Cherry Bekaert: Government Contractors Guidance

In this episode Neal Beggan, leader of Cherry Bekaert’s Risk Advisory Services and a Principal in Cherry Bekaert’s Information Assurance & Cybersecurity Practice, selected as one of the first Provisional Assessors nationwide by the CMMC Accreditation Body, and Eric Poppe, a senior manager in the Firm’s Government Contractor Services Group, discuss the current state of the Department of Defense (DoD) Cybersecurity Maturity Model Certification (CMMC) 2.0 program and share insights on what contractors and subcontractors in the defense industrial base (DIB) should be doing now to prepare.

Discussion includes:

• The Pentagon’s shift of responsibility for the CMMC program to the DoD CIO
• Change in leadership at the CMMC Accreditation Body
• Debunking some of the rumors around the CMMC 2.0 rollout, including:
  • DoD’s rollback on the number of companies who would have been allowed to self-attest, increasing the number of contractors that may require a third-party assessment 
  • The expected length of the rulemaking process and when the actual requirements will be incorporated into procurements
• The Government Accountability Office (GAO) report on the CMMC rollout
• What companies should be doing now to prepare for CMMC 
• Incentives being considered by DoD to encourage early adoption of certification

If you haven’t already, catch up on Cherry’s Bekaert’s previous guidance on CMMC 2.0:

• On-demand webinar: CMMC 2.0 Brings Major Program Changes
• Podcast: CMMC 2.0 Brings Major Program Changes

If you have any questions regarding CMMC, Cherry Bekaert’s Risk Advisory and GovCon Consultants are available to discuss your situation with you.

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Idle facilities and the associated costs have always been a topic of debate between government contractors and the Federal government. Contractors need to proactively monitor their facility use to avoid potential questioned costs while ensuring they can meet contract work fluctuations and future demand. 

With businesses becoming more comfortable with employees working from home due to the COVID 19 pandemic, office occupancy has greatly declined and there is uncertainty as to when, or if, government contractors will go back to a fully occupied office environment. Many contractors now find themselves in a position of evaluating their long-term needs for facility space.  

Listen to Brendan Halloran, a Senior Manager in Cherry Bekaert’s Government Contracting Industry (GovCon) practice who previously spent 10 years at the Defense Contract Management Agency (DCMA), and Curt Smith, a Manager in the Firm’s GovCon practice who spent 12 years at the Defense Contract Audit Agency (DCAA), discuss how the Federal government views idle facilities, how much time contractors are allowed before the government considers facility costs unallowable, and how contractors should address the costs associated with these facilities.

If you need help determining or supporting idle facilities costs, Cherry Bekaert’s GovCon Consultants are available to discuss your situation with you.

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Listen to Brynn McNeil, an Assurance Partner in Cherry Bekaert’s Government Contracting Industry practice and Eric Poppe, a Senior Manager in the Firm’s GovCon practice, discuss the important elements of an agreement when forming a Mentor-Protégé/Joint Venture arrangement.

They discuss:

• Benefits of the Mentor-Protégé Program
• Basic principles to consider in Agreements
• Regulatory requirements
• Other considerations

In our previous podcast on the SBA Mentor Protégé program, we gave an overview of the program, discussed some of the goals and benefits from participating in this program, as well as eligibility to participate both from the mentor and the protégé perspectives.

We will continue to do future podcasts on this topic, highlighting the annual evaluations that need to be performed, compliance issues, including limitations on subcontracting, accounting and financial reporting, and pricing considerations.

Our Government Contractor Services group has an in-depth understanding of the 8(a) program and advises a number of 8(a) government contractors through each step of the process to add value and anticipate ongoing opportunities. From the initial important decisions made in becoming an 8(a), to the first contract, to how the company is growing throughout the life of the program.

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The nine-year Small Business Administration (SBA) 8(a) Business Development Program is a business assistance program that was created to help small, disadvantaged businesses wanting to do business with the Federal government gain a foothold in Federal government contracting. 

Listen to Susan Moser, Partner and Leader of Cherry Bekaert’s Government Contracting practice and John Ure, Tax Partner and member of the Firm’s GovCon practice, discuss the lifecycle of an 8(a) company, including a brief overview of the 8(a) program and qualifications; and what an 8(a) company needs to know and focus on during the Developmental Stage, Transition Stage and as you prepare for graduation to help your 8(a) qualified business thrive and successfully graduate.

Our Government Contractor Services group has an in-depth understanding of the 8(a) program and advises a number of 8(a) government contractors through each step of the process to add value and anticipate ongoing opportunities. From the initial important decisions made in becoming an 8(a), to the first contract, to how the company is growing throughout the life of the program.

If you have any questions specific to your situation, Cherry Bekaert’s GovCon Consultants are available to discuss your situation with you.

If you haven’t already, catch up on other episodes in our podcast series discussing various aspects of the Small Business Administration’s (SBA) 8(a) Business Development Program:

• Part 1: The SBA 8(a) Business Development Program – What Is It and What Are the Requirements?
• Part 2: The SBA 8(a) Business Development Program Application Process and Requirements
• Part 3: What Are the Compliance Requirements for 8(a) Certified Companies?
• Part 4: Winning an SBA 8(a) Sole Source Award Contract – What’s Involved and What to Know
• Part 5: Winning an 8(a) Competitive Contract
• Part 6: Small Business Administration (SBA) Mentor-Protégé Program

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The Coronavirus Aid, Relief, and Economic Security (CARES) Act at the start of the pandemic was a lifeline for millions of small businesses in the U.S. The Paycheck Protection loan program (PPP) and the Employee Retention Credit (ERC) provided relief and cash for all kinds of small businesses, but for government contractors, the confusion and changing guidance and interpretations has caused much consternation, stress, confusion, and frustration.

Now, almost two years after the initial programs were put in place, there is still confusion. 

Listen to Susan Moser, Advisory Partner and leader of Cherry Bekaert’s Government Contracting industry practice, Martin Karamon, a Tax Services Principal and leader of Cherry Bekaert’s Tax Credits and Incentives advisory practice, Brynn McNeil, an Assurance Partner in the Firm’s GovCon practice, and Eric Poppe, a Senior Manager in the GovCon practice, as they provide a recap of the programs and discuss their current state, how contractors are handling relief, the accounting for these credits, the tax implications and how government auditors are looking at these credits and the impact on contracts.

If you have any questions specific to your situation, Cherry Bekaert’s GovCon Consultants are available to discuss your situation with you.

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Join Cherry Bekaert’s Government Contractor Services Group for part six of our podcast series discussing various aspects of the Small Business Administration’s (SBA) 8(a) Business Development Program. In this episode, Brynn McNeil, an Assurance Partner in Cherry Bekaert’s Government Contracting practice and Eric Poppe, a Senior Manager in the Firm’s GovCon practice give an overview of the Small Business Administration (SBA) Mentor-Protégé Program, including program goals, eligibility requirements, benefits from both the mentor and protégé perspective and why it’s advantageous to participate in the program.

This is our first podcast on the SBA Mentor-Protégé Program, and we will be doing future podcasts on this topic, highlighting compliance issues, including limitations on subcontracting, accounting and financial reporting considerations, pricing considerations and best practices.

Our Government Contractor Services group has an in-depth understanding of the 8(a) program and advises a number of 8(a) government contractors through each step of the process to add value and anticipate ongoing opportunities. From the initial important decisions made in becoming an 8(a), to the first contract, to how the company is growing throughout the life of the program.

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Listen to Brendan Halloran, a Senior Manager in Cherry Bekaert’s Government Contracting Industry practice who previously spent 10 years at the Defense Contract Management Agency (DCMA), and Curt Smith, a manager in the Firm’s GovCon practice who spent 12 years at the Defense Contract Audit Agency (DCAA), discuss allowability and where contractors might run into audit findings with questioned costs.

Discussion includes:

• What makes a cost allowable, including Reasonableness, Allocability, Cost Accounting Standards (CAS) and terms of the contract
• Direct and indirect costs
• Facilities costs
• Unallowable costs
• Supporting questioned costs

If you need any help in determining or supporting cost allowability, Cherry Bekaert’s GovCon Consultants are available to discuss your situation with you.

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Many of our government contracting clients are taxed as a pass-thru entity, generally an LLC that's taxed as a partnership or an S corporation. It is important to plan at both the entity level and the individual level since in the case of pass-thrus, the income is passed down to the individual owners through a Form K-1 regardless of distributions received during the year.

Year-end tax planning should be done to reduce the taxable income that passes down through K1s to the individual return. In the case of a C Corporation, year-end tax planning is helpful to defer taxes or potentially avoid taxes as much as possible.

Listen to John Ure, Carol Marin and Greg Marx, Tax Partners in Cherry Bekaert’s Government Contracting Industry practice and Private Client Services group, discuss tax-saving steps government contractors can take before the year ends.

Discussion includes:

• Methods of reducing current year income
• Special regulations and thresholds for SBA 8(a) program government contractors, including excessive withdrawals
• How retirement plans can be used to help manage income, including VIP retirement plans
• Research & Development (R&D) tax credit: qualifying activities and types of contracts not eligible for the credit
• New limitations coming back into play for 2021
• New tax legislation pending in the US House and Senate

If you need any help with year-end tax planning, Cherry Bekaert tax advisors are available to discuss your situation with you. We welcome the opportunity to work with you to identify the best tax positions and opportunities for you and the company.

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The Incurred Cost Submission (ICS) is an administrative hurdle and something that government contractors do not look forward to putting together every year. However, it is required to be submitted six months after the end of a company’s fiscal year for any contractor who has cost-type and T&M contracts that contain the Allowable Cost and Payment Clause.

Listen to Eric Poppe, Senior Manager in Cherry Bekaert’s Government Contracting practice and Rich Wilkinson, Director of Product Marketing at Unanet discuss the importance of the calculation of a Company’s indirect rates and Incurred Cost Submissions and the consequences for not having final rates or late submissions, as it is more than just an administrative exercise. 

Don’t put it off and don’t ignore the ICS. If you think you don’t have to submit, confirm with your contracts manager to identify all your active contracts containing Federal Acquisition Regulation (FAR) 52.216-7, Allowable Cost & Payment. 

If you haven’t already, catch up on part one, part two and part three of our four-part series:

• Indirect Rates – More than Just a Math Exercise: Part One
• Indirect Rates – Monitoring and Best Practices in Calculating Your Rates: Part Two
• Indirect Rates – The Close Out Process: Part Three

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On November 4, the Department of Defense (DoD) announced the strategic direction of the Cybersecurity Maturity Model Certification (CMMC) program, which marks the completion of an internal program assessment led by senior leaders across DoD. 

CMMC 2.0 brings about a number of changes which DoD will be pursue through the rulemaking process and will include public comment periods. 

Listen to Neal Beggan, a Principal in Cherry Bekaert’s Information Assurance & Cybersecurity Practice, selected as one of the first Provisional Assessors nationwide by the CMMC Accreditation Body, and Eric Poppe, a senior manager in the Firm’s Government Contractor Services Group, as they discuss DoD’s modifications and their potential impact on contractors and subcontractors in the defense industrial base (DIB).

 Changes include:

•  Eliminating levels 2 and 4 of the framework and using National Institute of Standards and Technology (NIST) cybersecurity standards
• Companies at Level 1, and a subsection of companies at Level 2 will only be required to demonstrate compliance through annual self-assessments
• Triannual third-party assessments at Level 2 for critical national security information, as well as triannual government-led assessments at Level 3
• Increase in oversight of professional and ethical standards of third-party assessors
• New waiver processes for select requirements - DoD indicated:
  •  “Under certain limited circumstances”, companies can make “Plans of Action & Milestones (POA&Ms)” to achieve certification
  • “Under certain limited circumstances”, waivers to CMMC requirements will be allowed

 DoD is also suspending the current CMMC pilot program for select contracts and will not approve any CMMC requirements in DoD solicitations while the rulemaking is underway. The Defense Department further indicated that it is looking at providing incentives to contractors who voluntarily obtain certification during the interim period and more information will be forthcoming. 

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