How the Government is Built
Do you really know your Federal customer? We all know the Government has three branches, executive, legislative and judicial executive, but do you really know all the people that are part of the contracting process?
The first thing you should be aware of is that the Federal Acquisition Regulation (FAR) and Prompt Payment Act (PPA) rules apply only to the executive branch. The other branches may use the FAR or its parts at their discretion.
The executive branch consists of the cabinet departments and many independent agencies, such as the General Services Administration (GSA), National Aeronautics & Space Administration (NASA), and Securities & Exchange Commission (SEC). Cabinet agencies also have many bureaus and sub-agencies. GSA, the Defense Department (DOD) and other agencies frequently provide contract administrative support to other agencies, boards, and commissions. GSA may also support the judicial and legislative branches for some services. In those situations the contracts are covered by executive branch rules.
It is important for all company personnel involved in managing a government contract to know all the participants in the process.
Process Participants. There are many participants in the government contracting process, each with a distinct role. Some participants may hold several roles simultaneously.
Funding Activity. The entity actually funding the contract. Some contracts have multiple funding entities. For example, a single contract to provide multiple services to an agency headquarters might involve janitorial, printing & reproduction, library and mailroom operations. Those four services would have to be separately accounted for by the contractor so those costs can be allocated to the correct agency accounts.
In some Department of Defense (DOD) contracts some or all funding is provided by a foreign government under Foreign Military Sales (FMS). This will impose additional invoicing requirements on the contractor and additional accounting procedures by DOD.
Requiring Activity. The entity with the actual requirement or need for contract issuing purposes. Generally the funding entity is the requiring entity.
Program Manager. The actual manager, who is generally the requiring activity. This person cannot bind the government to additional work or modify the contract.
Contracting Officer. This individual has many roles over the contract lifecycle and is the only person actually authorized by the government to issue the contract and thus obligate (bind) the government. No one else can commit the government. The contracting officer is issued a warrant. In most agencies, the office that issues the contract is also the contract administrator. This individual may also be involved in debt collection related to the contracts they administer. However, in DOD, many large contracts are administered by the Defense Contract Management Agency (DCMA). Sometimes the contracting officer role is divided into two parts, as shown below.
Procuring Contracting Officer (PCO). Sometimes called the ordering officer. This individual is responsible for pre-award duties such as solicitation and negotiation, the actual contract award, funds obligation, changes in terms, scope and conditions, and resolving performance problems during the contract. They may terminate the contract. They also determine the applicability of Cost Accounting Standards (CAS) to a contract. A PCO can be the ordering officer in a task order situation. This person is frequently a source of help in resolving payment problems.
Administering Contracting Officer (ACO). This individual can make administrative changes to the contract. In many cases the PCO is also the ACO. The ACO can help in resolving performance or payment problems and in interpreting the contract. The ACO has many functions, including approval or disapproval of progress payment or performance-based payment requests. (See FAR 32.5.) The ACO also reviews Cost Accounting Standards (CAS) compliance. Delegation of contract administration is more common in DoD than in the civilian agencies. (See FAR 42.307.)
Contracting Officer Representative (COR)/ Contracting Officers Technical Representative (COTR). The individual responsible for contract performance surveillance, and interfacing with the contractor on contract execution and technical issues. They must tell the PCO or ACO about performance problems. In some contracts they can also assess performance penalties, or deductions from payments. Sometimes they are the accepting official. The COR cannot modify a contract, order additional services and supplies, or change its scope. In some contracts the COR may also review the invoice before payment. The COR is never the ordering officer in a task order contract and cannot order additional work on a contract.
Receiving activity. The entity actually getting the supplies or services as designated in the contract. Their receipt date is used to start the Prompt Payment clock. Receipt of services is based on when the service is completed or month end, as appropriate.
Inspector/Acceptor. The individual who actually accepts or rejects goods or services on behalf of the government. This can be the COR as mentioned above. If goods or services do not conform to the contract there is no basis for payment. Inspection and acceptance is separate from physical receipt and can occur on a different date. It is common for the same activity to both receive and inspect goods or services.
Certifying Officer. This individual certifies the payment is legal, proper, and correct and is liable for incorrect payments. Legal means the payment is permitted by law and is consistent with the purpose of the funding appropriation. Proper means that funds are available, the transaction or contract is properly documented, goods are received and accepted and the payment voucher has been pre-audited. Correct means the payee, address and amount are correct, and it is not a duplicate payment.
Billing Office. The place designated in the contract to receive the invoice and is contractually different from the paying and disbursing offices. Their receipt of the invoice is a key part of determining when the payment clock starts. The designated billing office can be a contract administrative office, receiving activity, contract auditor or disbursing office. This office is designated in contract section G.
Paying Office. This can be separate or the same activity as the billing office and is an important distinction in understanding how the payment clock starts. They can only authorize payment after acceptance, the only exception being “Fast Pay”. This office is also different than the disbursing office, discussed below, that physically makes the payment, particularly in the civilian agencies. Treasury disburses for the civilian agencies. The paying office can offset debt owed to the agency, including duplicate or overpayments. This office does not have a role in most tax or debt offsets from other agencies and does not resolve contract performance or pricing problems. They generally cannot help with purchase card issues, as they are not a cardholder. This office is designated in contract section G.
Defense Contract Audit Agency (DCAA). (www.dcaa.mil) Responsible for various audit functions over a contract’s lifecycle, from negotiation and administration to final settlement. Depending on contract provisions, DCAA gives provisional approval of invoices. They also do work for many civilian agencies on cost reimbursable contracts. DCAA may withhold part or all of a payment on cost reimbursable contracts if there is an accounting issue or a performance problem. They approve a company’s accounting system for compliance with Government Cost Accounting Standards (CAS) on allowable cost. Many times this is done as a “pre-award” survey. They also do post award audits, contractor internal control system audits, publish cost accounting standards, audit guidance and contract closeout audits on large contracts. DCAA audits may also include price checks, subcontracts, time sheets, and your financial statements.
For Defense Finance and Accounting Service (DFAS) disbursed contracts, DCAA can authorize direct submission of invoices to the paying office if your company has an acceptable accounting system. They can also revoke direct submission if warranted.
A useful DCAA publication is “Information for Contractors,” available online at www.dcaa.mil.This covers many important topics, including pre-award surveys for prospective contractors, proposal audits, incurred cost audits, invoicing forms and related instructions, and a discussion of contract types.
Agencies other than DCAA may also perform audits, such as GSA Industrial Funding Fees.
Defense Contract Management Agency (DCMA). This agency administers many large contracts for DOD and civilian agencies. When DCMA is responsible for source acceptance as designated in the contract, you cannot invoice the government unless goods are accepted at your site.
Disbursing Office. The office that actually disburses (makes) the payment and is designated in the contract. This office also would take offsets (collect) for back taxes or other debts to the Government before making the payment.
There are several major disbursing activities:
- Treasury Financial Management Service (FMS) disburses payment for the civilian agencies. FMS only disburses the payment. Any questions on invoices or performance problems must be referred back to the purchasing agency. FMS also performs debt and tax offset, not the agency.
- Defense Finance & Accounting Service (DFAS) disburses payments for most DOD activities. Within DOD, DFAS is frequently, but not always, the billing, payment and disbursing office. Sometimes DFAS will also be the disbursing office for a civilian agency. DFAS also performs debt and tax offset for FMS.
- Army Corp of Engineers disburses payments for the civil works project contracts they administer.
- United States Postal Service (USPS), Tennessee Valley Authority (TVA) and the classified agencies, such as the Central Intelligence Agency (CIA), disburse payments themselves and do their own accounting.
- State Department (DOS) disburses payments for various overseas activities for itself and other agencies.
Board of Contract Appeals. There are two boards of contract appeals to resolve complex contract issues above the contracting officer level. These boards are the Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA). The CBCA was created from prior organization at the General Services Administration and the departments of Agriculture, Energy, Housing, Interior, Labor, Transportation and Veterans Affairs.
William Blumberg is a consultant specializing in Federal contractor payment problems and related contract administration issues. Bill started Federal Contract Solutions after he retired from the U.S. Government, with over 30 years of working in DOD financial operations and contractor pay policy, including 18 years on the Contract Finance Committee. He finished his Federal career at the Defense Finance & Accounting Service (DFAS), where he was the Ombudsman for contractor pay problems, helping to resolve contract/payment issues. This article is an excerpt from his upcoming book on improving your collections process from the Federal Government. Bill can be reached at firstname.lastname@example.org and/or 703-400-8947