PowerPoint Presentation - Microsoft...1 Footnote SOURCE: Source The Bad News We have Good news, but it is also handy to know about the Bad news. That way you can always be mindful

CP-110How to Stay out of Jail in the GOVCON World

Jack Fisher, Iuvo Systems Inc.Ed Muldrow, Iuvo Systems Inc.

How to Stay out of Jail in the

GOVCON World

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2019 Deltek Insight

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Agenda

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Overview of Iuvo Systems

Presentation of cases related to entities that were not prepared for the rigors of government contracting

We will concentrate on things that can be beneficial to your company, including:

• Winning business

• Managing and reporting your contracts

• Audit readiness

Proprietary & Confidential © 2019, Iuvo Systems, Inc

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Who is Iuvo Systems?

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Iuvo is the PREMIER COST EFFECTIVE accounting & managed services firm

partnering with government contractors and project oriented businesses.

Iuvo has worked with over a 1,000 government contractors since 2009.


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What Services does Iuvo offer?

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Systems Consulting &Compliance

Outsourced Accounting

Staff Augmentation

Special Accounting &Financial Projects


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Staying out of Jail

While the possibilities of actually going to jail are remote, it has happened, and will continue if contractors fail to educate themselves to the Laws & Regulations applicable to government contracting, and the specific requirements of each contract.

I often recall a statement I read on a GOVCON blog more than 15 years ago, that (to me) sums up this subject in a concise and forceful manner:

• ‘’…The U. S. Government is the most ruthless organization in the world when it comes to taking advantage of and punishing the ignorant, the misinformed and the ill prepared.’’

7Proprietary & Confidential © 2019, Iuvo Systems, Inc

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The Bad News

We have Good news, but it is also handy to know about the Bad news. That way you can always be mindful of the consequences of intentional or unintentional bad behavior. Here are a few examples to help you remember:


MJ-6Army C/O 6 Years

Glen DefenseNavy Civilian 3 Years

CPS Pain Clinics$50M Suit Drug Fraud

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Examples of what can happen

These cases illustrate misconduct by both Contractor and Government personnel, resulting in fines, demotions, discharges, mandatory retirement, and even jail time in Federal Prison.

Glen Defense Marine Asia

• Systematic bribery throughout the US Navy’s 7th Fleet

• The scandal reached from top Admirals to the rank & file military and civilian personnel

• Bribes included: cash, vacations, travel, elaborate food & drink, gifts of computers, and paid escorts

• In all over 550 individuals were investigated


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Examples of what can happen (cont.)

MJ-6

• A man and wife, working as civilian employees at Aberdeen Proving Ground, each held leadership positions related to the award of Task Orders under a $19.2 Billion Army Contract.

• They conspired to qualify MJ-6 for the contract and facilitated the award of Task Orders to MJ-6, in excess of $21 Million

• The owner of MJ-6, a former classmate of the couple at West Point USMA, used this relationship to gain contracting actions in his favor, by paying them $800,000 and booking these costs as labor expenses.

• All three have pled guilty. The first to be sentenced had to make restitution for $250,700 and serve 18 months in Federal Prison 10Proprietary & Confidential © 2019, Iuvo Systems, Inc

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Examples of what can happen (cont.)

CPS Pain Clinics

• A number of Whistle Blowers have sued CPS under a $50,000,000 Qui Tam Lawsuit. Interestingly, the Government has joined the Plaintiffs (Whistle Blowers) in their suit. This is important, in that the government normally only joins these suits if they have independently determined that there is sufficient evidence that a false claim has taken place.

• The Company, along with a sitting U.S. Senator, is alleged to have profited from a scheme to fraudulently charge Medicare for urine tests to detect opioids for patients who did not need such tests.


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The Good News

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Finding Opportunities

Winning

Performing

Getting paid for Government Contracts


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Finding Opportunities

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There are numerous connections that can be made between your Company’s offerings and the Government’s needs. The question is, how do I find out what they need?

• Many sources for information exist which can guide you to these business opportunities

• Most are online

• Some are available through relationships that you already have with other companies


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Proposal / Negotiation Process

Proposals


Proposal instructions in each solicitation may be different, BUT:

• It is most important that a company follow their policies and procedures when estimating costs

• Their methodology for producing the proposed goods or services must be consistent with other contracts under like or similar circumstances

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Proposal / Negotiation Process (cont.)

Negotiation (covered under FAR Part 15)


The negotiation of Contracts is not limited to price, the government will want to address other factors in determining the best value for the government, among these factors are:

• Contract Deliverables, including status reporting

• Delivery schedules (FAR Part 11)

• Inspections/testing (FAR Part 46)

• Change Order negotiations (FAR Part 43)

• Terminations (FAR Part 49)

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Contract Reporting


Requirements for contractor reporting must be contained in the contract.

Examples:

• EV management reports where required (EVMS)

• Materials Inspection & Receiving Reports (MIRR)

• Financial Reports

• Budget vs. Actuals

• Direct Labor Rates

• Indirect Rates

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Contract Reporting (cont.)


EVMS

MIRR (Form DD250)

• Not required for all contracts

• When required, must be submitted in a timely manner, obtain proper approvals or invoices may not be paid

Performance

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Financial Reports

Reports by period showing proposed costs compared with incurred cost, to date. Also helpful in highlighting the need for a revised estimate to complete

Budget vs Actual


Show proposed (or FPRA) rates compared to incurred average rates (supported by individual EE rate data)

Direct Labor Rates

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Financial Reports (cont.)


Provide detailed accumulations of incurred Pools and Bases and resulting incurred to date rates, explaining any variations and steps to reconcile these variances

Indirect Rates

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Audit Endurance & Survival


There are Over 60 Separate types of Audits performed by DCAA (see www.dcaa.mil Directory of Audit Programs)

These Audits include:

• Pre-Award Accounting Surveys for new contractors

• Billing process audits

• Direct Labor & Indirect Expense Rates for both forward pricing and final rate reviews

• Price Proposal audits

• As well as numerous Systems Surveys; and follow-up verifications for any corrective action items

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Audit Endurance & Survival


The incurrence of audit involvement will closely correlate to the number, type, and total value of the contracts you are either proposing or performing on

The way to Survive this rigorous gauntlet is through

• Meticulous preparation including the existence of up-to-date policies and procedures

• Knowing the applicable governments rules

• Having data readily available for audit review

• Treat the auditors with respect and professionalism, although if something seems off, do not hesitate to ask for clarification, if necessary form the audit supervisor, or Manager

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Summary

We began by saying the possibilities of doing time or paying the fine are somewhat rare. While true, the punishments meted out for infractions are far from just a slap on the wrist.

The cases we’ve presented vividly illustrate how severe the penalties can be, should you become entangled in the web of Waste, Fraud, and Abuse (WF&A) in connection with your performance on government contracts, or even your efforts to obtain or increase your government business volume.

You have seen a synopsis of the contracting cycle from opportunity identification through final audit and contract close out review.

The best guidance we can provide for you is to:

• Know applicable Laws & Regulations and follow them and to seek help if needed

• Have systems in place to manage your business

• Practice Audit Readiness

• Always be forthright and courteous when dealing with others (Especially Auditors)22Proprietary & Confidential © 2019, Iuvo Systems, Inc

Questions or Comments?

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PowerPoint Presentation - Microsoft...1 Footnote SOURCE: Source The Bad News We have Good news, but it is also handy to know about the Bad news. That way you can always be mindful