Rising Turnover + Fraud Concerns = Whitewater Ahead
Gene Townsend
Companies that win contracts will be those willing to provide a finely detailed level of documentation about every single element of the contract; not only providing expense estimates but providing extensive information about the methods used to make such estimates, for one example.
That prediction came from contracting expert Gene Townsend in the fourth and final presentation of his series on government contracting, sponsored by The Patuxent Partnership.
Further complicating the task is matching the cost of doing business to the expectations of the Department of Defense, which seems to be taking a page from Walmart’s playbook of “always low prices.” The key question is, according to Mr. Townsend, “Can you get into the zone to be considered? It’s a low-cost shootout.
“Most companies have a price-to-win person, but you’ve got to have the documentation required,” he says.
More and more, he adds, defense contractors are dealing with DoD insiders who are increasingly risk-averse, occupied less with program execution and more with returning money to the government. This has resulted “in a prolonged effort to reduce the money spent,” Mr. Townsend says, which impacts the number of contracts let. He also notes, DoD employees overwhelmed by larger amounts of information required in new contract proposals, are extending existing contracts.
Another DoD tactic to reduce costs is to lower the requirements for contract labor, for example, asking for a high school degree plus three years’ experience for a position that previously required a bachelor’s degree.
Mr. Townsend offered these suggestions for preparing contract proposals that will hit “the zone”:
- Provide consistent determination of direct and indirect costs.
- Prove that project costs are reasonable.
- Include a written statement of your accounting policies and procedures.
- Understand allowable and unallowable costs. Unallowable costs must be identified.
- Demonstrate that your overhead is allocable. It must be specific to the contract, benefit the contract and other work, and necessary to the operation of the business.
- Be meticulous about documenting hours worked, including time card entries.
- Contractors who used to be consultants must now produce “full-blown” cost proposals.
- In the current environment, labor escalation costs should be zero or very small.
- Use the government’s “Weighted Guidelines” to determine profit/fee.
The increasing complexity of government contracting is resulting in a high turnover rate among contracting specialists and rising concerns about fraud, Mr. Townsend says. Be prepared for some whitewater.
