President Trump’s executive order requiring enhanced enforcement of the Buy American Act (BAA) may be directed at executive agencies, however, it is also applicable to government contractors as well. The executive order requires each agency to assess its compliance with the BAA, especially in the area of waivers, and to develop a plan to maximize its enforcement. It is contractors, not the agencies, who will be subjected to maximum enforcement. Each agency’s current assessment and plans for maximizing enforcement need to be submitted to the Office of Management and Budget by September 15, 2017. Most experts agree that as a result, contractors are likely to see more “red tape,” longer procurement lead times, more costly proposals, and fewer waivers. Increased enforcement may include default terminations, suspension, debarment, and prosecutions under the False Claims Act.
Under these circumstances, contractors subject to BAA requirements should review their compliance now before the plans for enhanced enforcement are implemented. Although several FAR clauses address foreign source restrictions, the principal clause 52.225-1 Buy American – Supplies states that contractors must furnish end products mined, produced, or manufactured in the U.S. A product is manufactured in the U.S. is defined as having at least 50% of the cost of its components mined, manufactured, or produced in the U.S. FAR Part 25.103 offers some exceptions to the BAA requirement, including non-availability and unreasonable costs.
The government has effectively warned contractors that they will soon be aggressively enforcing the requirements of the BAA. We recommend that contractors develop or review their written policies and procedures related to the BAA requirement, review applicable purchasing files to verify compliance with the BAA, and provide BAA training to the purchasing staff. In some cases, market research to find domestic end products to replace products that previously received a waiver may be appropriate.
Forewarned is fair warned. Contractors should take this opportunity to ensure their BAA house is in order. For assistance in accessing your BAA compliance and other purchasing best practices, please contact Principal Consultant, Tom Marcinko at 301.231.6237 or firstname.lastname@example.org.
Earlier this month, Montgomery County’s Chamber of Commerce (MCCC) launched a significant advocacy effort aimed to help small government contractors’ transition into thriving midsized businesses. Aronson’s Government Contract Services Group is proud to support and help contribute their expertise to MCCC’s new initiative.
In today’s marketplace, approximately 20 to 25% of federal government contracts are awarded to small businesses thanks to various well-established set-aside programs. Depending on the nature of their goods or services, these contractors can quickly reach the classification ceiling of being designated as a “small business.” After reaching their size limit they become defined as “large businesses” and must abruptly compete evenly with all other companies, including giant enterprises with over $500 million in revenue. Some companies can end up being successful in this category, but many find huge barriers in place and their growth stagnates.
Realizing the vital role that midsized companies play in our economy, the Chamber and the GovConNet Council are opening up the discussion in three primary areas:
View MCCC’s full press release here and look out for more details on our blog in the coming weeks. For any questions on this initiative, please contact Barbara Morgan at email@example.com or 301.231.6238.
Winning a contract in a new state can present many challenges, not least of which is ensuring that your company is compliant with the state’s tax code. The worst approach to state tax compliance is assuming that the taxes your company may be subject to and the tax treatment of your company’s activity will be the same as in other states. This is especially the case when it comes to Hawaii. It’s not surprising that many government contractors venturing into Hawaii overlook the General Excise Tax (GET), as it’s often assumed that the GET is essentially the same as most other states’ sales and use taxes. However, the unique nature of the GET can catch many businesses off guard, and the Department of Taxation’s penalties can be quite unforgiving.
Government contractors are accustomed a myriad of reporting requirements. One such requirement that has caused much consternation is the FAR’s executive compensation clause which, as of October 1, 2015, applies to all contracts exceeding $30,000, as opposed to the pre-inflationary adjustments threshold of $25,000. The clause requires contractors to report their five most highly-paid executives and list their total compensation for the preceding fiscal year. Most contractors are–not surprisingly, given the nature of the information–very reluctant to disclose such information and our firm has received many questions as to the ramifications of non-compliance.
To begin, the reporting requirement is overlooked by many contractors because it only applies if the contractor receives $25 million or more in annual gross revenues from federal contracts, subcontracts, loans, grants, sub-grants and cooperative agreements. It also applies if that amount equals 80% or more of the contractor’s annual gross revenues. Firms that fall within both of these categories must submit the reports to the government unless the information is available under reports filed under either The Security Exchange Act of 1934 or the Internal Revenue Code of 1986. In other words, the reporting requirements only seem to apply to a small universe of firms.
It is a fact of life that business owners often spend all day working on billable client projects and then spend evenings or weekends writing checks, calculating payroll, preparing client invoices and writing proposals. How much of your time could be freed up to do business development or