I often have conversations with small, aspiring government contractors who tell me that they cannot afford a job order accounting software package specifically designed the industry in which they conduct business. They are often in pursuit of their very first cost reimbursable contract where DCAA compliance is a prerequisite, but do not want to undertake the perceived accounting software and related expenses until they get an indication that they just might win the coveted award. In other words, no contract award; no investment in the future. If that sounds familiar, I recommend that you take time out for a little bit of introspection.
- Feel that you are going to be in the business of government contracting for the long run?
- Perceive accounting software as an investment rather than as an expenditure?
- Value DCAA compliance on the front end instead of when it becomes a necessity in order to win a contract award?
- Prefer not to undergo a potentially painful and expensive financial system conversion process once you reach a critical point in your growth cycle?
- Wish to be less dependent on unreliable spreadsheets or a third-party accounting software add-on for project costing?
- Want to keep more of your hard earned cash versus spending it on high-priced consultants for preparing incurred cost submissions, assisting with internal controls and other outside services that could be better handled by your financial system?
- Envision a return on investment due to automating error-prone manual processes such as invoicing?
- Understand that accounting related costs are allowable under the FAR and may be recouped as part of your indirect cost rate structure and therefore reduce the net cost of ownership?
- Know that expenses incurred with the preparation of bids and/or proposals can be recoverable costs?
- Realize that cost plus awards when properly managed will yield guaranteed profits?
I sometimes will hear a naive contractor confidently state, "We only want to do fixed price work, so we don't need a cost accounting system." Is this because the risk of potentially losing money on a Firm Fixed Price contract where there are no funding modifications and no change orders is a better option than dealing with the regulatory oversight that comes with flexibly priced (e.g., CPFF) contract awards? Is this a good strategy to undertake when a prime contractor presents your company with an opportunity to perform work under a flexibly priced contract and you must reveal to them you do not have an acceptable cost accounting system in operation?
Somewhere within your fixed price bid there is - or should be - an allocation of indirect costs to be recovered in addition to your direct costs before you can apply a profit. Do you know with any degree of certainty the total estimated costs your company may incur to perform the statement of work? Would it not make projecting your costs easier with an accounting system in place that will provide historical data for like-kind projects?
If your government contracting firm is going to be in the business a year from now and beyond, then why operate at a disadvantage? A purpose built, industry specific cost accounting system doesn't cost -- it pays.