Rose Report: Issue 33

Are You Ready for Next Year’s Proposal Season?

Rose Report Government ContractingTake This Quiz

As summer winds down, the government proposal season heats up. With next year’s proposal season just around the corner, government contractors not only have to balance the hectic business of the final selling period of the year, but prepare for the year ahead, too. To be prepared, contractors should ensure that they have a well-documented accounting system, establish a basis for each upcoming proposal, define selling points, budget costs and set provisional rates. Each of these processes is equally important, but finding a starting point may be difficult based on your firm’s priorities. Take this quiz to find out if you have your systems ready for next year’s proposal season.

Do you maintain a well-documented accounting system with adequate internal controls?
A critical element of success in government contracting is to ensure that your company’s accounting system is Defense Contract Audit Agency (DCAA) compliant. It’s also important to have adequate internal controls built into your accounting system to prevent you from making a material misstatement. If you aren’t DCAA-compliant, you risk being excluded from future government opportunities. Is your company able to demonstrate that it has carefully documented all transactions, as well as followed its written policies and procedures? If not, now is the time to arrange for an accounting system evaluation.

Are you analyzing and reconciling accounting records on a monthly basis?
The DCAA requires contractors to calculate the indirect rates they charge the government by dividing their expenses into categories that typically include general and administrative costs, overhead expenses and fringe benefits. To ensure the budgeted indirect rates you give the government at the beginning of the year remain in line with the actual costs of doing the work, you need to have the processes in place to reconcile your balance sheet and income statement accounts and monitor indirect cost pools monthly.

Have you set revenue expectations for the upcoming year?
The importance of forecasting expected revenues and expenses for next year can’t be overstated. Doing so will allow your company to set an appropriate rate for its product or service, all while accounting for the growth and satisfaction of your business and employees. Establishing a budget, predicting incurred costs, provisional rates and setting revenue expectations are all processes that can be facilitated with the help of the previous year’s financial reports. Analyzing the inflow and outflow of previous funds is a critical component for projecting future revenue expectancy. These figures, along with current and expected contract figures, should provide a benchmark of what your firm expects to earn.

Are you keeping forward pricing in mind?
Government contractors rely on forward pricing—the practice of incorporating the projected costs a company will incur after the addition of a significant new project into their pricing model. This method allows you to predict what your indirect rates will be once you win those new contracts. Often, winning additional business allows you to increase revenue faster than overhead and G&A which can lower your indirect rates, giving your company a competitive advantage when bidding on future work.

Preparation is ultimately the key to government contracting success. With a DCAA-compliant accounting system in place, all figures analyzed and accounted for, and an effective rate determined, next year’s proposal season should be full steam ahead.