2013-09-26 Government Contractors Project Management Systems

Government Contractors Financial & Project Management Systems Seminar
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Thrive. Grow. Achieve.
Seth Zarny – Raffa Partner
Kellye Jennings – BDO Partner
Glenn Anstead – Raffa Senior Manager
September 26, 2013
Government Contractors
Financial & Project
Management Seminar

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Agenda
• The regulatory environment
• Business systems
• Time and expense challenges and requirements
• Job costing
• Definition and allocation of direct and indirect costs
• Allocation bases
• How rates are calculated

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Agenda (continued)
• Other issues
• Provisional versus actual rates
• Types of government contracts
• Government audits
• Questions?

Government Contractors Financial & Project Management System Seminar
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SECTION 1 – THE REGULATORY ENVIRONMENT

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The Regulatory Environment
Heavily regulated:
• Many potential pitfalls for the naïve or unwary seller
• Compliance costs (personnel, systems, procedures) require up front investment
Federal Acquisition Regulation (FAR):
• Covers all aspects of contracting for the Federal Government
• Includes “Cost Principles” and many other administrative procedures
Agency Supplements (e.g., DFARS):
• Provide additional Agency-specific guidance
Cost Accounting Standards (CAS):
• Provide guidance on acceptable cost accounting practices

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The Regulatory Environment
Key regulatory compliance issues include:
• Identification and Segregation of “Unallowable” Costs:
o As discussed further below, Government contractors are required to identify,
segregate, and exclude certain types of costs from proposals, billings, and claims.
o “Flexibly priced” contracts may require certification of proposed indirect cost
rates.
• Government Property Control Requirements:
o Contractors are required to identify, track and maintain Government Property,
including items acquired in performance of a contract.
o Lost, damaged, stolen or destroyed property must be promptly reported.
o Periodically, inventories of Government Property must be performed and submitted
to Government customers.

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(FAR) Federal Acquisition Regulation vs.
(CAS) Cost Accounting Standards
FAR Cost Principles Determine ALLOWABLE Costs
Cost Accounting Standards govern COST ACCOUNTING PRACTICES used for
Government Contracts:
• Measurement of Costs
• Assignment of Costs to Cost Accounting Periods
• Allocation of Costs

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What is “FAR”?
The Federal Acquisition Regulation (FAR) is the principal set of rules in the
Federal Acquisition Regulation System. This system consists of sets of
regulations issued by agencies of the Federal government of the United States
to govern what is called the "acquisition process," which is the process through
which the government purchases ("acquires") goods and services. That process
consists of three phases:
(1) need recognition and acquisition planning,
(2) contract formation, and
(3) contract administration
The FAR System regulates the activities of government personnel in carrying
out that process. It does not regulate the purchasing activities of private sector
firms, except to the extent that parts of it are incorporated into government
solicitations and contracts by reference.

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Purpose of “FAR”
The purpose of the FAR is to provide "uniform policies and procedures for
acquisition." FAR 1.101. Among its guiding principles is to have an acquisition
system that
(1) satisfies customer's needs in terms of cost, quality, and timeliness;
(2) minimize administrative operating costs;
(3) conduct business with integrity, fairness, and openness; and
(4) fulfill other public policy objectives. FAR 1.102(b).
The FAR also includes socioeconomic requirements, such as requiring certain
items to be purchased from the United States firms only and that large
organizations to use smaller businesses as subcontractors.

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What is “CAS”?
The Cost Accounting Standards (CAS) are methodologies and techniques used to
guide and consistently measure the cost accounting practices amongst government
contractors.
The Cost Accounting Standards Board (CASB) consists of members from the Office of
Management and Budget (OMB), Department of Defense (DOD), General Services
Administration (GSA), and private sector.
To promote consistency across agencies, the Cost Accounting Standards which
address the assignment of costs to government contracts are different from the
‘Cost Principles’ which provide guidance for cost allowability. Some of the
principles are based upon certain cost accounting standards and should be
referenced to determine if a cost is unallowable. Cost accounting can be
categorized into the following three areas:
(1) measurement of cost (market vs. present value),
(2) cost accounting period assignment (accrual vs. cash basis), and
(3) allocation of costs (direct vs. indirect)

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Purpose of “CAS”
The purpose of the CAS is to ensure your cost accounting practices as a contractor are
fairly standard, practical, yet flexible across the industry, while remaining consistent
with your disclosed practices, procedures, and policies for cost recovery:
(1) CAS should be considered during the design and configuration of your financial systems,
(2) CAS directly affect compliance
(3) CAS have a direct impact on your ability to recover costs
Your disclosed (submitted statement, if applicable) cost accounting policies and
practices must also be adequate and compliant and should be the basis for your
accounting and financial system design.

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Compliance Is Your Friend
Compliance Is Your Friend
Government Contracting Industry is heavily regulated
• Many potential pitfalls for the naïve or unwary seller
• Compliance costs (personnel, systems, procedures) require up front investment
Federal Acquisition Regulation (FAR)
• Covers all aspects of contracting for the Federal Government
• Includes “Cost Principles” and many other administrative procedures
Agency Supplements (e.g., Defense Federal Acquisition Regulation Supplement
- DFARS)
• Provide additional Agency-specific guidance
Cost Accounting Standards (CAS)
• Provide guidance on acceptable cost accounting practices
Compliance generally leads to a competitive advantage. Noncompliance
may lead to imposition of penalties, suspension, debarment, and no award

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SECTION 2 - BUSINESS SYSTEMS

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Business Systems Rule
Simply stated… the Contractor shall establish and maintain acceptable
business systems…
• Establishes criteria for mandatory adherence of requirements specifically related to a
contractors business systems to ensure best practices are maintained for all government
contracts.
• Criteria reflects a combination of existing requirements as found in CAS, FAR, DFARS,
and those historically enforced by DCAA, DCMA, cognizant audit agency, etc.
• Identifies the relevant business systems, corresponding guidelines and compliance
requirements.

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Business Systems Rule (cont.)
• Provides for mandatory financial penalties for any noncompliance that is deemed
a “significant deficiency”
• Allows for discretion (as exercised by government audit agency and reviewers) in
how compliance will be achieved; final determination resides with ACO, CO
directs withholding decision
• Defines grace period for implementing corrective action plan to rectify
deficiencies

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Acceptable / Deficient
“Deficiency” is defined as a
shortcoming in the contractors business
system(s) that materially affects the
ability of officials of the Department of
Defense to rely upon information
produced by the system that is needed
for management purposes.
“Acceptable contractor business
systems” are contractor business
systems which are found to be in
compliance with relevant laws and
regulations [Cost Accounting
Standards (CAS) clauses and Federal
Acquisition Regulations (FAR)
principles] as reviewed by your
cognizant audit agency.

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What happens if found “Deficient”?
You must respond in writing to your Contracting Officer (CO) within 30 days of receiving your
determination of identified business systems deficiencies to include your comments –
rationale for disagreement CO may issue a notice of intent to Contractor to withhold
amounts from interim billings not to exceed:
• 5% for one or more identified significant deficiencies in any single business system
• 10% significant deficiencies in multiple business systems

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What happens if found “Deficient”? (cont.)
If you correct the deficiencies or submit an acceptable corrective action plan (one that
includes milestones and steps taken to eliminate issues) within 45 days of notice of intent to
withhold, and as verified by the cognizant audit agency (auditor), the CO may:
• Decrease the withholding percentage until such time all deficiencies have been corrected and
verified
• Discontinue withholding and release previously withheld amounts (if not related to other system
deficiencies) and verified by auditor
• If no determination of the corrective action plan by the CO has been made within 90 days,
withholding could be reduced by 50%, but not release payment for previous withholdings
If the corrective plan is not followed and the deficiencies continue to exist, the
CO may:
• Increase the withholding percentage if the corrective action plan is not followed and deficiencies
continue to exist

BDO USA, LLP, a Delaware limited liability partnership, is the U.S.
member of BDO International Limited, a UK company limited by
guarantee, and forms part of the international BDO network of
independent member firms. BDO is the brand name for the BDO
network and for each of the BDO Member Firms.
What systems can I use to run my business?

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Microsoft Integrated Solutions
• Dynamics ERP
• SharePoint
2

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What is Microsoft Dynamics?
• Integrated Financial and Operational/Project Management
Software
• Familiar to Your Employees
• Government Contracting Industries:
• Professional Services
• Contracting
• Manufacturing
• Distribution
• Accepted by DCAA
2

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Functionality Provided by Dynamics
•Financials
•Accounting
•Fringe, Overhead and G&A Rate Calculations
- Cost Segregation – Allowable vs. Unallowable
•Job Costing
•Purchasing & Requisition Mgmt
•Manufacturing
•Inventory Management
•Sales Orders
•Service Management
•Customer Relationship Management
2

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Microsoft SharePoint
What is Microsoft SharePoint?
A foundation for connected information
• Team Collaboration
• Dashboard
• Key Performance Indicators
• Dynamics Business Portal
• Integrated with Project Server
2

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What will you get from the Integrated Solution?
Organized flow of information
• Project Management
• Resource Allocation
• Financial Reporting
Seamless integration of information
One view of the data
Tools your team is familiar with…
2

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Project Manager Support
2
• WEB ACCESS TO YOUR DATA
• Immediate access to Projects profitability
• Maintain projects
• Assign resources to projects, tasks or subtasks
• Create initial and subsequent budgets
• Set maximums for Projects and Tasks
• Store and share Project invoices in a document
repository
• Enter time remotely supporting your companies
needs: bi-weekly, semi monthly…

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Reporting vs. Dashboards
Many people use the terms interchangeably
What is the purpose of a report in Government Contracting
company?
• Compliance
• Company Directed
What is the purpose of a dashboard?
• Drive user towards decision
How do you know what the Dashboards should be?
• Key Performance Issues of Company
What are KPI’s?
• Key Performance Indicator
2

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Critical Requirements for Success
What to look for when reviewing integrated solutions?
Out of the Box, Proven Financial and Operational Software
- Proven management of Indirect and Direct Costs
- Integrated across Finance and Project Management / Operations
- Business Process Automation
- Setup Flexibility to meet business needs
2

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Business Process Improvements
Indirect Rates
• Monitor Trends via standard reports
• More Accurate Cost Information for Bidding
• More Accurate Historical Procurement Costs
Traceability of Source Documents
• Management Reporting Drill Down
• On line Inquiry Screens
• Transaction Level Detail
• Imaging/Document Management
2

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Statement of Indirect Expense
2

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Operational Benefits
What benefits should Operations & Project Managers receive from
Microsoft Dynamics?
- Superior Cost Control
- Real time visibility into committed costs
- Immediate access to supporting documentation via
document imaging
- Earned Value Management visibility
3

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Job Summary Report
3

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Dynamics SL Overview
Exec Mgmt Dashboards
Real-time visibility
into your data
Top 10 Customers
Year over year
Sales and Margin
3

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Project Dashboard
into your data
Project P&L
Labor hours statistics
3

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Dynamics Overview
Increased Visibility
into your data
Labor statistics by
Customer
3

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Dynamics Overview
Project Visibility
Online Project
visibility – multiple
levels…
3

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Dynamics Overview
Project Visibility
Online Project
levels…
Commitments &
Budgets
3

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Dynamics Overview
Self Service Access
Online Project
levels…
Self-service – Project
profitability
3

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Dynamics Overview
Ability to drill into the details
Online Project
levels…
Self-service – Drill
into the supporting
details
3

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SECTION 3 – TIME AND EXPENSES

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Objectives of Timekeeping System
• Ensure that proper and reliable contract labor costs, identified as either direct
or indirect, are:
- Accumulated
- Reported
- Billed
• Billings to the government via a system of accurate, timely, and complete
posting of labor hours on individual employee timecards

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T&E System Best Practices
• Employee understanding of procedures for preparing time
sheets/cards/entering time, and preparing expense reports
• Employee independence in preparing and correcting time sheet/expense report
and adequate management review and submission to accounting
• Adequate written policy and procedures that employees and management must
follow
• Traceability of changes
• System for detecting errors/required changes

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T&E System Best Practices (continued)
• Proper coding of expenses to corresponding accounts.
• Inclusion of sufficient business purpose on expense reports.
- A business purpose of “miscellaneous reimbursement” is not adequate and does not
provide transparency into the nature of the expense.
• Detail regarding number of attendees for meal expenses on expense reports
(dependent on Company policy)
• Itemized receipts for expenses relating to meals (dependent on Company
policy)

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Basic Requirements of Timekeeping
System
• Employee is given or mapped to correct project or charge number via work
authorization before work commences
• Time cards/sheets or access to system provided to employee at beginning of
pay period
• Time cards/sheets are pre-coded with pay period, name, etc., if manual
• Employee has control or possession of timesheet (if manual) or sole access to
electronic system
• Employees record time daily
• Supervisors or other personnel do not prepare timesheet entries for employees
(unless out due to sickness, etc.)

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Basic Requirements of Timekeeping
System (continued)
• Audit trail for changes made to initial timekeeping entries
• Management approval of timesheet corrections noted
• Explanation of timesheet corrections provided
• Timesheet signed by employee at end of pay period
• Paid absences charged to correct indirect code
• Indirect duties (training, meetings, etc.) properly charged
• Timesheets collected by appropriate official and reviewed and approved

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What DCAA observations will elevate
audit risk?
• Mix of cost plus government & commercial contracts
• Lack of written or inadequate t&e procedures
• Significant adjusting entries to G/L labor charges
• Data indicated on timesheet during floor check does not match time sheet
after entered to labor distribution
• Significant and non-verifiable changes and alterations to employee timesheets
• Timesheets without employee signature
• Inadequate demonstration of employee training for preparing time sheets

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How do I know if I have Timekeeping
System problems?
• Timekeeping procedure is twelve years old and has not been updated to reflect
current electronic methods
• At end of payroll period, electronic time entries for several employees are
changed & then “approved” by supervisor
• John Doe provides Lisa Smith, another employee (not his supervisor) his
timekeeping password so that Lisa can prepare entries for him while John is in
rehab
• Jane Doe, an “exempt” G&A person, often works uncompensated OT, but does
not record more than 40 hrs/week
• Company cannot reconcile total payroll to labor distribution

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Time Reporting
• All time worked should be reported, including all time worked in excess of the
standard workweek. This includes all time worked for clients, whether billable
or not.
• All time and expenses associated with an individual contract should be
recorded in a Work Breakdown Structure (WBS) element. Any time or expense
related to the execution of a specific contract should be charged to the correct
WBS elements, regardless of whether or not those time and expenses can be
billed. All other time and expenses should be charged to the appropriate WBS
element.

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Labor System Authorization/Approvals
• The contractor should have procedures to ensure the segregation of duties for
work authorizations and/or job assignments to the extent practical. Work
authorizations/job assignments should be controlled and issued by individuals
independent of those responsible for performing the work - a critical control is
the procedure used to open and close work authorizations.
• The contractor should have procedures for the preparation of labor
documentation/work descriptions that require clear identification of the
nature of the work performed - trackable to intermediate or final cost
objectives
• The contractor should establish a labor charging awareness program to train all
employees, as appropriate, on proper labor charging practices.

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Labor System Authorization/Approvals
cont.
• The contractor should assure that labor hours are accurately recorded and that
any corrections to time keeping records are documented including the
appropriate authorizations and approvals.
• The contractor should assure the proper allocation of labor costs to cost
objectives.
• The contractor should provide reasonable assurance that labor transfers or
adjustments of the labor distribution are documented and approved.
• The contractor should monitor the overall integrity of the time keeping system.

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Overtime Approval
• Requests for overtime should be made by project managers or department
managers. Overtime must only be authorized when a project or department
manager has documented the following in writing:
- Overtime is necessary to meet delivery requirements,
- Overtime is necessary to meet performance requirements, or
- Overtime is necessary to make up for delays beyond the control or without the fault
or negligence of the contractor
• When required by contract provisions, the project manager authorizing
overtime must obtain the contracting officer's written approval.

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Timecard Changes / Modifications
• It is improper for supervisors to unilaterally make changes to an employee’s
timecard. Doing so may result in disciplinary action.
• If a time correction is necessary PRIOR TO submitting the time sheet to the
Payroll Department, the employee should ensure that the time sheet correction
is made in ink and initialed. The reason should be clearly documented and
approved by a supervisor.
• When making a correction(s) to reported time SUBSEQUENT TO submitting the
time sheet to the Payroll Department:
- The correction may not be more than 30 days old.
- Employees must indicate the reason for the correction, the job numbers affected by
the adjustment, and the related hours.
- The documentation for the labor corrections must be signed by a supervisor and
submitted to accounting.
- Consider creating a “Labor Correction Form” that will state the necessary procedures
for making labor corrections.

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Distribution of Labor Costs and Labor
Transfers
• Written justification is required for any transfer of labor costs to ensure the
proper allocation of labor costs to each project. Each justification should be
retained in accordance with the contractor’s record retention policy. Journal
vouchers are commonly used to document labor transfers.
• The contractor should consider additional procedures for more closely
scrutinizing transfers.
• The contractor should include procedures to address management review and
approval of labor transfers, labor distribution edit errors, and review and
correction of labor errors.
• Labor distribution edit errors should be processed in a suspense account and
billed to customers only after correction.

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Consequences for Deliberate Failure to
Follow Timekeeping Policies and
Procedures
• The contractor should be committed to the enforcement of all timekeeping
procedures. Any clear infraction of the policy stated above will result in
disciplinary action which may include a warning, reprimand, probation,
suspension, reduction in salary, demotion, or dismissal.
• Employees should be aware, in addition to company imposed sanctions, that
individuals directly responsible for deliberate mischarging of time or materials
may be held personally liable for civil penalties and actual damages sustained
by the government as a result of the mischarging. Criminal prosecution may
also result which carries fines and/or imprisonment.

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Consequences for Deliberate Failure to
Follow Timekeeping Policies and
Procedures cont.
• Employees must be vigilant in their efforts to accurately record time. The
penalties for knowingly mischarging time can be as severe as termination and
other Governmental ramifications (i.e., False Claims Act).
• The contractor should periodically conduct floor checks to ensure timekeeping
practices are being followed and actual hours worked are accurately recorded.

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Dynamics Overview
Web based Timecards
Online Timesheets
5

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Web Based EE Expense Report
5

Page 57
Dynamics SL Overview - Assign Resources
5

Page 58
Dynamics Overview - Increased Visibility
into your data
Labor statistics by
Customer
5

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SECTION 4 – JOB COSTING

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Job Cost Accounting Systems
• Used to determine cost of a product or service
• Can be used to determine prices – government contract prices are often based on costs
charged to a job
• Used to record cost of an individual transaction
• May be used to distribute indirect costs to cost objectives
• Government does not require “on book” distributions
• “Memo records” are acceptable
• Facilitates integration of production data into accounting records

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Job Cost Accounting Systems
(continued)
• Costs must be accumulated under general ledger control
o Job costs must be reconcilable and posted to general ledger control accounts
o Costs must be posted at least monthly to books of account
• Costs must be segregated between direct and indirect types
o Controls must exist to preclude direct charging of indirect expenses
• Direct costs must be accumulated by contract
o Must either have a subsidiary job cost ledger or accounts receivable ledger
o Must be able to “drill down” to at least Contract Line Item Number (“CLIN”) level
• Indirect costs must be allocated to jobs
o Accumulated in logical cost groupings and allocated based on causal or beneficial
relationships

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Allocation of Expenses
When a company incurs an expense, it is either a direct expense that is charged to
a specific project or it is an indirect expense that benefits various projects and the
company as a whole.

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Accounting for Unallowable
Costs
An allowable cost in government contracting terms means billable – it’s allowable if the
rules permit it to be included in an invoice to the government. An unallowable cost is
just the opposite; it’s the kind of cost you can’t bill the government for.
Under the FAR 31.201-2, a cost is allowable only when it meets all of these
requirements:
Terms of the contract
Limitations set for the in FAR 31.201
Reasonable and allocable

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What is a Direct Cost?
If a cost is easily identified with a single project, it is generally considered a direct cost.
To help make this determination, ask…
“If we did not have this contract, would we still incur this cost?”
A “no” answer to this question indicates that it is probably a direct cost.

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Direct Costs Examples
• Labor performed while working on a
project
• Travel to project status meetings
• Material consumed entirely on a project
• Subcontractors/consultants hired to
work on a project
.

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What is an Indirect Cost?
An indirect cost is a cost incurred that:
• Benefits more than one contract
• Incurred for the common good of the company
• Impractical to split
• Immaterial direct cost

Page 67
Defining Indirect Costs
Fringe benefits
Company expenses incurred for the benefit of its employees
• Employer payroll taxes
• Medical insurance paid by the company
• Company 401(k) contributions
• Paid time off

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Overhead
Costs not directly related to cost objectives but are support-type costs
necessary for the production of goods or services
• Salaries and wages of support and production personnel
• Facilities cost
• Supplies
It is common to find separate overhead pools for engineering,
manufacturing, and for certain off-site activities

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G&A
Costs associated with the general administration and overall management of a
company
• Compensation of company executives and related fringe
• Legal and professional fees
• Administrative personnel and costs
• Business insurance
• Company taxes (except federal income taxes)
• Bid and proposal costs

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Subcontractor/material handling
Costs associated with overall administration of subcontractor and materials
acquisitions
• Selecting, negotiating, and managing subcontractors and materials purchases

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Direct or Indirect – Gray Areas
Example: Company A and B ship monthly program reports to their clients
Company A
• Charges the shipping expense
against the contract
• Support personnel charge
time to overhead
Company B
• Charges all shipping to overhead
• Administrative staff charge:
o Time supporting projects
o Overhead when working on
support of a general nature
The same approach can be taken on many other types of
expenses, such as photocopies, phone calls, faxes, etc.

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G&A or Overhead
Company A charges HR costs to G&A while
Company B allocates the cost of HR across
the entire company.
HR benefits the Company as a whole,
meeting the criteria of a G&A cost, but HR
also benefits all ee’s of the Company.
Company B rational:
• The fundamental costs of the majority
of ee’s are maintained in OH
• HR costs will be allocated between OH
& G&A based on a method such as
using proportionate number of ee’s
Can certain G&A costs qualify as OH expenses?
Deciding to allocate costs between
G&A and OH takes detailed planning
and consideration of materiality and
cost /benefit relationship

Page 73
Defining Allocation Bases
Assigning an indirect cost pool to a particular allocation base depends upon:
• Types of costs included in the pool
• Whether the base provides a reasonable representation of the relative
consumption of pooled indirect costs by direct cost activities
Labor costs are an appropriate allocation base for the fringe expenses.
There is a clear relationship between the two.

Page 74
Indirect Rates
Indirect rates are equitable, logical and
consistent process for allocating costs not
directly associated with a single project or
cost objective.
The only requirement of the FAR is that the
allocation of indirect costs be:
• Fair
• Reasonable
• Equitable

Page 75
Indirect Rates
Key points to establish and manage indirect cost structures:
Fiscal year
The period for allocating indirect costs is a
contractor’s fiscal year – it is not related to a
period of performance for a given contracts.
Simplicity
When substantially the same result can be
achieved through less precise methods, a company
is permitted to keep the allocation simple and not
be forced into more complicated allocation
formulas that are technically more accurate but
not materially different.
Consistency
Once treated as a direct (or indirect cost), a cost
should be treated consistently.
Companies have a great deal of
latitude to determine indirect rate
structure

Page 76
Calculation of Indirect Rates
Indirect rate =
Similar cost (pool)
Allocation base
The calculation of indirect rates
is simple math – it is just a
matter of grouping, adding, and
dividing.
It’s how and why certain
numbers are grouped together
that can be complex.

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Indirect Rates

Page 78
Indirect Rates

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Indirect Rates
Methods practiced to reduce indirect rates:
• Charge as many costs direct as possible. By charging shipping and copying directly to a
contract, it will keep it out of overhead pool, which will in turn reduce the overhead
rate.
• Direct charge unique costs to a specific contract
• More indirect rates by splitting large groupings
• Indirect rates for different types of work
• Establish a services center
A company with high rates may not really be any more expensive -- though they
are often perceived that way. When developing or evaluating indirect rates, a
company should keep in mind ways to reduce at least the appearance of indirect
rates.

Page 80
Indirect Cost Allocation Cycle
Indirect cost allocation typically follows the cycle depicted in the following figure:
Forward Pricing
Estimate
Indirect
Contract Costs
Final Allocation
Allocate
Indirect Costs
to Contracts
Billing
Progress
Payments Cost
Reimbursement

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Forward Pricing- During this phase, the contractor proposes forward pricing rates and
uses those rates in contract proposal pricing.
Contract Billing- Provisional / Target rates are indirect rate projections used on contract
billing that have been reviewed and approved by the DCAA or the contractor’s cognizant
agency for proposal and estimating purposes.
For example, a company may develop budgeted rates for the current year and
forecasted rates for the next two years. All three years of rates can be
approved for proposal preparation purposes.

Page 82
Final Pricing. After the cost accounting period is completed, contractors can calculate
actual indirect cost rates to determine actual contract cost.
• For contracts that require final pricing (e.g. cost plus) the responsible contracting
officer or auditor must determine final indirect rates for the contract.
• Final indirect rate proposal is submitted by the contractor.
• Months or years may be required to complete this process. Under certain limited
conditions, the contracting officer and the contractor may agree to use estimated
quick-closeout indirect cost rates for final pricing.
• Data used to support final rates will become part of the data available for estimating
forward pricing and billing rates for subsequent accounting periods.

Page 83
Government Contract Life-Cycle
Pre-Award
Award
Accounting
Controls
[Policies,Procedures,Training]
Accounting
System

Page 84
Project Dashboard
• Real-time
visibility into
your data
• Project P&L
• Labor hours
statistics
8

Page 85
Dynamics SL Overview - Create New Project
8

Page 86
Dynamics SL Overview - Create New Project
8

Page 87
Dynamics SL Overview - Assign Resources
8

Page 88
Dynamics SL Overview -
Create/Update Budget
8

Page 89
Benefits Beyond The Norm
8
Traditional
Project Management
• On time versus original
schedule estimate
• Within budget versus
original cost estimate
• Within scope versus
original deliverables
• Meet or exceed
customer expectations
• “Best available” resource
utilization
Project Management
& Accounting
Reduced time to
market and/or cycle
time
Project revenue, cost,
and profitability
Business value of
services delivered
Alignment with
business and client
objectives
“Best fit” skills-based
resource optimization

Page 90
Other Measurable Benefits
9
• Better Prioritization of Projects and Services
It is shocking how many “projects” operate below the radar screen with
no plans, controls or accountability
• Shorten Billing Cycles
Better allocation of resource T&E to project schedules and invoicing, and
faster resolution of billing disputes
• Minimize Revenue Leakage
Eliminate errors from manual entry or redundant systems used to
invoice client services
• Improved Service Agility
Quicker response to sudden or unexpected changes in business
priorities, competitive pressures, new technology, and economic
downturns

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Bringing it All Together
9
A SINGLE VIEW OF OPERATIONAL DATA
• Discover the one truth for your business
• Provide people access and empower them with
simple but sophisticated tools
• Focus on what is important and act!
• Institute the command and control you need to
meet goals

Page 92
Exec Mgmt Dashboards
into your data
Top 10 Customers
Year over year Sales
and Margin
9

Page 93
Dynamics Overview
Increased Visibility
into your data
Labor statistics by
Customer
9

Page 94
Dynamics Overview
Web based Timecards
Online Timesheets
9

Page 95
Dynamics Overview
Project Visibility
Online Project
visibility –
multiple levels…
9

Page 96
Dynamics Overview
Project Visibility
Online Project
levels…
Commitments &
Budgets
9

Page 97
Dynamics Overview
Self Service Access
Online Project
levels…
Self-service –
Project profitability
9

Page 98
Dynamics Overview
Ability to drill into the details
Online Project
levels…
Self-service – Drill
into the supporting
details
9

Page 99
Web Based EE Expense Report
9

Page 100
Dynamics Rate Table Setup
1

Page 101
Provisional vs. PTD Actual reporting
1

Page 102
Provisional vs. YTD Actual
1

Page 103
Statement of Indirect Expense
1

Page 104
Project – GL reconciliation report
1

Page 105
Job Summary Report
1

Page 106
Employee Labor Distribution
1

Page 107
SECTION 5 – OTHER ISSUES

Page 108
Actual versus Provisional Rates
• Provisional rates – estimated rates that are required to reimburse contractors on an
interim basis.
o Sometimes referred to as “target rates.”
o Should be adjusted as facts and circumstances change to prevent substantial
underpayments or overpayments.
• Actual rates – final indirect rates that are determined during or after a contractor’s
fiscal period.
o Subject to audit
o Required to be submitted in the final indirect proposal within six months after
year-end
o Used in the contract close-out process

Page 109
Basic Types of Government Contracts
• Fixed price – contractor is paid a predetermined fixed amount for a specified scope of
work and has full responsibility for the performance costs.
• T&M and labor hour – contractor is paid fixed hourly rates for direct-labor hours
expended under specified labor categories. Materials and other non-labor costs are
usually reimbursed at actual costs plus allocable indirect costs.
• Cost reimbursement – contractor is reimbursed for allowable incurred costs plus a fee
(if specified).
TIP: Do not make your accounting systems decision based on the contract mix that you have
today.

Page 110
Scope of Government Audits
• Proposal / pre-award
• Incurred cost
• Business systems
• Forward pricing/estimating
• Special
o Termination proposals
o Progress payments
o Financial capabilities
o Other claims
• Other audits
o CAS Compliance
o Defective pricing
o Other

Page 111
The Current Audit Environment
• Increased oversight on contractor business systems and controls
• Stringent rigor applied to audit practices, programs and documentation
o Decreased cooperation with contractors to prevent appearance of bias
o “Zero tolerance” with respect to meeting control objectives.
o Elimination of recommendations on deficiencies
o Inadequate/adequate findings – no more “inadequate in part”
• As a result, an increasing number of contractors now have inadequate systems with
“significant deficiencies” and “material weaknesses”
• Most inadequacies have been accompanied with recommendations to ACOs to pursue
withhold of payments
• ACOs face an up hill battle in disagreeing with auditor findings
• Impacting contractors ability to win new awards and sub-awards

Page 112
The Current Audit Environment
(continued)
• Through periodic business systems audits and flash reports – opportunities for
inadequate systems are higher.
• Since there are no longer “inadequate in part” determinations, a single finding is now a
“significant deficiency” representing a “material weakness.”
• As a result, a single audit finding can now result in a recommendation of withhold of
fees/payments.
• Since there is a backlog of audits and because audits > 4 years old are no longer
current, there is an increased number of contractors with unaudited systems.
• DCAA is working on reducing the backlog of open incurred cost audits.
o Data is old
o Personnel may have changed
o Systems may have changed
• Results in increased audit scrutiny (e.g., substantive testing) in all other audits and
impacts contractors ability to obtain new awards

Page 113
Dealing with government auditors
• Understanding what is being audited
o Pre-award – evaluation of whether the contractor is capable of performing the
proposal.
o Post-award – evaluation of accuracy, completeness, and currency of pricing data
submitted.
o Incurred costs – evaluation of whether direct and indirect costs are properly claimed
for reimbursement on flexibly-priced contracts.
• Be prepared
o Establish an audit liaison
o Understand the programs that the auditor will be using
o Insist on an entrance and an exit conference
o Be prompt in your responses
• Understand that not all government auditors are the same.

Page 114
Questions?

2013-09-26 Government Contractors Project Management Systems

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2013-09-26 Government Contractors Project Management Systems