Resolute Services - A Government Contractor Finance & Accounting Consulting Firm A Monthly Guide for Government Contractors
F & A: The Foundation of a Successful Business
Next Issues Feature: - Allocable & Allowable Costs - Direct versus Indirect Costs
One cannot emphasize enough the importance of having a solid finance and accounting (F&A) practice within their government contracting business. The F&A function is the foundation for operating a successful business. For government contractors, the F&A requirements can be very cumbersome and confusing. One of these requirements is classification of costs, which is a basic fundamental of government contractor accounting. This newsletter will explain why understanding cost accounting is important and gives you the specific regulations that can be used for additional guidance.<p> Understanding the fundamentals of cost accounting for government contracting is a basic necessity for operating within the industry. For example, a contractor that understands and properly applies cost principles in their pricing exercises will more likely be compliant with their contracts covered by the Truth in Negotiations Act (TINA) P.L. 87-653. In other words, the application of sound cost accounting practices overlaps into other areas of your business, such as pricing. The presentation of a fundamentally strong price book (consistent and compliant with the cost regulations and principles) should be an indicator and provide confidence to the government (your customer) that you know how to manage your business. Therefore, it is imperative to have an understanding of the fundamentals and regulation requirements for proper cost accounting. The main regulations concerning costs are the following: • FAR Part • 16.301-3 Cost Limitations • Part 31.202-Direct Costs • Part 31.203—Indirect Costs • Part 31.205.1-52—Selected Costs FAR Part 31 should be used for pricing of fixed priced contracts, subcontracts and modifications to contracts and subcontracts whenever cost analysis is performed or a fixed-price contract clause is used in the determination or negotiation of costs.<p> Not to be as a surprise, costs are especially crucial to all cost-type contracts. Contract modifications and changes involve the reliance upon costs and their determination. Cost Limitations—FAR 16.301-3 A cost reimbursement contract may be used only when the contractor’s accounting system is adequate for determining costs applicable to the contract, and the appropriate government surveillance during performance will provide reasonable assurance that efficient methods and effective cost controls are used. The comprehension of the cost regulations is the first step and implementing the practice of complying within your policies and procedures is the next step. Implementing consistent best business practices cannot be over emphasized.<p> Technology is an important tool to leverage for applying consistent best business practices within F&A; however, by just implementing the technology does not imply you are compliant with the regulations. The bottom line to laying a solid business foundation is having an understanding and practicing the fundamentals consistently day to day.
Resolute Services Offers: - Outsourced F&A Back Office Support Service - System Implementation & Restructuring - Incurred Cost Submission Preparation Assistance - Assistance with Development of Compliant Policies & Procedures - DCAA Liaison Assistance - M&A Transaction Services - Other Specialty Services
Resolute Services is determined to provide valuable and definite accounting and financial solutions to the government and government contracting industry. This industry is experiencing rapid changes, increased competition and increased pressure on profit margins. Resolute Services is here to ease and simplify the accounting and financial demands of the industry so that our clients can focus on how to grow and improve their operations. Our group is comprised of consultants that are innovative thinkers, experts in their field and are motivated to meet and exceed the expectations of our clients.
© 2008 Resolute Services - A Government Contractor Finance & Accounting Consulting Firm | 404.886.2350 | ResoluteSvs.com