What are the Benefits of a GSA Schedule …and Will it Work for Me?

If your business is considering becoming a federal contractor, you probably want to consider using a GSA Schedule Contract, especially since many federal agencies use GSA Schedules, including the Armed Forces.

Although applying for a GSA Schedule can be challenging, these contracts can be fiscally rewarding and offer several benefits that make it worthwhile. If you’re a small business, another point to consider is that 80% of GSA MAS contracts go to small businesses.

What is a GSA Schedule?

GSA Schedule Contracts, also known as GSA Schedules or Federal Supply Schedules, arean indefinite delivery, indefinite quantity (IDIQ), long-term contracts under the General Services Administration’s Multiple Award Schedule (MAS) Program. The GSA contracts are agreements by the federal government to purchase goods and services from private companies. They serve as a fast and easy contracting vehicle for both customers and vendors.

The Value of GSA Schedules

The GSA Schedule contract program expenditures contribute billions of dollars to the economy every year. In fact, more than $40B flows through GSA Schedule contracts annually. In FY11, GSA had over 19,000 schedule contracts, and approximately 40% of the 19,000 contracts won government business. Consider, too, that approximately 5% of the GSA Schedule contracts win 80% of the business.

The Benefits

As a small business owner, GSA Schedules directly benefit you in the following ways:

  • Streamlined buying process with a quick turnaround. Buyers like the schedule because the purchase process is fast, simple and rarely subject to protest.
  • Once a business applies successfully to sell to a government department or agency, including the Armed Forces, it can sell to any part of the government via the GSA Schedule contract vehicles.
  • No cost data is required to gain procurements.
  • Prices are based on your commercial prices, and procurements are based on “best value”, not the lowest price.
  • Schedule contract procurements don’t have an order size limitation. Multimillion-dollar orders can be processed using the Schedule contract ordering process.
  • For IT firms, using STARS II (a specific GSA vehicle set aside for 8(a) companies) is strategically beneficial. This is because it can extend the 8(a) life beyond the nine-year limit since they can bid on 8(a) set-aside contracts that are procured under STARS II as long as that contract is alive. The strategy is to get the STARS II contract in place one or two years before the 8(a) graduation, thus extending access to some 8(a) contracts three or four years beyond graduation.

The Disadvantages

When considering GSA Schedules, you should also be cognizant of the disadvantages involved. These include the following:

  • The cost of obtaining a Schedule (i.e., the cost to the company for preparing the proposal and negotiating the contract). It is an expensive process to prepare the proposal and negotiate the agreement. It costs you time if you do it yourself, and it costs you money if you hire a specialist.
  • The cost to the buying agency (i.e., the cost that a government agency pays GSA to administer GSA contracts).
  • The sales minimum required by GSA Schedules. If you don’t achieve that minimum, you may lose the contract. Typically, the minimum is $25,000.
  • Not all procurements will be available to the GSA Schedule. Some contracting officers prefer to keep certain procurements in the normal (historical) procurement process.
  • Some agencies don’t use GSA Schedules.
  • Reporting requirements. Contractors need to set up their accounting system to track GSA sales and payments because they are required to pay a quarterly percentage (.75%) of the sales or payments. Periodically, a GSA representative will do a site visit to audit this process and make sure that GSA receives the proper amount.
  • Marketing requirements. GSA expects contractors to market their GSA Schedule. This means they expect contractors to publish the Schedule on their website and the GSA advantage website. You can expect GSA to audit your marketing efforts when they audit the IFF payment process.

It’s also worth noting that the median time to first award is between 8-9 months; and in general, awards for more complex products and services take more time than awards for selling commodity type products. Additionally, because of the expense of getting on the GSA Schedule, you want to be sure that your customers are willing to use the schedule and that you are committed to selling to the government.

Final Thoughts When Considering GSA Schedules

As a final step in the process of considering whether or not a GSA Schedule is right for you, ask yourself the following questions:

  • Having analyzed the market, bid opportunities, and cost to win business on one Schedule and SIN in GSA MAS, are there other schedules or even other contract vehicles to consider?
  • Should you seek opportunities as a subcontractor rather than a prime contractor in order to give yourself some experience in the government contracting world?
  • Do you need a Schedule contract to pursue future subcontract opportunities?
  • Do potential customers you identified use GSA Schedules? If not, can you convince them to use them?
  • Do customers favor your products and services over the competition?
  • How can you differentiate your company from other competition on the Schedule/SIN(s) where you want to make a proposal?

Ultimately, you have to make the decision that is right for you. If you have further questions regarding GSA Schedules, contact us at KDuncan & Company.

How to Prepare for Submitting Defensible Bids

Last month, I spent a considerable amount of time supporting a favorite client in answering “Clarifications and Discussion” coming from the government.  My client and his subcontract team had submitted a proposal earlier in the year and the government was asking them to support their costs. As it turned out, neither the prime nor the subcontractors had developed the support before submitting their cost proposals.  In fairness to the team, the government had not required them to submit supporting cost and pricing data at the time of submission.  So, our response to clarification request entailed a considerable amount of research, time, and stress to complete.  In addition, each member of the team is unsure whether they will make or lose money if the contract is awarded to the team.

To avoid this, contractors should always prepare and submit a defensible bid; whether the government is requiring it for the procurement or not.

Defensible bids must be based on something other than your knowledge and experience of the product and services you want to provide. If you want to beat your competition and posture yourself for success, you need to be prepared to defend your bid.

Here is a list of acceptable support documents that you should have available before you submit your bid:

  1. Direct Labor Costs:
  • Payroll reports for current employee labor rates
  • Contingent hire agreements
  • Labor survey data (Department of Labor, Towers, ERI, others)
  1. Consultant Costs
  • Consultant’s cost proposal
  • Quotes from 3 or more consultants
  1. Travel Costs
  • Hotel and per diem – Joint Travel Regulations (JTR) for the continental United States (CONUS) or outside the continental United States (OCONUS)
  • Air fare – Quotes from travel agency, airline, or travel website
  • Rental cars – Quotes from travel agency, rental car company, or travel websites
  1. Material Costs
  • Quotes from 3 or more vendors
  • Vendor invoices for like items
  1. Other Direct Costs
  • Quotes from 3 or more vendors
  • Vendor invoices for like items
  1. Costs Related to Office or Facilities Rentals
  • Lease agreements
  • Rental broker quotes
  1. Fringe Benefits Costs and Rates
  • Annual fringe benefits budget. This budget is based on payroll tax requirements, worker’s compensation rates, company leave policy, and other company fringe benefits, including:
    • Health care and disability insurance
    • Company paid retirement expenses.
  • Historical fringe benefits costs and rates for reasonableness (for comparison)
  1. Overhead Costs and Rates
  • Annual overhead budget
  • Compare to historical overhead costs and rates for reasonableness
  1. General and Administrative (G&A) Costs and Rates
  • Annual G&A Budget
  • Compare to historical G&A costs and rates for reasonableness

Although this may seem like a long list of documents, the time and effort it takes to have them ready will pay dividends when you’re asked for them; and it could make the difference between winning the contract or not. The goal is not just submitting a bid, but submitting a defensible bid.

If you need assistance in preparing your bids or want more information about our government contract and accounting services, contact us at KDuncan & Company.

Most Effective Government Contractor Timekeeping

As most government contractors know, DCAA is extremely serious about effective and accurate timekeeping. In short, your government contractor timekeeping must be perfect. In the few instances that one of our clients failed to have their accounting system approved, it was caused by their timekeeping being less than perfect.

The two criteria included on the SF1408 are:

  • A timekeeping system that identifies employee’s labor to the appropriate cost objectives
  • A labor distribution system that charges direct and indirect labor to the appropriate cost objectives

So this means that the employees must be able to choose the correct place to charge their hours each day. To do this, the employees must be instructed about their available charges. Of course, if you have an electronic system, you could bracket the available charges so that you limit access to incorrect charges.

Then, the audit trail for labor charges must have integrity: the hours and dollars must match. The labor audit trail is the flow of data, documents, and reports relative to labor charges and costs.

The components of the labor audit trail are:

Timekeeping Policy >Timesheet > Payroll Register > Labor Distribution Report > Job Cost Detail > General Ledger Detail > Invoice (Cost Plus or Time & Materials).

Government Contractor Timekeeping

This means that if an employee charges 97.5 hours to a contract in an accounting period, those 97.5 hours must be evident in each and every component of the audit trail. If the timesheet and invoice to the Government show 97.5 hours, but the payroll register shows 97, there is a problem. It shows the auditor that there is a deficiency in your labor tracking system. Any invoice that goes out the door must be supported by a report from your accounting system and the numbers on the two must match exactly.

Being human, we make mistakes.

There are two types of mistakes to be conscious of: those made within the pay period and discovered and corrected by the employee, and those discovered by supervisors further up the chain. For either type, the process of handling any mistakes must be documented in your timekeeping polices and followed without flaw. Corrections should be made within a pay period. If this for some reason is not possible, ensure that the correction goes through in a subsequent period. Put a note on your calendar. You don’t want your entire accounting system to fail because you forgot to get the correcting timesheet posted to your system.

Also important is the certification and authorization processes. For timesheets to be considered valid, the employee must certify the timesheet as accurate at the end of each pay period by signing it. In addition, a supervisor must authorize the timesheet as correct by signing it. With electronic timesheets, certification and authorization are done with processes built into the software.

Using an electronic timekeeping system for your government contractor timekeeping will provide the following advantages:

  • Increased efficiency and shortened process times: 50 employees spending one hour per pay period versus one employee spending 50 hours on data entry.
  • Improved accuracy: no errors from double entry or wrong interpretations because data is transmitted electronically. No human hands after certification.
  • Improved quality control: employees must pick charges from a list of “available” direct and indirect labor charges.
  • Other criteria important when choosing an electronic timekeeping system are:
    • The electronic timesheet software integrates with your accounting software, whether Deltek or QuickBooks.
    • If using QuickBooks, the timesheet software should track a field that maps to the QuickBooks payroll items field; otherwise you will not eliminate double-entry completely.
    • You can check during the pay period to see which employees are not up-to-date on making their labor charges.
  • The system, including implementation, is cost beneficial.
  • There is effective support from the software vendor.

If you have questions or need any assistance in developing timekeeping policies, timekeeping system setup or modification, or government contractor timekeeping, please contact us.

KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.

All About Government Paybacks

A common question that I field is: “Does this mean that we have to pay the government back?” Let’s go through the situations where a contractor will be in a government payback position. First, the obvious:

  1. The Government overpaid you; such as paying an invoice twice.
  2. A contract that you have has disincentive clauses that you activated.

Other overbillings need to be viewed from the prism of the contract type.

Fixed Price:

  1. You billed the Government and got paid, but you did not provide the goods or services required. Or the goods or services did not meet the Government standards.
  2. The goods and services were provided but delivery was outside of the terms and conditions of the contract; for example, the period of performance.

Time and Material: 1) and 2) under Fixed Price plus:

  1. You billed more hours to the Government than you incurred.
  2. You billed higher rates than contained in the contract.
  3. Some of your employees did not meet the minimum education and experience prescribed for the labor categories in the contract.

Cost Plus Fixed Fee: 1) and 2) under Fixed Price plus:

  1. You billed more direct costs to the Government than you incurred.
  2. You billed more indirect costs to the Government than you incurred.

a. Your final actual indirect rates were lower than billed
b. Your final indirect pools contained costs which were unallowable
c. You were unable to support some of your indirect costs incurred; i.e. unable to produce source documents during the audit.

Please note that most of the items causing payback under Time and Material and Cost Plus Fixed Fee contracts would be uncovered during an incurred cost audit.

Need more help with government paybacks? Give us a call at (301) 608-3200 or contact us and we’d be happy to help you out.

KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.

Cost Budget

How to Prepare a Cost Budget

If you have not started, now is the time to prepare your direct and indirect costs budgets for next year. Budgets are of vital importance to government contractors. First, your budget provides the basis for determining the pricing on cost proposals. This budget will be the document that government auditors and pricing specialists will want to see for justification for the indirect rates bid in your cost proposals. It allows you to determine whether you will make money on the contract. Second, the budget will provide a yardstick to use in assessing your financial performance. Finally, if you are submitting provisional rate requests to DCAA or your cognizant agency; this budget is the basis for that request.

To prepare a cost budget, you will do the following steps.

  1. Estimate your expected volume of business for the coming year.
  2. Estimate your direct costs given the volume of business expected.
  3. Estimate the indirect costs in each indirect cost pool.
  4. Calculate the indirect rates for the coming year.
  5. Compare the budgeted indirect rates with historical indirect rates. If there are any substantial variances, analyze and be able to explain them. There could be errors.
  6. When you are satisfied with your costs and indirect rates, publish this budget as you baseline for costing out cost proposal for the coming year.

Three things to remember when preparing a cost budget:

  1. Your budget should be in the same format as you chart of accounts.
  2. Be fairly conservative when estimating your expected volume of business for the coming year. You don’t want you budget indirect rates to be lower than you can perform.
  3. Periodically compare your actual indirect rates to your budgeted and contracted rates. Make adjustments to your costs where possible to stay within your budgeted rates.

Visit our events page for more on government accounting training.

KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.