What is Going on in the GovCon Market? Benchmarks and Trends for Government Contractors Presented by Kim Koster, Unanet. Uncover the insights and tips to grow your government contracting business. * Plan & strategize for next fiscal year. * Focus on internal control best practices and standards. * Insights to create internal roadmaps and manage controls. * Drive value in your overall organization.

1. © Unanet
GAUGE Report
2019

2. 70%of the respondents were optimistic about the
current environment of government
contracting.
18% were neutral.
12% were pessimistic.
Optimism Abounds!

3. What is the GAUGE, and why do we do it?
GOVERNMENT CONTRACT COMPLIANCE
ACCOUNTING
UTILIZATION
GROWTH
EFFICIENCIES
Survey respondents fell into four
broad categories based on company
revenues:
Up to $25M, $26M-$50M, $51M-
$100M, and $100M & up

4. We have Evolved!

5. Why is this Survey Unique?
Report is broken down
into 5 categories
So you can benchmark your
organization against fact-based
data
The GAUGE is theme based: 2017 –
Budgeting Strategies 2018 – Small to
Large/Sub to Prime, and 2019 –
Internal Controls Best Practices
(100 Top Tips by Section)
Crystal Ball for
2018, 2019 and 2020

6. Use Internal and External Benchmarks
Gives a perspective of
the overall industry
Provides an understanding of what
others are doing
to be successful
Produces ideas
for improvement
Benefits of Benchmarking
Makes you more competitive
Helps you win more business and
grow your organization

7. Who Responded:

8. Who Responded:

9. Interesting Stats on Respondents

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Government
Contract
Compliance

11. Compliance Summary
Questioned costs
rose 25% in the
$50-$100k category
ICE submissions (again) No.1
audit performed
28% said they had an increase
in government oversight – up
6% from previous year
Faced compliance challenges
with rate composition, billing,
and timekeeping

12. DCAA Audits
Expect to see a more balanced mix of
audits to include business systems,
truth in negotiations, cost accounting
standards (CAS), pre-award surveys,
claims, and terminations
DCAA Compliance Trends
to Expect

13. Top Compliance Challenges

14. Incurred Cost Submissions

15. Government Contract Compliance Top Tips
Regulatory
Stay current on interim FAR
and NDAA changes
Understand record keeping
requirements in FAR 4.7
Document closeout processes and any
negotiations held
at closeout
DCAA Interactions
Review work programs utilized by
DCAA to ensure you are ready for an
audit
Insist DCAA hold entrance
and exit conferences
Develop a great relationship with you
ACO
Choose an internal point of contact to
be a liaison with
your auditor

16. Compliance Considerations for Upcoming Year
809 Panel suggestions stalled?
Quieted because
of lack of funding?
DCAA in full compliance with
NDAA
Review DCAA.mil for Report
to Congress
Cybersecurity was top
of mind and contractors are
estimating the cost
in proposals as direct costs
OTAs still hot-topic, funding
increasing as
1% of respondents had been
awarded an OTA

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Accounting

18. Accounting Summary
72% small impact from
tax law changes
Cash is king – DSO improved <45-day
category
Invoice cycles are 12% better in
<10-day category
Continued drive for strategic
indirect rates
M&A demand – 25%
in the market to buy

19. Cash is King

20. M&A
Internal Control Tip
If M&A is a future possibility for you, what
typical controls are examined?
When performing due diligence of a potential target,
an investor or acquirer will assess how effective the
target’s internal controls are related to key risks. An
investor or acquirer typically examines the target’s
controls regarding its 1) financial processes,
2) information technology, 3) third party onboarding
practices, and 4) regulatory compliance efforts.

21. Accounting Top Tips
Financials
Understand ASC 606
EBITDA – Calculate it,
understand it, and create a
goal for it
Have an ERP system
that handles cost pools and
allocations
Business Systems
Create policies and
procedures that are
both compliant with federal
government regulations and
practical for your business
Review your policies
and procedures annually
Self audit
AS/Advanced Topics
If you make a change
in accounting practice, get
help preparing a cost impact
analysis before talking with
your customer
Get help on items you don’t
handle often like termination
claims,
cost impact studies, etc.

22. Accounting Consideration for Upcoming Year
Remote work policies
are a necessity now
Lease changes –
delayed – 12/15/21
606 Revenue Recognition –
12/15/19 non-public
companies
Accounting changes – learn in,
plan for it, train your peeps,
etc.
Recruitment in the future as
healthcare cost rises – this is top of
mind of many executives as the
largest indirect costs other than
labor are scrutinized
more than ever

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Utilization

24. Utilization Summary
Evolution of project
management still
needs attention
Hiring and Spending –
73% respondents say
they will hire
STEM and other technical talent in
short supply
57% report >75% of their projects
are on cost and
69% say >75% are on schedule
Review FTE headcount graphs
– compare to your company

25. The Workforce

26. Revenue Scale Accounting HR Recruiting Contacts
Business
Development
Up to $25M 2.0 1.3 1.3 1.9 2.1
$26M-$50M 4.6 2.6 2.1 2.3 4.0
$51M-$100M 5.1 3.1 3.3 2.6 5.0
$100M and up 14.7 7.5 4.1 8.9 7.8
FTEs by Revenue Band
Internal Control TipFTEs per Function
Have your business area owners
review these FTEs for differences and
similarities. Have them explain why
their numbers might be inconsistent –
not all companies are the same so use
this as a guide. Maybe there are
inefficiencies that are driving FTEs up
in certain areas.

27. FTEs by Revenue Band
Revenue Scale
Project
Controls
IT Compliance
Internal
Audit
In-House Legal
Up to $25M 1.6 2.7 1.0 0.8 0.7
$26M-$50M 2.8 3.1 1.3 1.0 1.2
$51M-$100M 2.0 2.8 1.3 1.0 1.0
$100M and up 8.5 12.9 2.3 1.7 2.1
Internal Control TipFTEs per Function
New in 2019
Have your business area owners
review these FTEs for differences and
similarities. Have them explain why
their numbers might be inconsistent –
not all companies are the same so use
this as a guide. Maybe there are
inefficiencies that are driving FTEs up
in certain areas.

28. What is Keeping You up at Night?

29. Utilization Top Tips
Invest in Employees
Invest in wellness programs
for your employees
Consider hiring a
compliance officer
Know how many back-office personnel
it takes to run
your business
Establish a corporate culture
of ethical compliance from
the top down
Training
Develop an extensive pool
of qualified staff and subject
matter experts, even if they
are consultants
Consider investing in a project management
training program
and treat project management
as a discipline
Train all employees on timekeeping policies
regularly with emphasis on the consequences

30. Utilization Considerations for Upcoming Year
Perform annual code of conduct,
conflict of interest, and unallowable
training
Review your staffing
plans – 8 strategies for resource
management
49% say they “believe” their
resource planning
is mature
Future focus on project
execution for new wins
Review FTE headcount graph and
new areas
added to the survey

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Growth

32. Growth Summary
Lack of funds tops the list
of business dev. concerns
Organic growth No.2 –
Uncertain federal
spending No.1
Competition is keeping you up at
night
72% expect to grow next year
more than 10%
Win rates are up,
with 31% winning
>50% of their proposals

33. Organizations’ Biggest Financial Challenge is How to Grow

34. Growing Takes Money and Wins

35. Growth Top Tips
Proposal and Pipeline
Have a documented
capture process
Follow the RFP instructions –
write winning proposals by providing
the agencies the information they are
requesting and highlight your strengths
Carefully watch your pipeline –
establish a review cadence
and keep the opportunities
up to date
Budgeting
Kick off your budgeting cycles by
providing a timeline, parameters,
guidelines, and overall goals
Make sure you have a tool that
all stakeholders can utilize to participate
in the upfront
budgeting process and to
see the performance to budget as
required

36. Growth Considerations for Upcoming Year
Estimating/Purchasing/
EVMS systems were part of
scoring OASIS and they will be in
the future too
Review DOD spending and
don’t forget civilian agencies
have $$$ too
for your opportunities
More contractors winning and
bidding
on Best Value vs LPTA
Consider investing and
maturing your project
management discipline

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Efficiencies

38. Efficiencies Summary
Inexperienced project
managers are not the leading
project issue
in this survey
Forecasting is the
biggest challenge for project
management
Budgeting/Forecasting overall
for every dept. in a business is
challenging
Resource management
is still performed on an
ad-hoc basis and project by
project
Review your wrap rates!

39. Wrap Rates

40. Indirect Rates up to $25M

41. Indirect Rates from $26M–$50M

42. Efficiencies Top Tips
Indirect Rates
Review contract profitability and
indirect rates monthly
Know your rate variances for OH, G&A,
Fringe, MSH, and Labor
Periodically review your indirect rate
structure for competitiveness
Do not overcomplicate your rate
structure, because as you grow it can
become difficult to manage
Flowdown Clauses
Know which flowdowns are mandatory
and don’t waste
time trying to negotiate these
Monitor the addition of new
clauses in modifications
Read your contract

43. Efficiencies Considerations for Upcoming Year
Invest in project and resource
management tools as these
can be huge differentiators
Review wrap rates
monthly with your
management team
Management of your rates
could be the difference
between winning and losing
Review actuals vs provisionals
and compare them to others –
review our wrap rates by
revenue band

44. © Unanet