Counting the cost …. You’re in business. You sell a product or service. You set the price and your customers pay it. So what’s the problem…? The problem is that when doing business with the government you’re not in Kansas anymore. You’re not in Oz, either. In fact, the hazards of Oz would be inconsequential compared to what you might encounter in the land of government contracts! Case in point: One company spent more than a decade and millions of dollars on attorney fees defending against alleged violations of the Truth In Negotiations Act, a.k.a. “TINA.” But who ever thought a legislative enactment with a name reminiscent of a character from a 1960s beach movie would have such dire consequences? Your friendly government contracts attorney, that’s who! So convoluted can the realm of government contracting be that Dante’s hellish advisory, “Lasciate ogne speranza, voi chintrate” might well have been included in the preface to the FAR. Translated, it means “Abandon all hope, ye who enter here.” One expert in the field said, quote, “the most challenging task in Government contracting is contract pricing.” End quote. He was referring to TINA and its implications for the unwary. TINA requires disclosure of confidential business information you wouldn’t dream of disclosing in the commercial sector, and potentially serious consequences can arise from even unintentional noncompliance. But there are other hazards, as well. Hazards like “cost principles” and the Cost Accounting Standards, or CAS. Add to that government audits you may be subject to and you can understand why attorneys attired in $2,000 suits line the corridors of federal courts. What you can do …. • Invest the time and energy to set up good accounting system and practices. • Adequately document cost and pricing assumptions, rationales, and strategy. • Insure identified costs and prices “track,” i.e., can be traced through supporting schedules and documentation. • Insure that cost allocations, whether direct or indirect, are consistent. Don’t charge costs as direct in one instance and indirect in another. • Familiarize yourself and your team with government cost principles and procedures, including audit procedures. • Above all, document, document, document! You should be able to back up any cost or pricing claims you make. • And remember: You’re not in Kansas anymore!
Posted on: Mon, 15 Sep 2014 21:55:52 +0000
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