Federal Acquisition Regulations (FAR) - Understanding What's Needed
By Roberto Sharon on November 22, 2017
Government contracting can be a good source of business, but it’s important to understand the special requirements that government projects often entail. All federal government contracts are subject to Federal Acquisition Regulations (FAR), which spells out required processes and procedures that must be followed in order to bid on, win and get paid for your work.
FAR requirements are becoming increasingly common on public projects at state and local levels of government, as well. Specifically, Puerto Rico Highways and Transportation Authority is requiring some consultant-engineers to show that their overhead rates and labor costs are in accordance with FAR. Understanding what’s involved is essential if you plan to pursue almost any type of publicly funded contract.
Requirements
Federal contracts generally contain a provision that allows the government to audit the contractor’s billings, underlying costs, fees and rates. FAR Part 31 contains detailed guidance on costs that are reimbursable by the government. This applies to virtually all time-and-materials, cost-plus and reimbursable-type contracts, of course, but even fixed-price contracts are subject to federal audit requirements under FAR.
Traditionally, the Defense Contract Audit Agency (DCAA) was responsible for performing such audits and reporting back to the contracting agency. Today, however, agencies often require contractors to submit independent audits that verify their compliance with FAR Part 31 overhead cost guidance. Some agencies will require that all contract bids include a FAR-compliant overhead rate, while others will require a copy of your company’s audited overhead schedule and related footnotes.
What You Need to Know
If you learn that a FAR audit will be required, you should consult with your CPA immediately to determine the cost and timing of the audit. In many instances, the audit cost may be a reimbursable expense. If so, you will definitely want to verify this with the contracting agency. If not, you must evaluate whether this expense is worth incurring in view of the opportunities it can open for bidding on additional projects in the future.
In addition to specific FAR audit procedures and schedules, you should also be familiar with the generally accepted cost accounting standards and controls that the regulation requires. You will need to maintain a job costing system with appropriate controls so that costs are recorded according to accepted definitions and categories, using the correct terminology and coding.
The purpose of a FAR audit is to determine that those requirements are met. Understanding these standards in advance can help you avoid scrambling at the last minute to reallocate costs in order to comply.
In addition to policy compliance, you should also make sure your accounting systems are capable from a technical standpoint. Verify that your accounting system can provide the information the auditor will need to review, in a format that he or she can use, in order to deliver a “clean” FAR compliance opinion without qualifications.
The objective is to avoid a last-minute rush to bring your system into compliance when a deadline is looming.
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We can answer your questions about FAR compliance and auditing requirements.
Kraft Heinz withdraws $143B offer to buy Unilever
By CB The Associated Press on February 19, 2017
U.S. food giant Kraft Heinz Co. Kraft Heinz has decided to withdraw its $143 billion bid to buy mayonnaise, tea and seasonings maker Unilever, just two days after announcing the offer.The companies announced the decision Sunday in a joint press release.
Unilever, which has a head office in London, earlier had spurned the offer, saying the price was too low.
Despite rejection, ketchup, cheese, and lunch meat maker Kraft Heinz said last Friday it was still interested in the deal.
Florida-based Financial Services Company Opens Puerto Rico Office
By Caribbean Business on February 8, 2017
Lendacy, a financial services company based in Sarasota, Florida, has opened an office in San Juan to provide lending solutions for government agencies and private equity businesses throughout Latin America.
The company intends to provide its clients access to funds “with flexible lines of credit at below prime rates,” the announcing release reads.
“Throughout 2016 we traveled back-and-forth between Sarasota and San Juan to pursue opportunities with local business owners and government officials,” Kelly Locke, president of Lendacy, explained. “Now that we’re doing a substantial amount of business in Puerto Rico, it made sense for Lendacy to open a second office.”
The company is working with government agencies to develop “sustainable financing solutions” and has committed to hiring local employees to staff its new office.