Rose Report: Issue 25
Strategies in GovCon Billing
When billing the federal government, it is important to pay attention to the details of the contract. Knowing the requirements will help to avoid falling into unintentional mistakes and potential violations. Some agencies can have complex billing formats that include estimates and detailed information, whereas others may be more straight-forward. Regardless, it is important to follow best practices when it comes to billing.
With careful preparation and attention to details, you can ensure that your business’ billing process is smooth and accurate. Here are some tips:
Read the contract. Be familiar with the terms and conditions agreed upon. Is the contract Time and Materials (T&M), or Cost Plus Fixed Fee? These bills will be calculated differently. For example, a T&M contract may bill a senior technician at an agreed upon rate of $50 an hour, whereas a Cost Plus contract may bill the same person at a rate determined by their hourly cost plus indirect rates.
It is also important to know how much money has been obligated or funded versus what’s been authorized. While you may have won a contract for a million dollars, only $300,000 may be funded at the time, which sets the spending limit until more funding is released. Contractors sometimes make the mistake of assuming that they can bill as much as the contract award, even if less funding has been allotted at the time.
Have a written procedure and checklist. Set up a very detailed step-by-step checklist that is followed every time a bill is to be sent. Include the following:
- Contract administrative data, such as type of contract and task order number
- Periods of performance
- Cumulative amounts billed to date
- Ceiling, funded and authorized amounts
- Amounts remaining in the budget, which help prevent billing past the funded amount
- Bill cycle, such as monthly or semi-monthly
- Billing instructions for electronic submissions, such as with WAWF— a Wide Area Workflow system, used by many Department of Defense agencies
Do a trial-run in the beginning. Prior to sending the first bill, a contractor should work up a mock invoice and send it to the government agency to make sure it is done correctly and both parties are in agreement with the process and the format. Doing a trial-run before the first invoice is even sent can smooth out any mistakes and avoid having to reconcile any differences and problems that develop over time.
Doing a trial run invoice is also a good idea if you’re working as a subcontractor, in order to ensure the invoices you are sending the prime contractor are in the correct format. Getting it right the first time will help minimize the impact on cash flow.
Check your internal support. The government takes a serious look at contractors’ system set-ups and the internal controls surrounding the timekeeping and billing procedures. It is necessary to ensure that your systems are able to properly track and monitor costs and produce accurate billings.
Proper supervision and approval of subcontractor hours and invoices are becoming increasingly important as well. For example, you need to have a process in place that matches up hours and amounts billed by a subcontractor to what is billed to the government. Timing and other differences need to be reconciled to avoid under/over billings and potential fraudulent practices.
As part of the process of setting up internal controls, contractors should have written instructions documenting the process and making ensuring solid internal control checkpoints are in place. Updating manuals on a regular basis will enable contractors to continuously keep their policies and procedures accurate and effective.
Do not assume the government agency knows best. Even if the client is a government agency, it does not mean you should rely on them to tell you what to do. It is the contractor’s responsibility to abide by terms of the contract and follow the rules. It is important for both parties to be clear on the terms of the agreement from the onset, and to adjust as needed throughout the life of the contract.