Tatum Partners has released an interesting whitepaper, the first in series focused on contract, cash flow, and controls challenges in government contracting.

Here’s a couple interesting tidbits taken from this publication and the authors cited below, to see the full article please click here.

• Proposals and Contracts - Based on recent studies, as many as three-quarters of all proposals received by the Government are deemed nonresponsive or inadequate.

• Managing Cash Flow and Backlog - Building a backlog is probably the most difficult challenge facing government contractors, due to the constantly increasing number of new entrants in the market place and the limited resources available to small organizations. If we assume that your company is currently generating $24M in annual revenues, it will burn approximately $2M monthly of your contract backlog. This means that you will need to win $2M a month in new or re-compete business
  just to keep the status quo. If your company has a win ratio of 50%, you will need to bid $4M in new business each month to maintain the current level of revenues.

• Controls - The underlying theme of an effective cost structure is consistency: when a method is selected, it must be consistently applied. DCAA and other auditing agencies will not expressly require one specific accounting system. However, it is recommended that government contractors invest in a system that will allow proper accumulation and segregation of costs between allowable and non allowable, that is project centric, allowing accumulation of costs by project, and that automatically allocates out its indirect costs on the basis of parameters consistently applied.

ABOUT THE AUTHORS

Luigi D’Amato is a financial executive with 20+ years of results in the federal defense industry in CFO,Corporate Controller and VP Finance roles for small and large Government Contractors. Throughout his career,Luigi has built vast knowledge in all aspects of the Federal Procurement cycle and offers a proven track record in M&A, Divestitures, and Joint Venture startups in the US and overseas. Mr. D’Amato is recognized as an expert in cash fl ow and treasury management,cost savings strategies, business consolidations and turnarounds of financially distressed organizations. He can be reached at 202.905.0728 or Luigi.Damato@TatumLLC.com.

Bob Martins has directed fi nancial strategy as CFO of a high growth middle market government contractor,including completion of two strategic acquisitions and the sale of a subsidiary for $44 million cash plus a retained interest. He restructured and directed all administrative functions to facilitate high growth, and met working capital needs with bank financing. Martins has held senior positions with regional banks in the DC Metro area, where he was responsible for commercial lending groups including specialized Government Contractor finance. He can be reached at 202.470.3756 or Bob.Martins@TatumLLC.com.