to certifications Differences in contractual relationships Government/Prime Prime/Subcontractor

14 Contractual Discipline and Insights Drafting and Negotiating the Subcontract - Prime contractor perspective Cover it or ignore at your peril Pass on what the Government passes (or could pass) to you Mandatory flowdown FAR/DFAR clauses Clauses providing backup protection under Prime Contract Take care in defining SOW

15 Contractual Discipline and Insights Drafting and Negotiating the Subcontract - Subcontractor perspective Accept FAR/DFAR clauses that are mandatory, helpful, or inconsequential Address exclusivity Obligate the prime Perform under Prime Contract Timely furnish equipment / materials Make timely payment Exercise options/extensions? Include reciprocal indemnification/hold harmless

16 Contractual Discipline and Insights Statement of Work Prime s perspective Subcontract Terms Use relevant portion of Prime Contract SOW Beware of descriptions / restatements / qualifications in subcontractor proposals Sub s perspective Know your requirements Review specs / drawings carefully Responsibility for equipment / materials? Clarify ambiguities

17 Contractual Discipline and Insights Other key terms Subcontract Terms Termination for Convenience Subs: Only if Prime is terminated (unless in default) Changes Prime needs option to make changes Govt requires Stop-Work /Suspension of Work Disputes Mediation/Arbitration - Reserve right to seek injunctive relief Any court of competent jurisdiction

18 Contractual Discipline and Insights Teaming Agreements An agreement to enter into a subcontract upon award is unenforceable in most states Beware of using form agreements Exclusivity

19 Subcontract and Teaming Agreements can impact Small Business status What is a Small Business? The number of employees or annual receipts [under the applicable NAICS* code] indicates the maximum allowed for a concern and its affiliates to be considered small. 13 CFR Affiliation Rules Who is in control? Stock ownership Common management Identity of interests Newly organized concern Joint ventures - Exceptions and Ostensible Subcontractor 13 CFR

20 Summary Proper formal Accounting and Project Reporting are critical for your small business success Good Contractual Discipline will keep you out of trouble

21 Success looks like this: Compliant Formal Accounting Systems, policies and procedures DCAA Approval and Quick Audits Current and complete prime and subcontracts A Mentor, SBA, SCORE and Consultants can help you get there.