PVBS is excited to sponsor the December SECAF Educational Program: “What Growing Government Contractors Need to Know about the ARRA:  A Critical Update. This will be a members-only program. Cost is $35. The event will be at the Tower Club. Program is on December 1 at 745am. Contact SECAF to register.

Here’s the event description:

The $787 billion gorilla, the American Recovery and Reinvestment Act (ARRA), has come out of the corner!  The Administration is finding out that it is easier to say “stimulus,” than it is to actually spend the money.  There are many things growing government contractors need to be aware of concerning rules and reporting requirements. These rules support the Administration’s desire to have greater “oversight and accountability” along with more “transparency.”  As a result, there are many potential complications for Federal contractors. At this education event, Rich Marksberry, an expert on the ARRA, will discuss what government contractors need to know to ensure success.

Richard Marksberry, Principal, ROM and Associates, will be the keynote speaker. Marksberry has, as the CFO, led the selection and implementation of accounting systems for three federal contractors each with sales over $100 million annually.  He was recognized as one of the “Top 10 CFO’s in Government Contracting” by ExecutiveBiz in 2008. He is an expert on government contractor financial management topics.

Stephen Fuller, PhD, the Dwight Schar Faculty Chair and University Professor; and Director, Center for Regional Analysis, School of Public Policy, George Mason University, gave a fabulous lunch time keynote, “The Shape of the Economic Recovery,” at the 3rd annual Microsoft Government Contractor Summit on November 17. Click The Shape of the Recovery, Stephen Fuller for a pdf of his presentation.

PVBS was pleased to sponsor the “Government Contractor Expert Panel” that closed the 3rd annual Microsoft Government Contractor Summit on November 17 at the Marriott Fairview Park. The moderator was Tom Temin of Federal News Radio 1500AM.

Panel members were:

• Kwesi Rogers President, Federal National Payables, Inc.
• Ken Bricker, Managing Partner, Goodman and Company
• Tony Bui, President, EMW

Questions posed by Tom included:

1. Discuss recent OMB guidance urging more use of fixed-price, competitive contracts instead of no-bid, or cost-plus or time-and-materials contracts. Is it actually happening at the agency task order or contract level? How should companies prepare for it? How might it effect small contractors when they are subs to larger primes? How does this affect a small firm’s ability to fund their operations?
2. Small Business Administration is proposing new rules. For instance, Hawaiian native corporations can also get unlimited sized sole contracts, not just Alaska Native. All must now perform 40% of the work, and not just sub it all out to large companies, under the proposed rules. Are SBA and other federal mandates for use of various classes of businesses striking the right balance of fairness, competition and best value for the government?
3. Discuss technology changes you see in the government–are they real and what effect will they have on small or highly specialized contractors. Examples are cloud or hosted software services; data analysis and machine readable streams; mobility devices; collaborative tools.
4. What does the acquisition workforce really look like from the standpoint of contractors? Discuss in light of the new OMB direction to increase acquisition ranks by 5% over the next five years. Have you noticed or been affected by a trend of government hiring from the private sector?
5. Discuss how you’ve used Microsoft Dynamics technology to assist in meeting the above challenges and the role business applications will help growing government contractors meet the above challenges.

Microsoft has launched a very cool site called the Public Sector Idea Bank that demonstrates many of the solutions it offers Federal Government customers. Check it out.

Microsoft CRM Idea Bank

One of our accounting firm partners, Goodman & Company, will host its 14th Annual Government Contracting Update Seminar on Thursday, October 22, at the Tysons Corner Sheraton Premiere, as well as, Thursday, November 12, at the Westin at Virginia Beach Town Center from 8:00 a.m. to 5:00 p.m.  PVBS Vice President Paul Skurpski will present a keynote presentation at both events.

The title of the presentation is “Optimizing Your Accounting Solution’s Reporting Capabilities.” Skurpski will discuss:

• Challenges Facing Government Contractors and Reporting
• The Government Client as an Information Consumer
• Standard Reports You Should Be Receiving
• What are Your Internal Audiences Expecting from Reporting?
• The Future of Reporting

Microsoft and Tatum, LLC are proud to announce that Peter A.S. Pfeiffer, Managing Partner of Tatum’s Mid-Atlantic practice, has been named as a new member of Microsoft’s Government Contractor Executive Forum. “It is an honor to be asked to support such an important program at Microsoft, one that parallels Microsoft’s objectives with Tatum’s value proposition in the Government contracting space”, said Peter A.S. Pfeiffer.

The Microsoft Government Contractor Executive Forum is comprised of senior level executives from the government contractor industry. The Forum provides insight into key business challenges relative to high growth government contractors. A one day Government Contractor Summit will be held on November 17, 2009. The Summit will expose interested government contractors to Microsoft Dynamic DCAA Compliant Financial Management solutions and CRM solutions in addition to networking with peers and gaining access to best practices.

“Government Contracting is a very specialized industry with ever evolving compliance needs. As we service the needs of forward thinking CEOS, having Peter Pfeiffer of Tatum, LLC take a board position was a very natural next step. Through their deep industry expertise, Tatum, LLC is about unveiling possibilities and delivering operational expertise to the contracting community. This marries up well to what Microsoft Dynamics offers the contractor marketplace. This collaboration becomes a real winning combination,” said Christine Zmuda, Strategic Engagement Manager for Microsoft.

Mark Roberts is a partner with Argy, Wiltse & Robinson, P.C. (Argy), a full-service, independent public accounting firm.  He has over 25 years of experience in government contracts having worked in private industry, public accounting and at a law firm serving as a consultant and litigation specialist. 

We continue to see a fundamental shift in the DCAA’s approach to contract audits, a shift that is making it increasingly more difficult to do business with the DCAA. In July 2008, GAO issued a report criticizing the DCAA for its failure to properly follow Generally Accepted Government Auditing Standards.  This report and subsequent guidance has had an adverse effect on many contractors’ relationships with the DCAA. Many contractors report that the DCAA is less willing to work closely with them to resolve issues fearing it may violate the DCAA’s need for independence.  In the wake of Gov 2.0 and the Government’s initiative to promote transparency concerning federal spending, it is no wonder that the DCAA is taking a strict approach to conducting contractor audits.

In December 2008, the DCAA issued revised audit guidance on “Denial of Access to Records Due to Contractor Delays”. The prior audit guidance stated that supporting information should be provided to the auditors within a reasonable period of time, but did not include guidance on expected or required timeframes for response. The revised guidance defines a reasonable time period and requires auditors to take swift and punitive action (i.e., subpoenas, suspension of costs) if contractors fail to provide information in a timely manner. The revised guidance also makes clear that the DCAA strongly believes that access to records includes access to people.

In reaction to the revised guidance, many contractors are moving to more formal and structured policies and procedures around DCAA requests for information. Many contractors are also implementing automated tracking systems to document the requests and responses for information. Some contractors are also using shared access Web sites to better control and manage the process.

To summarize the revised guidance:

• Supporting documentation should be readily available and should be provided immediately on request unless there are extenuating circumstances.
• If there are extenuating circumstances, the auditor should allow the contractor additional time and agree on a due date.
• If the due date is missed, the auditor is to prepare a formal written request to senior management within five days of the missed due date. Senior management is defined as the CFO or VP within the company.
• The formal request should state that the information is required by a specific date, but that date should not exceed one week.
• If the information is not provided within one week, the auditor must notify the contractor that a denial of access to records situation exists and it is being reported to the appropriate government personnel, including ACO.
• If those efforts by the auditor and ACO fail, the DCAA Regional Director should consider issuing a subpoena for the records.
• The DCAA should consider issuing a DCAA Form 1 and suspending unsupported costs on cost reimbursement contracts.
• The DCAA should consider whether an internal control deficiency exists.
• Even if the contractor agrees to disallow questioned costs based on a lack of adequate support, the auditor should pursue access to the records and report the contractor’s denial of access.
• Access to records includes access to Company personnel.
• Contractor’s use of liaisons should not delay or inhibit auditor’s access to personnel.
• Generally, auditors should obtain support directly from the person responsible for the information. 

While the DCAA considers this revised guidance “clarifying” guidance, many in the industry disagree and view this as a fundamental change, especially with respect to access to people. Compliance officers from several industry associations are already reporting that DCAA auditors are demanding direct access to employees in conducting their audits. It appears that the DCAA is quickly moving beyond the contractor’s liaison personnel.

Interestingly, several attorneys we’ve consulted agree that the DCAA should only has access to Company personnel in very limited circumstances and those situations are normally around time reporting and labor classification. According to these attorneys, the DCAA should not expect unfettered access to contractor personnel.

Typically contractor liaison personnel play a critical role in ensuring that the DCAA is getting current, accurate and complete information in conducting their audits. The liaison understands the applicable rules and regulations and is critical to managing the process for the contractor. By involving less experienced personnel in the audit process, it becomes highly likely that the DCAA will receive information that is not always accurate and that misunderstandings may occur.

Staff may offer inaccurate information while trying to answer questions when he or she does not possess first hand knowledge. When the DCAA discovers that the information is incorrect, the DCAA may increase its audit scrutiny. Another concern is that staff are not always required to talk to the DCAA and may refuse. How the DCAA will react to such a refusal is unclear. If a company decides to allow unfettered access to staff, it may want to consider having a compliance representative present for each interview.

As discussed above, many contractors now have to invest additional resources in their DCAA audit support processes due to these changes. Many are revising policies and procedures as well as, implementing new systems to better track and manage the process.

Tim Hutton is the Vice President of Sales for USI Insurance Services LLC. He is a frequent commentator on insurance issues for government contractors.

The anticipated outbreak of the H1N1 flu has certainly raised personal concerns for many people.  However, Government Contractors must also be concerned and prepared for the flu’s potential impact on their businesses and, working with their agent/broker, must examine the coverage that may or may not exist in their commercial insurance programs.

Since a true “outbreak” would be a first time event, it makes the various coverage scenarios difficult to predict as there is no existing case law surrounding such an event.  An “outbreak” of the H1N1 flu could have an impact on any or all of the commercial insurance policies such as these:

• Workers’ Compensation: A “disease” acquired as a result of one’s work is generally covered under most WC policies, but, how would an employee prove they contracted the flu at work/as a result of their work?
• Business Interruption: Business interruption coverage protects a business from losses due to unavoidable interruptions in their business operations, however, this is a property policy and the required coverage ‘trigger’ is physical damage.   Since an outbreak of flu would not be considered “physical damage” coverage may not apply.
• General Liability: This policy includes coverage for third party claims for bodily injury (such as a ‘slip and fall’ injury).  However, the flu may not meet the GL policy’s definition of ‘bodily injury” and the GL policy may include exclusions that limit or deny coverage for bodily injury related to infectious disease and/or “organic pathogens”.

To respond to the potential gaps in coverage, some insurance carriers are offering new policies providing extra expense coverage for a suspension of operations by a public health official.  Since these policies are new, careful attention must be paid to the terms and limitations contained therein.  (NOTE: These policies are generally written on a ‘non-admitted’ basis, have limited coverage per location, have strict exclusions, and can be very expensive.)

Given the exposures outlined above, Government Contractors should initiate a careful review of their current commercial insurance program with a qualified insurance agent/broker.

The following information is from the CDC’s website http://www.cdc.gov/h1n1flu/business/guidance/: Actions Employers Should Take Now:

• Review or establish a flexible influenza pandemic plan and involve your employees in developing and reviewing your plan;
• Conduct a focused discussion or exercise using your plan, to find out ahead of time whether the plan has gaps or problems that need to be corrected before flu season;
• Have an understanding of your organization’s normal seasonal absenteeism rates and know how to monitor your personnel for any unusual increases in absenteeism through the fall and winter.
• Engage state and local health department to confirm channels of communication and methods for dissemination of local outbreak information;
• Allow sick workers to stay home without fear of losing their jobs;
• Develop other flexible leave policies to allow workers to stay home to care for sick family members or for children if schools dismiss students or child care programs close;
• Share your influenza pandemic plan with employees and explain what human resources policies, workplace and leave flexibilities, and pay and benefits will be available to them;
• Share best practices with other businesses in your communities (especially those in your supply chain), chambers of commerce, and associations to improve community response efforts; and
• Add a “widget” or “button” to your company Web page or employee Web sites so employees can access the latest information on influenza: www.cdc.gov/widgets/ and www.cdc.gov/SocialMedia/Campaigns/H1N1/buttons.html

Nick Wakeman, editor in chief of Washington Technology, talks about the challenges government contractors are facing these days with the DCAA. “While it has been several years in the making, government contractors say the ability to form partnerships with their customers has hit a new low.” Click here for the rest of the article.

For a PVBS white paper on how to best work with the DCAA, click here.