With fierce competition for government contracts, one must ponder if meeting the minimum standards, is enough to win some of the most coveted contracts with the Federal Government. Vendors are finding they must set themselves apart from the competition. Compliance excellence is one way to do this.
According to a GOVCON Expert, the Defense Contract Audit Agency connected with approximately 5,800 contractors in fiscal 2021. They learned that not all contractors maintained accounting compliance. Using compliance gives contractors an edge. (GOVCONWire March 2, 2023)
The Gauge Report from 2022 gives an indication of how compliance gives contractors an edge:
- Nearly 66% of all solicitations call for adequate accounting systems.
- Government contracting firms put adequate accounting systems second on their list of top auditing challenges.
- Labor floor checks have increased. (ibid)
The six business systems relevant to the audit process are accounting, estimating, material management and accounting systems, purchasing, government property, and earned value. Contractors that show they have adequate business systems in these areas may have an advantage over the competition. According to the Gauge Report, accounting systems are one of the most frequent requirements in new solicitations. (ibid)
How does a contractor get an “adequate” rating? When a solicitation requires documentation, bidders must provide some form of evidence, such as a letter from the Defense Contract Management Agency (DCAA) stating that the system has been approved for use on government contracts. Many contractors do not have assessed systems, which excludes them from solicitations. (ibid)
There are three possible ways a firm can turn compliance into a competitive edge:
- Your company has been examined by an agency and it is determined to be “adequate.” Keep a copy of the report/determination and provide the documentation as part of the bid. (If however, deficiencies are found, fix them and obtain a follow-up audit), once an adequate determination is made, use the determination when bidding.
- Request a system review. Since DCAA or DCMA do reviews based on contractor requests, a strong relationship with a PCO is necessary to work on your behalf to “push” a request through. To note, the examination process can take months due to the current backlog
- Your company pays a commercial firm, such as a CPA, to conduct an independent examination. Some government solicitations will only accept examination findings performed by government agencies.
The government appears to be making progress. In a recent OASIS+ solicitation, the solicitation language is more flexible by following the latest procurement trend, a self-scoring system. In a self-scoring system, companies earn points for systems, clearances, certifications, and past performance, and all bidders meeting the minimum points requirement are eligible to win an OASIS+ contract. (ibid)
Your company can stay proactive by:
- Advocate for your company. When necessary, object to the restriction limiting SF1408 examinations be performed by “government officials.”
- Ask for clarification of vaguely worded compliance sections. Make certain you are clear on all sections as it may be the difference between winning or losing a contract.
- Make sure your company and the accounting department are knowledgeable and up-to-date with new accounting standards.
- Invest in cybersecurity, it will carry more weight than ever before. (ibid)
Questions concerning compliance excellence or how to get an adequate rating? Give us a call.