Best Practices to Reduce Risk Factors Related to Government Contracting – Part 2

This is the second part 2 of a 2 part blog about government contracting best practices to reduce business organizational risk factors.  Today’s is for large business.  You can find the other one related to small businesses here.

I have been re-reading a book called Winning US Federal Government Contracts by Gregory A. Garrett.  In Chapter 3, he mentions 12 factors for both small and large businesses that help to reduce the wide range of business risk factors as prime contractors and/or subcontractors.

So, how does a large established company go about reducing these risk factors?  After all, they got big through government contracting, potentially, or are already a big company for a reason.  I pulled 5 of the 12 steps mentioned for large companies for this part of the discussion:

1 – Create a separate business unit or business entity to segregate your commercial business from your U.S. government business.  The government requires you to basically keep a different set of books for accounting for government contract costs both  direct and indirect.  The easy approach to this is to maintain a clear division between the commercial (non-GC) and government contract business.  This helps keep costs from overlapping and in my experience creates less of a hassle since you can also talk the “GC language” with anyone on the government side of the business.  Less translation makes for more efficient operation.

4 – Serve as a subcontractor to a proven successful small business.  This point seems a little counter-intuitive.   However, at some point the large dollars have been spent and the only way to continue to grow is to become the 49% of a small-business set aside contract.  When you are a large company, competition cannot normally be avoided outside of sole-source contracts.

 5 – Sell only commercial items, products, and services pursuant to FAR Part 12.  The government can easily purchase commercial items with little red tape and less justification than a full-fledged award based on the merits of your proposal versus the others competing for the right to provide the government these items.  This factor is the same for small or large companies.

8 – Build close relationships with the government agencies key program decision-makers related to your products and services.  If you are on LinkedIn and use it to its full potential, you are aware of the value of networking.  Perhaps the government official you have a relationship with doesn’t have any funds outside of the contract you are already performing, but leveraging that relationship can lead to other contracts at other agencies or even just within another “stovepipe” of the agency you are already working with.  If you have gone through the chore of getting yourself a contract int he first place, why not take advantage of the doors it could open (not to mention follow-on contracts and new projects)?

10 – Manage your supply chain effectively, while ensuring full compliance.  Full compliance is trickier and trickier the larger you become.  Costs are harder to trace to a final cost objective.  Reports are harder to follow up on.  Subcontracts are harder to maintain.  Logistics becomes harder for everything because it is just on a larger scale.  It is important to read the contract, manage internally to the goals of the project, and ensure compliance from your vendors and subcontractors.  It is critical to research mandatory and optional flowdown clauses to ensure you know what is required for you and your counterparts.

Hopefully you will take the time to follow some of the links above and see what tools are available to help mitigate some of your risk factors.

About Marty Herbert

With 13 years of government contract administration, analysis, finance, and audit experience, I have established a firm baseline in ethics and a specialization in government contracts that has prepared me to become a subject matter expert in my field. I am currently working on enhancing government contracts management and compliance through workflow tools and product offerings - attempting to make the process proactive as opposed to reactive.
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