GovCon Managed Services

What are the advantages of a managed services approach?

There is a lot of hard work that needs to get done to grow from a startup to a prime contractor! As a start-up you need to do the basics well - getting customers, building excellent past performance and managing your finances. As a prime contractor, you need to focus on being competitive, managing more complex contracts, managing subcontractors and making sure your infrastructure is secure.

At some point, as a prime federal contractor, you'll need to make a strategic investment in an ERP system. An ERP system provides the processes and systems needed to successfully manage government contracts. However, implementing an ERP system can be expensive, risky and disruptive. Implementing an ERP is even more risky and disruptive without the people with the requisite skills to make it all work. And it takes time to train the people.

A managed service approach allows a service provider to provide both the people and the system using an outsourced model. For firms that are new to government contracting, employing the services of an outsourced provider can be the best approach. Managed services allow contractors to augment their "back-office" team and gain access to professionals with the accounting, HR, contracts, and projects expertise that can implement the required processes and systems needed to mature their operating model.

How Can Utilizing Managed Services Improve Competitiveness?

Government Contracting can be very lucrative! Winning a contract with the government can provide a long-term income stream while also providing the opportunity to create a market niche. On the other hand, doing business with the government can be challenging because it requires a range of capabilities that require time, money, and expertise to put in place. Regardless of whether you're new to federal contracting, a mature prime contractor or somewhere in between, putting in place these capabilities are critical factors for long term success. Accomplishing this in a cost-effective manner provides a significant competitive advantage.

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How Can Managed Accounting Services Support Competitive Pricing?

During proposal preparation a government contractor has two major objectives: submit a winning bid and making money. These two objectives can sometimes work against each other. Submitting a competitive bid and making money requires analyzing the contract requirements, developing a basis of estimate, understanding your fully burdened cost and profit margins, and developing a competitive price. In this blog, we discuss how to strike the right balance between these competing objectives. We present general management strategies that will help when developing competitive pricing as well as strategies to consider when bidding a contract. We describe the cost components you'll need to consider when building your price. We explain why competitive indirect rates are important to competitive pricing. We also discuss how to build a basis of estimate that supports how you will build a competitive price. Developing effective pricing capabilities can be difficult and takes a team with years of experience in government contracting. These capabilities and skills require significant experience, time and money to put in place. If your organization does not have effective pricing capabilities this will significantly impact your win rate. 

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How Can Managed Accounting Services Support Budgeting and Forecasting

Well-run government contractors prepare an annual operating budget for both revenue and cost. The budget also serves as a benchmark of the cost that the contractor plans to incur throughout the year. The budget is used to develop indirect rates that indicate whether your business is performing according to plan. If you are required to submit forward pricing, developing an annual budget and target indirect rates are essential steps required to establish compliant financial controls.

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How Can Managed Services Support the Incurred Cost Submission (ICS)?

Every government contractor who is working on a cost-reimbursable type contract will be required to produce and submit an incurred cost report. Producing and accurate ICS is a tedious and time-consuming task. Managed Services powered by a DCAA compliant ERP systems can provided the support required to streamline the creation of the ICS. Producing the ICS requires accounting knowledge and skills as well as a thorough understanding of compliance requirements. Utilizing managed services can provide a great option for getting the accounting help you'll need. In this blog, we describe how setting up an integrated accounting, timekeeping and payroll systems can provide the data required and can be a significant time saver. Configuring these systems properly requires knowledge of government compliance as well as an accounting staff with skills in government accounting, the FAR Part 31 requirements, and cost accounting standards. If your organization needs help, managed accounting services can be an excellent option for getting the help needed to get the job done efficiently.

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What back-office subject matter expertise is required to support government contracting?

Every federal contractor needs a back-office support team with the experience in government contracting and subject matter expertise in areas, such as, cost accounting, HR, contract and project management and security, including:

• Human Resources (HR): SMEs (HR Specialists) with a background in human resources management. The HR specialists have expertise in all aspects of HR from recruiting, developing HR policies, and have worked with DOL to understand the details of compliance.
• Accounting: SMEs (CFO, Controllers & Bookkeepers) with a background in government accounting to ensure the funds provided by the government are properly managed and that accurate record keeping is in place to support government audits.
• Procurement & Vendor Management: SMEs (Procurement Managers & Analyst) with a background in government contracting involved in purchasing supplies (products, materials), and services needed for efficient business operations. This includes identifying and selecting suppliers, negotiating teaming agreements and contracts, placing purchase orders, receiving supplies, invoicing, and processing payments.
• Contract Management: SMEs (Contract Managers and Administrators) with a background in managing the entire lifecycle of government contracts, including tracking and managing deliverables, funding and modifications.
  
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• Project Management: SMEs (Project Managers and Analysts) with a background in developing project plans, including budgets, schedules and generating project job cost reports.
  
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• Security: SMEs (CISSO, Policy and Security Analysts) with a background in cybersecurity, requiring an understanding of emerging security requirements such as CMMC.

Not all of the SMEs listed above will be required on day one. As a "start-up" you may only require accounting and HR support on a part-time basis. Prime contractors responsible for managing more complex contracts, that also require subcontractors, may need support from all of the SMEs listed.

What back-office processes and systems are required to support government contracting?

Listed below is a summary of the key processes and systems needed to support government grants as well as more complex contracts.

Workforce Management (HR): People are most companies' greatest asset. This is especially true for federal contractors who are in the "start-up" stage as they often lack the capital and market reputation to attract and retain the resources needed to support their growth. In fact, the necessity to implement policies and processes that support the lifecycle management of their human resources is a critical success factor. To successfully grow, all businesses must develop effective policies, processes and systems for recruiting, assessing, onboarding, training, evaluating, compensating, retaining and off boarding their people. In addition, their systems must be effective at managing all the changes required during their employment. If these processes and systems are done well, it will go a long way in helping the business to develop a reputation as a great place to work. Conversely, if done poorly the company will struggle to grow!

Procurement: Procurement includes all the processes involved in purchasing supplies (products, materials), and services needed for efficient business operations. This includes identifying and selecting suppliers, negotiating teaming agreements and contracts, placing purchase orders, receiving supplies, invoicing, and processing payments. If government contractors are purchasing $50M or more in supplies and services for their contracts, they must understand the compliance requirement imposed on them by the government.

Vendor Management: Vendor management includes functions that ensures that third-party relationships are nurtured, and risks mitigated. Processes are put in place to eliminate risks that include selecting qualified vendors, tracking the funds awarded to vendors, and evaluating vendors' performance. Well-defined and repeatable workflows, transparent and efficient communication are important features that are available in modern ERP systems.

Managing Payroll: Paying employees timely and accurately is a critical task that must be performed by all businesses. For federal contractors executing grants and contracts this requires putting in place timekeeping systems for tracking all hours spent working on government projects by employees, consultants, and subcontractors. Whether processing payroll in house or utilizing an outsourced provider, accurate timekeeping records must be used when processing payroll.

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Cost Accounting: Long term success in government contracting requires the ability to perform on "cost" type contracts with the federal government. Cost contracts reduce risk for businesses by ensuring adequate compensation for work that may involve some uncertainty. The government requires the most stringent accounting standards in cost contracts to ensure fair and reasonable usage of public funds. Implementing cost accounting processes and practices in a small business is challenging, especially for a firm conducting an SBIR contract, because the employees have a bias toward delivering excellent products and services rather than focusing on building the business. It is difficult to develop innovative technologies while trying to implement home-grown or cumbersome software solutions to capture direct and indirect costs like labor, travel expenses, utilities, material costs, employee benefits, etc.

Current solutions to the problem of implementing cost accounting systems range from manually using spreadsheets to expensive customized software development. Spreadsheets are inadequate solutions for long-term growth and many software options either demand too many resources or narrowly focus on only one aspect of the business, such as human capital management.

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Managing Contracts: Contractors that begin to gain traction in government contracting find that a key element of successful growth is to be able to manage multiple contracts. In many cases, each contract requires different management techniques. For example, the profit and loss associated with a Time and Materials contract differs from a Firm Fixed Price contract or a Costs Plus Fixed Fee contract. Poor management of the costs and activities associated with each type of contract can result in leaving money on the table by not invoicing properly, or incurring cost overruns.

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Technology Commercialization: One of the main objectives of the SBIR program is to develop commercially viable companies that contribute innovative products to the US industrial base. The primary customers of SBIR Phase III projects are government program managers. Government PMs are busy people who manage the introduction of innovation into their programs risk. The PMs generally will tolerate technology risk because they can manage its impact. However, PMs cannot tolerate business process risk inside the operations of a contractor because they have little control over it. Poor business processes that cannot meet government contractual requirements will stifle commercialization regardless of how promising a new technology may be.

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Subcontracting: Many technologies developed through SBIR grants and contracts become attractive to government prime contractors who need innovative solutions to challenges faced in large government programs. For example, a robotic paint arm developed through the SBIR program improved the accuracy of applying special radar-reflective coatings on military aircraft, while doing it at a lower cost and removing the safety risks associated with manual application. The prime contractor manufacturing the aircraft inserted the robotic painting capability into the assembly line.

Subcontracting to a government prime contractor can be a tremendous opportunity to gain traction in the government market and mature an organization. However, the government often requires prime contractors to pass many contractual requirements down to subcontractors in their supply chains. This requires the same standards of performance for subcontractors in areas like cost accounting, cybersecurity, and reporting as those expected of prime contractors. Prime contractors will not jeopardize their contractual relationship with the government by introducing risk into their supply chain. Subcontractors must deliver reliable performance.

Cybersecurity: The Department of Defense Federal Acquisition Regulation Supplement (DFARS) clause 252.204-7012 requires all contractors and subcontractors handling "Controlled Unclassified Information" to implement cybersecurity safeguards outlined in the National Institute of Standards and Technology Special Publication 800-171. Covered defense information includes personally identifiable information, contract sensitive information, military operational information and anything DoD may designate as covered. For example, social security numbers, troop deployment schedules and even building floorplans may be considered CUI. In addition, emerging personally identifiable information (PII) and other security requirements, place an increased demand on government contractors. Prime contractors or their subcontractors who are unable to implement cybersecurity safeguards risk being in non-compliance.

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Compliance: Federal contractors face a range of federal, state, and local regulations. In addition to the cybersecurity requirements, GovCon's will be subject to many compliance audits. Government contractors must often satisfy cost accounting standards defined by DCAA SF-1408 to meet accounting system compliance audits. Service Contract Act (SCA) requirements in contracts require adjusting the approach to managing hourly workforce, using geographically determined benefit and payroll policies. Contractors must focus on establishing compliant accounting, timekeeping, procurement, property management and data retention systems that can withstand the scrutiny of a government audit.

Conclusion - Benefits of Utilizing Managed Service

Federal contractors need a range of processes, systems, and subject matter expertise (people) to be successful. Trying to build required capabilities while also focusing on growing your contracting business can be overwhelming. There are significant advantages to utilizing a managed services approach. The table below provides a summary of the benefits of managed service powered by AtWork Systems' OneLynk SaaS platform:

AtWork Systems designed OneLynk to enable GovCon businesses to navigate through the challenges of growing a GovCon business by providing the infrastructure to deliver exceptional performance. While a government contractor is maturing in the government market, as either a prime or subcontractor, OneLynk is there to instill the processes needed to help achieve government compliance. AtWork Systems offers subject matter experts - across functions like accounting, HR, financial, contract and project management - to help startups step out on the right foot or to help more mature firms transform ad hoc or inadequate processes into higher levels of performance. The combination of AtWork Systems' OneLynk and associated professional services is available as a comprehensive, secure and affordable means of gaining a competitive advantage.

Learn More About AtWork Systems

AtWork Systems is an Arlington, Virginia based managed services and software development company. Its principals have decades of experience doing business with and working for federal, state, and local government. They developed OneLynk as a configurable and scalable business operating platform that digitizes and optimizes processes while providing just in time business intelligence for decision making. OneLynk contains a suite of easily configurable web applications for automating and monitoring business transactions, including: human capital management, finance, timekeeping and expense management, procurement, contracts and project management, payroll services and more. Discover the latest ERP System for Government Contractors at www.atworksys.com.