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Breakout Session # 1906 Doyle McBride, Director of Contracts, Qualis Corporation Date April 24, 2007 Time 3:20 – 4:

How Large is Small? . Breakout Session # 1906 Doyle McBride, Director of Contracts, Qualis Corporation Date April 24, 2007 Time 3:20 – 4:20. How Large is Small?. It depends…. How Large is Small?. It depends…on your perspective. Three Perspectives. Eligibility size Regulatory size

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Breakout Session # 1906 Doyle McBride, Director of Contracts, Qualis Corporation Date April 24, 2007 Time 3:20 – 4:

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  1. How Large is Small? Breakout Session # 1906 Doyle McBride, Director of Contracts, Qualis Corporation Date April 24, 2007 Time 3:20 – 4:20

  2. How Large is Small? • It depends…

  3. How Large is Small? • It depends…on your perspective

  4. Three Perspectives • Eligibility size • Regulatory size • Organizational size

  5. Three Perspectives • Eligibility size • Regulatory size • Organizational size

  6. Eligibility Size Standards • Based on NAICS Codes http://www.sba.gov/services/contractingopportunities/sizestandardstopics/tableofsize/index.html • Replaced SIC codes in 1997 (NAFTA) • Based on annual receipts or number of employees (ref. FAR 19.100, 13 CFR Part 121) • Tied to procurement, not company • Contracting Officer decides, but can be appealed (ref. FAR 19.303)

  7. Eligibility Size Standards • Self-Certification • Government must notify offerors of apparent winner per FAR 15.503(a)(2) • Size can be protested IAW FAR 19.302 • Affiliation and Ostensible Subcontractor Rule often cause for protest

  8. Eligibility Size Standards • Contract Performance • FAR 52.219-14 defines requirements • Services: at least 50% cost of personnel • Supplies: at least 50% cost of manufacturing • General construction: at least 15% cost of contract • Construction by special trade contractors: at least 25% cost of contract • 13 CFR Part 125.6 provides details • Compliance evaluated by CO and/or SBA • Compliance period generally period evaluated in proposal

  9. Eligibility Size Standards • Re-certification Rule Changes • New rules effective 6/30/07 (FR 11/15/06) • Before the 6th year of contract and before each option year thereafter • At the time of merger, novation, or acquisition • KO’s can request re-certification per task order • Must re-certify in original NAICS code, size standard as of date of re-certification

  10. Three Perspectives • Eligibility size • Regulatory size • Organizational size

  11. Regulatory Size Considerations • Federal Labor Laws www.shrm.org/hrresoures/basic_published/CMS_002787.asp • 1 to 14 employees • Fair Labor Standards Act of 1938 • Federal Insurance Contributions Act of 1935 • Sarbanes-Oxley Act of 2002 • Plus fifteen other laws • 11 to 14 employees, add • OSHA Recordkeeping

  12. Regulatory Size Considerations • Federal Labor Laws (continued) www.shrm.org/hrresoures/basic_published/CMS_002787.asp • 15 to 19 employees, add • Americans with Disabilities Act of 1990 • Title VII of the Civil Rights Act of 1964 • 20 to 49 employees, add • Age Discrimination in Employment Act of 1967 • Consolidated Omnibus Benefits Reconciliation Act of 1986 Americans with Disabilities Act of 1990 • 50 or more, add • Family and Medical Leave Act of 1993 • EEO-1 Report filed annually (federal contractor)

  13. Regulatory Size Considerations • Federal Labor Laws (continued) www.shrm.org/hrresoures/basic_published/CMS_002787.asp • 100 or more employees, add • Worker Adjustment and Retraining Notification Act of 1988 • EEO-1 Report file annually (if not federal contractor) • Federal Contractors, add • Davis Bacon Act of 1931 • Walsh-Healy Act of 1936 • Service Contract Act (1965) FAR 52.222-41 • Plus six others

  14. Regulatory Size Considerations • RFP Requirements • Describe accounting, compensation, and estimating systems • Provide detailed pricing of labor, overhead, G&A, other direct costs • Expect DCAA audit of your proposal

  15. Regulatory Size Considerations • Contract Post-Award Requirements • DCAA Post Award Audit • Financial Capability • Accounting System (for direct invoicing) • Allowable Cost and Payment, FAR Clause 52.216-7 • Reimbursable Allowable Costs (FAR Part 31, DCAA Contract Audit Manual) • Annual Incurred Cost Proposals • Provisional Billing Rates • Contract Closeout

  16. Regulatory Size Considerations • Forward Pricing Rate Agreements • Described in FAR Part 42.1701 • Initiated by CO, Contractor, or ACO (but) • Negotiated only with contractors with “significant” volume of proposals • Applicable to all of contractor’s proposal activity • DCMA Guidebook (guidebook.dcma.mil) describes ACO process

  17. Regulatory Size Considerations • DCAA Systems Reviews • Listed in DCAA CAM Part 5-102 (www.dcaa.mil under “publications”) • Control Environment and Overall Accounting Controls • General IT System • Budget and Planning System • Purchasing System • Material System • Compensation System • Labor System • Indirect and ODC System • Billing System • Estimating System

  18. Regulatory Size Considerations • DCAA Systems Reviews (continued) • Dollar Thresholds in DCAA CAM Part 5-111.1 • Based on “Auditable Dollar Volume” • Over $90M (major) requires comprehensive review • Between $15M and $90M (nonmajor) less comprehensive • Less than $15M may use narrative format • However, auditor can perform comprehensive review in any area determined to be high risk for any ADV level

  19. Regulatory Size Considerations • Contractor Purchasing System Review (CPSR) • Requirements defined in FAR 44.3 • Basis for ACO to grant approval • If contractor sales (excluding FFP, FFP-EPA, commercial) expected to exceed $25M in next 12 months • Every 3 years, ACO determines if review necessary • Surveillance level determined by ACO • Withdrawal of approval is not a good thing

  20. Regulatory Size Considerations • CPSR (continued) • Thorough review conducted by special DCMA team • Comprehensive purchasing procedures should be in place • Will review for management oversight, proper requisition, source development, competition, price analysis, etc. • First time pass rate not very high • FAR Clause 52.244-2 (Subcontracts) defines contractor’s purchasing requirements • No consent required if system is approved • If not approved, consent required for certain types of subcontracts • If subcontract evaluated with competitive prime proposal, no consent required.

  21. Regulatory Size Considerations • Cost Accounting Standards (CAS) Applicability • Described in FAR Appendix • Exemptions • Sealed bid contracts • Negotiated contracts & subcontracts not over $500K • Contracts & subcontracts with small businesses • Contracts & subcontracts with foreign governments • Contracts & subcontracts in which price set by law • FFP & FP w/EPA contracts & subcontracts for commercial items • Contracts or subcontracts of < $7.5M provided no current CAS-covered contracts $7.5M or greater (“trigger” contract) • Four others

  22. Regulatory Size Considerations • Types of CAS Coverage • Full Coverage • If received a single CAS-covered contract award of $50M or more; or • Received $50M or more in net CAS-covered awards during preceding cost accounting period • CASB Disclosure Statement required • Modified Coverage • Can be triggered by $7.5M CAS-covered contract • Only CAS standards 401, 402, 405, 406 apply

  23. Three Perspectives • Eligibility size • Regulatory size • Organizational size

  24. Organizational Size ConsiderationsSource of ranges: www.beasonnalley.com • 0 – 50 Employees or $0 - $5M Revenue • G&A budget limited and based on new contract revenue base • May need to outsource accounting, human resource consulting, contract administration assistance, cost proposal preparation, and DCAA representation • 50 – 200 Employees or $5 - $20M Revenue • Company principals need to build support infrastructure by hiring key people (accounting, contracts, human resources, e.g.) • Consider implementing comprehensive project accounting system • Implement comprehensive procedures for accounting, purchasing, compensation, estimating

  25. Organizational Size ConsiderationsSource of ranges: www.beasonnalley.com • 200 – 500 Employees or $20M - $50M Revenue • Consider hiring executive management staff (CFO, COO) • Consider upgrade of project accounting system to accommodate more complex contracts • Evaluate processes and procedures for compliance with Government audit standards • 500+ Employees or $50M+ Revenue • Takes steps to ensure compliance with CAS requirements, disclosure statements • Implement strategies for transition to large company through merger, acquisition, etc.

  26. Organizational Size Considerations “Dress for the job you want, not the job you have.” “It’s better to be a large small company than a small large company.”

  27. So How Large is Small? It depends on who’s asking and why.

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