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Everything posted by here_2_help

  1. Well, yeah. I interpreted this question as: If I charge costs to a FFP contract--and they are legitimate direct costs of the contract--then, afterwards, if I repurpose residual items to which I have retained title, do the costs associated with that material have to stay on the original contract to which they were originally charged, or do I have to transfer the costs to the contract or other cost objective where I am repurposing the material. Answer to my interpretation of the question: It depends. You run the risk of having the customer pay twice for the same material items. (Example: Items were priced in the original FFP value, and now you are transferring them to a cost-type contract.) You also run the risk of being accused of defective pricing. (Example: Price negotiated for the second contract included costs of the materials, and if you don't transfer the costs along with the materials, you are getting a windfall profit, especially if you knew you had the residual materials when you negotiated the contract.) So: It depends. It depends on the contract terms & conditions associated with the contract or other cost objective(s) where the company intends to reuse the residual items to which the company has retained title. It's not automatic, but it's certainly within the realm of acceptable practices. If you transfer costs off the completed FFP contract, then you will record a higher profit/margin than you originally thought. That's not a terrible thing.
  2. I'm neither an attorney nor a tax expert. That said, I have helped a half-dozen companies enter the Federal marketplace. In each case, I have counseled the owner(s) to treat themselves as employees of the company. Several of my clients have listened to their tax advisors and, as a result, decided not to pay themselves a salary. (That's when we part ways.) That's fine, especially if you are getting a FFP contract award and/or your customer will be determining that your price is fair & reasonable based on something other than cost analysis. But when you have a customer who is performing cost analysis, you will then have no costs to show. Everything will look like profit. If you're okay with that result, then feel free to ignore my anonymous advice. Re: your second question, no. You will be too small for DCAA to care about. But your billing rates have to be based on something. Since you may not have costs, a cost plus markup approach will not work. In that case, your customer will likely look to the market to set the reasonableness standard for your billing rate. You should think about how to help your customer make the determination that's in your favor.
  3. Yeah, but you're such a helper! I was hoping people would be motivated to read the decision on their own, to see what was being referenced. You're the helper, not me.
  4. I read the CoFC bid protest from the link on the front page. Nicely done, Mr. Edwards!
  5. Unless you are providing a commercial service, I believe the answers to your questions are: 1. Yes. As with most small start-ups I work with, you are not seeing the difference between you as owner and you as employee to your business. Two different concepts. The business has its own expenses, of which your salary is but one. The business makes a profit or loss, which is taxable income to you (depending on how you structure your business). 2. Yes, your business does, if it wants to do business in the government marketspace. Yes, paid time off does exist--as a business expense of the business. Forget taxation (or don't forget it, but don't focus on it either). You need to set up the business, even if it is a sole proprietorship. The business will need its own financials statements. 3. If you are going to subcontract with a prime, you will still need to have the accoutrements of a business. Even if you are just a consultant.
  6. Good article! It does explain how Boeing used (or tried to use) military sales to offset demand problems on the commercial side. Today, though, I believe it serves more as a valuable historical retrospective than a critique of current events. Unfortunately, the article is focused on the failed leasing deal and not on the current aircraft procurement contract award. Its market analysis is similarly aged, in my view. In the past couple of years, Boeing has had problems on both sides of the house. Big problems. Which is why it slashed the corporate dividend and saw its stock price fall precipitously. Between 2012 and 2020, though the company's stock price soared.
  7. No. Disagree with you. Just look at how USAF converted the FPIF contract that was WAY beyond PTA into what seems to be a cost-type contract. Boeing has fallen behind schedule, experienced egregious cost growth, and had quality control issues. USAF doesn't care (or doesn't seem to). They're locked into Boeing now. You'd think they'd be sending cure notices, right? But no. They need that new tanker, whether it meets specs or not. Just my opinion, of course. I have no inside knowledge whatsoever.
  8. Nope. And you know a lot. Somehow we've gotten away from my original assertion, which was that Boeing's LPTA "investment" strategy was brilliant and resulted in a number of key program wins--not only KC-46 but also MQ-25. I have no opinion on their engineering acumen, or lack thereof.
  9. I'm pretty sure, having spoken with company employees, that the commercial division is supposed to generate robust cash flows through commercial margins to be used by the government division to invest in R&D and new program awards. I like this USNI article from a couple of years ago. It doesn't address my assertion (above) but it does speak to Boeing's strategy, which was working just great before the 737-MAX debacle.
  10. You're making an assumption based on ... something. Look, I don't want to argue with you. I'll assert that you don't understand Boeing, especially the interplay between its commercial division and its government division. Let's just leave it at that.
  11. Stop your timelines just before the 737-MAX tragedy/debacle/fiasco and rerun your numbers. I think you'll reach a different conclusion.
  12. It's not buying-in when there is no intention of getting well through change orders. Instead, the company (obviously) plans to recoup its initial losses through follow-on work. It's a great strategy and it destroys most competitors, because only the very biggest contractors can absorb the initial losses.
  13. This story shows me that Boeing's people were the smartest people in the room, despite what DoD and USAF leadership said at the time about their team(s). Boeing's strategy of "investing" in new programs by intentionally submitting a price that it knows is less than the expected cost of performance, and then riding out the initial losses--expecting to make its investment back plus a return on that investment in the long-term, continues to work for the company. The company apparently has outstanding financial strategists. Kudos to them.
  14. Okay. I'll let others more well-versed in fiscal law answer your question.
  15. For those of us who might remember the long and arduous road the Air Force took to get the contract awarded, and the promises made by Air Force and DoD leadership at the time. USAF Releases Boeing From Future Cost-Growth Liability On KC-46A Tanker. Inside Defense (1/28, Sherman) reports behind a paywall that the US Air Force has “released Boeing from future cost-growth liability on the KC-46A tanker, altering the fundamental terms of a 2011 contract that capped government costs at $4.9 billion and forced the defense contractor to pay out-of-hide for remedial work that so far totals $5.5 billion – a move that comes as Boeing saddles the Air Force with a new major milestone delay.” According to Inside Defense, “federal auditors revealed these and other new developments in a report on the $43.8 billion KC-46A program.”
  16. I believe Vern once wrote an article calling such contractors "Person[s] Without a Clue" - PWACs. You don't say how many years have passed. More than six?
  17. Interesting position. I would suspect that the writing of the COFD would be easier than surviving an appeal of it, but litigation is always a dicey proposition.
  18. Sure. As I acknowledged could be done. You'd have to point to a specific contract clause to overcome your burden of proof, though. Hopefully it wouldn't go to court.
  19. No. Different circumstances. For example, some costs of travel may be direct contract costs while other costs of travel may be charged indirect. The circumstances drive the accounting treatment.
  20. I'd like to add that the cost does NOT need to be an indirect cost. The notion that there must be a specific contract requirement to create a direct nexus is misinformed. Such a position confuses the concept of a "beneficial or causal relationship." (Emphasis added.) See FAR 31.201-4. CAS 402 (48 CFR 9904.402-30) defines a direct cost as follows-- For example, a vaccination incentive associated with an employee who is assigned on a full-time basis to one and only one contract could conceivably be a direct cost of that contract. It is the contractor's choice. The government contracting officer can decide whether they believe the cost to be allowable; but if they believe it is not allowable, they have the burden of proof to point to the regulation making it unallowable.
  21. Bingo! If the contractor has one single employee in the facility, then it is not an idle facility. There may be excess capacity, but that's a different concept, the allowability of which is determined differently. Generally speaking, I would expect the more specific cost principle at 31.205-17 to trump the general principle at 31.201-3. (See 31.204(d).) But it seems various judges have the own approach to cost allowability analyses, so who knows?
  22. You didn't specify the socioeconomic status of the entity that has the 70% share of the new business. You didn't specify the relationship between the WOSB and the new business.
  23. This is the single most important concept that so many people get wrong. Both government and contractor. Vern's sentence should be put on T-Shirts and handed out to Cost/Price Analysts and contract auditors everywhere.
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