By Susan Mitchell, chief services officer at NeoSystems
Whether associated with national, state or local entities, new government contractors face numerous compliance-related obligations that may initially seem overwhelming. One of the best options is to behave proactively from the start, so affected individuals can take all necessary steps promptly rather than trying to catch up later.
For example, contractors must register their businesses and receive the associated identification numbers before bidding on projects. It is also necessary for them to become part of the System Award Management database, which lists available contract opportunities. Resources exist that make it easier to achieve and maintain compliance, positioning entities to remain competitive and increase the chances of securing more contracts.
How Can Parties Ensure Compliance With Regulations as New Government Contractors?
The Defense Contract Audit Agency’s website has lots of great information for new government contractors. This entity provides financial oversight for the Department of Defense to maximize the dollars spent on defense contracting. Its primary function is to conduct contract audits and handle related financial advisory services. A particularly useful PDF presentation for those new to the agency and its audit process is a standout resource published on its website.
Government contractors should also figure out which software they will use for tracking financial books and records. QuickBooks, CostPoint, Unanet and Jamis are some of the many possibilities. Setting up these programs immediately and correctly from the beginning prevents future stress.
People may think they can save time by putting off this step or not completing the setup. Conversely, those options cause trouble in the long run by delaying contract awards, complicating tax reporting at the year’s end, causing a buildup of cost and pricing data based on actuals and interfering with the ability to get a line of credit from a financial institution to further growth.
A checklist, such as the one offered by NeoSystems LLC, can help new contractors understand their obligations and act accordingly. The accompanying compliance guide breaks the main requirements into several categories. That format makes the content accessible and allows readers to focus on the most relevant areas before studying the checklist to prioritize their efforts.
How Do Compliance Requirements for Small Businesses Versus Larger Contractors Differ?
Some compliance requirements apply to contractors regardless of size. Cybersecurity is a good example. Rather than allowing self-attestation, third parties must verify that entities fulfill the required security controls.
Beyond that, cost accounting standards typically apply to larger government contractors based on the size of their contracts. Many small businesses are subcontractors to larger contractors and receive Federal Acquisition Regulation clauses as flow-downs in their contracts from the prime contractors.
How Does Technology Help New Contractors Achieve and Maintain Compliance?
There is a lot of automation and technology out there that can help GovCons. Among the most basic are tools that can design the chart of accounts in any financial system to appropriately segregate direct, indirect and unallowable costs to allow for appropriate collection and allocation. The best financial systems can calculate indirect rates and allocate them to projects at the push of a button. Those reduce manual activities and increase accuracy.
Some experts also believe that artificial intelligence will soon help government contracting teams respond more quickly to proposals or identify compliance gaps while increasing their competitiveness. Staying aware of new technologies and their potential advantages helps new contractors decide if and when to adopt them.
GovCons that sell technology in the form of software can showcase a competitive advantage by demonstrating that they offer inherently secure products. That recommendation aligns with Homeland Security Secretary Kristi Noem’s holistic approach that emphasizes cybersecurity. Products that automate code testing and produce reports about the overall security of products before launch can fill gaps, but they should not replace human oversight.
Why Are Compliance Pitfalls So Prevalent?
Most new government contractors have developed a great product or expertise in a specific skill set (think ex-military personnel with years of experience building or working with a mission-critical system). They then bid on contracts, but have no background in contracting with the government or the financial aspects of owning a business.
Hiring external experts to close knowledge gaps and provide tailored recommendations prevents many such challenges. NeoSystems LLC provides back-office management by delivering support for technology and best practices via expert professionals to handle the crucial details. GovCons can then focus on developing and practicing core competencies, such as serving customers, growing their businesses and securing more contracts.
Achieving Compliance as a Government Contractor
Noncompliant contractors face adverse consequences such as penalties, terminated contracts and exclusion from future government opportunities. Therefore, affected parties must become compliant from the beginning. This approach requires initial effort but eventually pays off by helping entities navigate the often complex landscape and enjoy ongoing success.
Recognizing when to seek external support from dedicated service providers helps representatives from applicable businesses address their compliance-related shortcomings effectively, while ensuring they do not take on too many tasks outside their area of expertise. Exploring opportunities to automate tasks or apply technology to them can help identify potential oversights, allowing contractors to spot them sooner and strengthen their overall competitiveness.
