Relationships With Prime Contractors

1.Primes “flow down” clauses that increase the accounting burden on small business subcontractors

2.Your accounting capabilities become a factor in competing to be on teams or participate in awards – but you may not be able to get DCAA to review your systems

3.Some primes intimidate smaller subcontractors using terms such as “CAS Covered”, “FAR Requirement” or requirement under the new Contractor Business Systems Rule – many of these rules do not apply to smaller contractors so be prepared to discuss the requirements without alienating your prime contractor customer

4.The subcontract between a prime contractor and a subcontractor is considered a commercial contract and some of the rules that apply to the prime contractor may not apply to the sub UNLESS the contract specifically states the clause or requirement

5.If your subcontract is awarded as a COST REIMBURSABLE or COST PLUS contract, you may be required by your prime to complete and submit an INCURRED COST SUBMISSION also called the “ICE”

6.DCAA may or may not audit your incurred cost submission if you have no prime contracts

7.Some primes are requiring subs to engage a CPA firm or other third party to review your ICE, even though:

a. A CPA firm cannot technically audit the ICE Submission (unless under DCAA)

b. Your indirect rates should not be shared with your primes and competitors

c. Cost of ICE preparation and review is a significant burden to small business
8.Know what the COMPETITIVE indirect rates are for small businesses in your area and based on the technical levels for the work you are pursuing

a. Fringe: 10% payroll taxes, 10% leave, 10% group benefits
b. Overhead – varies based on Company Site vs Client Site, technical support requirements such as recruiting, certifications, software support, OCONUS
c. G&A– do not bid  or accept unreasonably LOW G&A such as under 8% to cover your corporate expenses

9.Beware of deals where you’ll be handling all the MATERIALS for a percentage handling – will have credit approvals and limits, requirements to accept COD or pay by credit card, expediting fees, acceptance and return issues

10.Do your own costing and estimating and make sure the pricing makes good business sense – so you are not bullied into going along when the prime tells you that “everyone agreed to a 3% fee”

11.Consider the capabilities of  your existing proposal, contracts and accounting team and the software upgrades that may be required for growth

12.Get involved with other small businesses that are involved in federal contracting as a source of information (NCMA, AFCEA, FDCA, NDIA)

13.Focus on core competencies where you plan to be #1 or #2 in your market

14.Work with multiple teams and primesBe very selective in choosing TARGETS that are within your WEIGHT CLASS(Kevin Jans of Contracting Officer Podcast)