“The worst reason to do anything is because ‘it’s always been done that way’. The second worst reason to do anything is because ‘we don’t have the budget to do it right’.”

– Nick Sanders

If you’ve read this blog for any length of time, you know the importance we place on workforce development. Quite honestly, we can’t think of a single more important thing for a supervisor or manager to think about. If you’re not developing your staff, then you’re not honoring your obligation to the future of the enterprise that’s paying your salary today.

A failure to provide your team with the necessary training to accomplish their jobs efficiently and effectively is negligence, plain and simple. And a failure to provide your team with the opportunity to grow and develop in order to accomplish other jobs efficiently and effectively is negligence as well.

Or—to paraphrase somebody else from another context – you better get busy learning or get busy dying.

But the challenge we all face is how to do that within the budgetary constraints we’ve been given, which are often established by our top-level leaders and forced downward on us from above. Assuming we have the best of intentions, and are desperately eager to give our subordinates the maximum opportunity to learn and to grow … how do we do that and still meet those budget constraints—budget constraints that are, too often, arbitrarily set and imposed by leaders who have little or no idea of the consequences associated with those constraints. How can a leader who’s committed to workforce development obtain the necessary training for his/her staff, when the budget’s been slashed and people have started whispering about furloughs and layoffs?

(Hint: Answer at the end of this article.)

But before we offer a solution, let’s describe the problem. Unfortunately for our government readers (and there are many of you!), our focus today is going to be on the contractor’s training conundrum. Even though the budgetary constraints are the same for both government and contractor, we’re going to focus on the contractor for several reasons. The first reason is that some training requirements have been made mandatory for government contractors through contract clauses. If the contractors don’t conduct the required training, they run the risk of being accused of breaching their contracts. Government entities don’t have that same risk profile.

The second reason for focusing on contractors is that the government already has some low-cost solutions available to its workforce. For example, most large government departments and agencies and independent commissions already have distance-learning solutions. (While we can certainly debate the efficacy of such training, we can’t deny it exists.) In sad contrast, too many contractors don’t have any part of their organizations dedicated to training and, thus, they simply rely on external training resources—of various types—to provide both required workforce training and elective employee development opportunities. Too many contractors approach their workforce training needs on an ad hoc basis, resulting in inconsistent results even in the best of times.

As one senior aerospace/defense executive explained to us: “When times were good, we didn’t see the need to invest for the future. Now that times are tough, we don’t have the money.” As you may gather, we were impressed by her candor and, at the same time, we were appalled at her leadership style.

But rest assured, even if you are in similar straits, we have a solution for you. You’ll have to read the rest of this article to receive it, though. (No fair scrolling down to the end!)

Getting back to moving beyond an ad hoc approach to workforce training, we want to focus first on required training before discussing other opportunities for employee development. We think that should be the learning prioritization. However, we daresay that the majority of government contractors don’t even know what training is required of them by contract clause, let alone what other opportunities might be available to their workforce.

So let’s start with required training for a typical government contractor. What kind of stuff do you need to train your workforce in, regardless of budgetary constraints?

Timekeeping is the obvious answer. We all need to make sure our employees have robust training in our timekeeping system and its requirements. That’s the first answer that comes to mind, even though you probably can’t find a single contract clause that requires such training. (Thanks, DCAA.) But yes, you need employee orientation training on your timekeeping system and you need annual refresher training as well.

Let’s move beyond that answer and look at what some contract clauses might require of you, in terms of employee training.

The recently-enacted DFARS Business Systems regime mandates certain employee training foci. To the extent that a contractor has a contract containing one of the six individual DFARS Business System adequacy clauses, the contractor must provide its employees with certain training in order to have DOD reviewers find that its Business Systems are adequate. And—as we all should know—if any Business System is found to be inadequate, then the cognizant Administrative Contracting Officer will be imposing mandatory payment withholds, which could significantly impact future cash flows.

• An adequate Estimating System must “Ensure that relevant personnel have sufficient training, experience, and guidance to perform estimating and budgeting tasks in accordance with the Contractor's established procedures.”

• An adequate Contractor Purchasing System is defined by 24 individual criteria. Criterion No. 18 states, “Perform internal audits or management reviews, training, and maintain policies and procedures for the purchasing department to ensure the integrity of the purchasing system.”

• The adequacy of a contractor’s Property Management system is largely defined by the FAR (instead of the DFARS). According to the attorneys at McKenna, Long & Aldridge, an adequate Property System will ensure that relevant property management training “is performed on an annual basis.”

• Having an adequate Earned Value Management System doesn’t expressly require employee training; but, looking at the 32 criteria of an adequate EVMS (per ANSI/EIA 748), you’d have to be an idiot to think you could implement an adequate EVMS without significant amounts of employee training.

• Similarly, an adequate Material Management and Accounting system does not depend on any specific employee training. On the other hand, if you are subject to MMAS requirements, and you want to comply with them, then you had better have really well-trained staff on hand to assist you.

• Interestingly, none of the 18 criteria associated with Accounting System adequacy require employee training, even though adequacy depends on compliance with the 19 Federal Cost Accounting Standards (CAS) when they are applicable—and many of the Standards become applicable when the FAR Cost Principles of 31.205 are invoked. Thus, we suggest that training your accounting staff in the intricacies of government contract accounting and cost accounting may be worthwhile.

But that’s not the end of the story.

It’s been about five years since FAR contract clause 52.203-13 (“Contractor Code of Ethics and Business Conduct”) was promulgated. We note that the clause requires “an ongoing business ethics awareness and compliance program.” That requirement includes the following—

… reasonable steps to communicate periodically and in a practical manner the Contractor’s standards and procedures and other aspects of the Contractor’s business ethics awareness and compliance program and internal control system, by conducting effective training programs and otherwise disseminating information appropriate to an individual’s respective roles and responsibilities. … The training conducted under this program shall be provided to the Contractor’s principals and employees, and as appropriate, the Contractor’s agents and subcontractors.

Yeah. How are you doing with that one?

We could go on, discussing the Drug-Free Workplace Act (FAR 52.223-6) or Export Controls, or other, arcane, stuff that requires specific employee training in order to assure compliance. Our point is: if you don’t understand what training is required of you, it’s going to be difficult to demonstrate that you provided it when the auditors start asking, several years from now.

Moving on to desirable, though not required, training, one has only to visit the websites of the major training houses to see the available options.

Over at venerable Federal Publication Seminars, there are 76 different courses offered under the heading “Accounting, Costs and Pricing.” There are 200 courses offered under the heading of “Government Contracting.” But that’s not all. There are 18 courses offered under “Construction Contracting.” There are 21 courses offered under “International Contracting.” And there are three courses offered under “Grants.”

Over at the up-and-coming Public Contracting Institute, it’s less easy to tally the number of course offerings. But PCI also offers multiple courses under the headings of “Accounting and Costs,” “Government Contracting,” “International Contracting,” and “Federal Grants.” PCI also offers lower-cost Webinars, as well.

Enigmatic Marcus Evans offers “by invitation” conferences in various government contract-related areas. And the relatively new American Conference Institute offers its own conferences, as well. ACI has conferences in Aerospace/Defense-related topics, such as “Government Contract Cost & Pricing,” “DCAA Audits – Overview,” and “ITAR Compliance.”

There’s no scarcity of training opportunities when you’re thinking of employee development. So what’s stopping you?

Oh yeah, you don’t have the budget to send your staff to these outside training opportunities, that’s what’s stopping you.

You don’t have $1,000 or $1,995 or $2,595, or even (in at least one instance) $3,495 for an “Elite Pass” that entitles your employee to attend the training conference and both associated workshops. You don’t have $400 or $500 or $1,000 to send your employee on a flight across the country. And you don’t have $120 or $150 or $229 to spend per night to put your employee up at the hotel associated with the conference. And you don’t have $25 or $38 or $49 to spend per day on meals and incidentals. Not to mention local mileage, car rentals or taxi fares, and airport parking. You don’t have $3,000 or more (likely more) to spend on sending a single employee off to one of these training opportunities—even if you could spare your employee for the three days or so that they’d be away from the office.

And you certainly can’t afford to send two employees to the same conference or seminar at the same time, even if by doing so you’d save 50 percent on the cost of the seminar. (Gotta love those 2-for-1 deals!)

And if you have a decent-sized staff, there’s no way on God’s green earth that you could afford to send everybody to one of those seminars/conferences. Sure, maybe you can send a couple people to one held locally. They hold them in Washington, D.C. almost every week, so if you have a major office in that area, then you’re golden. And they hold them in other places, too—places such as San Diego, and Hilton Head, and Irvine, and Denver, and Chicago. So there’s a good chance that you can avoid the airfare, and perhaps even the lodging expense. So if you’re smart and look far enough in advance, you can probably find a conference or seminar that’s close enough to avoid some of the additional expenses.

Probably.

But still, even at 2-for-1 advance pricing, you’re going to pay a minimum of $500 per attendee. Send five people, and that’s $2,500. Send 10 people, and it’s $5,000. Not counting anything else.

And chances are, your folks aren’t going to want to go to the $1,000 seminar that’s offering 2-for-1 pricing if you order today. Nope. Your folks are going to want to go to one of the fancy conferences, the ones with the workshops. And that’s going to cost you a lot more than $500 per head. Count on it.

Did we mention that you don’t have the budget for that? Oh, we did. Right.

What’s a manager to do?

Well, here’s your answer. (Free of charge.)

Call Apogee Consulting, Inc. Bring us into your facility. Let us train your staff in-house.

Here’s our pitch: Nick Sanders, Principal Consultant, is a very experienced trainer. He’s instructed at UCLA Extension in the Government Contracts Certificate Program. He’s instructed at ESI in its Government Contracts Masters Certificate Program. He’s taught more Federal Publication Seminars than he can count—and he coordinated and managed and taught the “Government Contract Accounting” seminar on behalf of Federal Publication Seminars, LLP, for many years. He’s taught “Cost Reimbursement Contracting” and “Cost/Price Analysis” and “Cost Accounting Standards”. He’s instructed in-house at Sandia National Labs and at the Stanford Linear Accelerator Center. He’s conducted training in “Hot Topics in Government Contracting” for Fluor Engineering and Jacobs Engineering. He’s conducted training for the NISH Leadership Academy. He’s conducted training—and developed his own course—for the Raytheon Company. In short, he’s a very experienced trainer.

And he’s a good trainer, as well—if we do say so ourselves! His student feedback scores at Fed Pubs and at NISH consistently ranked among the highest of any instructors. His “war stories” of real-world experiences, combined with his (shall we say?) unique sense of dry humor, were listed as being positive attributes in student comments. Believe us: people rarely get bored when Nick Sanders is up in front of them, teaching them about dry CAS or FAR or DFARS topics.

Enough about us. Let’s talk about you.

You need training. You want training. But you don’t want to pay a lot. You can’t afford to pay a lot. That’s where Apogee Consulting, Inc. comes into the picture. We work cheap.

You tell us what you want, and we’ll give you a quote. You want a 4-hour seminar—you got it. You want a one day seminar—you got it. Ditto for two and three day seminars. You pick the topics, we’ll do the rest. And if you want us to tell you what you need to know, no problem—we’ll handle that end, as well.

You want somebody to explain to your executive leadership that it’s not just you—that DCAA has gone insane across the country and all contractors are feeling the same pain—then we can do it. We know executives don’t have a lot of time, so we’ll knock off an executive briefing in an hour. We’ll come speak at your offsite retreat, if you’d like.

You want an intro course to introduce non-accountants to the FAR Cost Principles or to the Cost Accounting Standards? We can do that.

You want an advanced course in cost/price analysis or the financial implications of the different contract types? We can do that.

How much will we charge you? Depends on what you want. But we’re pretty confident we can train 5 or more employees for about the same cost as sending one employee across the country to one of those fancy conferences with associated workshops.

You want to create a webinar and have lots of folks watch from a distance? Not a problem. You want to video tape the training and use it to train your employees for years to come? We can work that out. You want to mitigate risk by having us quote our travel on a firm fixed-price basis? We will.

The point is, Apogee Consulting, Inc., is flexible and we will work with you to deliver the training you need and want, at a price that’s within your budget constraints. We are confident that you will not find a better employee training value, anywhere.

So what are you waiting for?

Call us at (949) 705-9773, or e-mail us here.

In the recent past, we have written less-than-flattering analyses of certain decisions issued by Judges of the Armed Services Board of Contract Appeals (ASBCA)—decisions that involved the Statute of Limitations (SoL) associated with the Contract Disputes Act (CDA). We’re sure that nobody over at the ASBCA cares a whit about our opinion of their decisions. After all, we are not attorneys and it should be crystal clear that we don’t understand all the intricacies and nuances of The Law.

But still. We can read and we can reason and we have opinions that at least some people take the trouble to read. So when we were somewhat critical about Judge Delman’s decision in the matter of Lockheed Martin’s alleged CAS noncompliance regarding its accounting for Independent Research and Development (IR&D) costs, we thought we were raising some reasonable points (for a layperson, anyway). And when we called Judge Delman’s subsequent decision in the matter of the allowability Raytheon’s executive incentive compensation plans a “half-a-loaf, not a full loaf” of a victory for contractors, we thought we were discussing relevant and on-point issues that few other sources were discussing.

And now we are back with another ASBCA decision by another Judge (Judge Melnick) on another CDA SoL case filed by the Raytheon Company, in which Raytheon cleaned the government’s clock. (Pending appeal, of course.)

Oh yeah, we don’t have too many strident layperson-type criticisms to level at this case. You all really, really need to go read it right now. The decision was issued January 28, 2013 but was held for 30 days to give the parties an opportunity to review and redact; consequently, it was published at the end of February.

In case you’re too lazy to go find and read it (even though we gave you a link to click on), we’ll recap it for you. We take the trouble to do this because we know our readership. Here goes:

Raytheon Missile Systems (RMS), one of the operating businesses of The Raytheon Company, disclosed to the Government its cost accounting practice of excluding certain subcontract costs (called “Major Subcontracts”) from the application of full indirect rate burdens. The disclosure was made at the end of 1998, to be effective January 1, 1999. Subsequently, on June 18, 1999, RMS submitted an amended CAS Disclosure Statement in which it disclosed that the group of Major Subcontracts would be expanded, so that more subcontracts would qualify for that special reduced indirect rate burdening. Even though RMS disclosed the revised cost accounting practice in mid-June, the practice was to be retroactively effective as of January 1, 1999.

On May 14, 1999, NAVAIR awarded RMS a letter contract to remanufacture Tomahawk missiles. RMS submitted a cost proposal to definitize that letter contract on July 20, 1999. That definitization proposal was submitted about one month after submission of the revised Disclosure Statement; consequently, RMS should have applied the revised Major Subcontract burdening practice in its cost proposal to NAVAIR. Allegedly, RMS failed to apply its reduced indirect rate burdens to the Lockheed Martin subcontract costs included in its proposal. The contract price was negotiated and agreed-upon on August 4, 1999, and nothing was said of the potential noncompliance with disclosed cost accounting practices at the time—even though a DOD pricing analyst reviewed the proposal in detail (including the application of indirect rates to proposed subcontract costs).

About six years later (in 2005), “the same DCMA price analyst performed a second review” of RMS’ 1999 pricing data. This time around, the price analyst noted that RMS failed to burden its proposed Lockheed Martin subcontract costs with its reduced Major Subcontract indirect rates. In April, 2006, DCAA issued a “draft condition statement” alleging that RMS’ proposal deviated from RMS’ disclosed cost accounting practices, and that the deviation led to “a significant increase in contract price.” RMS replied in July, 2006, “stating that it did not concur and that the alleged noncompliance [with disclosed cost accounting practices] had no cost impact.” DCAA issued its final audit report on September 22, 2006—seven years and one month after the contract price had been agreed-upon.

RMS’ Divisional Administrative Contracting Officer (DACO) issued an Initial Determination of CAS noncompliance on October 13, 2006. Discussions ensued. Eventually, on May 14, 2009, RMS communicated its final calculations regarding the cost impact of the alleged noncompliance. DCAA “evaluated” RMS’ analysis “and declared it to be inadequate” in a report issued June 28, 2011.

Yes, you read that correctly: DCAA took more than two years to determine that RMS’ cost impact analysis was “inadequate”. Unfortunately for contractors everywhere, that audit duration (and ultimate result) is far from unusual in the current audit environment.

The alleged inadequacy of RMS’ analysis did not prevent the DACO from issuing a Contracting Officer’s Final Decision on November 29, 2011, demanding $10,157,000 plus $6,885,884 in accrued interest. RMS appealed to the ASBCA.

To recap, in 2011 the government demanded that RMS pay $17 million, based on an alleged failure to follow disclosed cost accounting practices that took place in 1999. That’s a duration of 12 years between events giving rise to the alleged liability and the assertion of a claim for damages. As we’ve discussed many times before, the CDA SoL contemplates a duration of not more than six years.

Seems like an easy call for the Judge to make. And indeed, such seemed to be the case. Judge Melnick dismissed the Government’s claim as being “untimely and … therefore invalid.” The appeal was dismissed for lack of jurisdiction, meaning that Raytheon Missile Systems owed the Government nothing.

Yay, RMS. (Pending appeal.)

Judge Melnick made the following points in his decision that we want to bring to your attention.

• The Government contended that RMS had the burden of proving that the Government’s claim was untimely. Judge Melnick disagreed, writing “By advocating in response to Raytheon’s motion that its decision is valid the government is effectively the proponent of our jurisdiction and therefore bears the burden of proving it under these circumstances.”

• Judge Melnick discussed when the CDA SoL timeclock began to run in this case, writing “The events fixing liability should have been known when they occurred unless then can be reasonably found to have been either concealed or ‘inherently unknowable’ at that time.

• The CDA SoL timeclock began to run in this dispute in 1999. Judge Melnick wrote, “Raytheon … disclosed sufficient facts to the government in 1999 to conclude it [the Government] should have known about the claim at that time. Accordingly, to the extent the government now claims the expanded special burden was effective on 1 January 1999, and that the Lockheed Martin subcontract should have received special burden under that expanded definition, Raytheon gave it all the information necessary to know of that claim in 1999.”

• Judge Melnick wrote, “claim accrual does not turn upon what a party subjectively understood; it objectively turns on what facts are reasonably knowable.

The Government argued that what the price analyst knew was irrelevant, and that only the DACO’s personal knowledge mattered with respect to starting the SoL timeclock. (Echoing the position taken by Judge Delman in his Lockheed Martin decision.) Judge Melnick rejected that argument, writing—

The government fails to cite any authority supporting the proposition that claim accrual is based only upon the knowledge of the individual clothed by a contracting party with authority to assert the claim. If that were the case, then both contractors and the government could suspend accrual by internally compartmentalizing relevant information and insulating senior decision makers from it for as long as they choose. Nothing in FAR 33.201, which commences accrual of a claim when the events fixing alleged liability ‘were known or should have been known’ by a party, contemplates permitting such gamesmanship. Claim accrual is not suspended simply because the government may have been delayed appreciating the implications of what Raytheon had disclosed, or in funneling to the individual authorized to act upon the claim all of the information relevant to it.

As if he realized that he was disagreeing with another sitting ASBCA Judge, Judge Melnick wrote—

Accrual of a contracting party's claim is not suspended until it performs an audit or other financial analysis to determine the amount of its damages. … Damages need not have actually been calculated for a claim to accrue. … The fact of an injury must simply be knowable. … The fact the government waited until 2006 to declare in an audit report that these earlier materials provided that notice is irrelevant. Delay by a contracting party assessing the information available to it does not suspend the accrual of its claim. … These facts distinguish this appeal from Lockheed Martin Corp., where we held the government was not notified of overbillings until a DCAA draft audit discovered them. … Additionally, in the absence of misconduct by Raytheon rising to the level of trickery, once the claim accrued and the limitations period began to run, subsequent communications between Raytheon and the government about the claim's merits and magnitude did nothing to toll it. … There is no evidence of trickery here.

To sum this up, Judge Melnick’s decision—with its concise refutation of all government arguments as to why their claim for damages should be heard 12 years after the events that fixed the alleged liability took place—seemed to signal a return to a more “bright line” test of CDA SoL claim accrual. Assuming that other ASBCA Judges find Judge Melnick’s reasoning more persuasive that Judge Delman’s reasoning, the two major Contracts Disputes Act fora (the ASBCA and the U.S. Court of Federal Claims) may be narrowing their interpretative differences regarding SoL claim accrual.

Which is good news for contractors everywhere.