'We work for free,' contractors say

More than eight of 10 government contractors have performed out-of-scope work without getting paid, and most don't believe they have effective procedures to identify those situations in advance, according to a new report from Grant Thornton LLP.

The company’s sixteenth annual Government Contractor Industry Survey  released on Jan. 17 said 83 percent of the contractors surveyed had performed out-of-scope work without compensation.

In a related finding, 69 percent of the contractors said their procedures for identifying out-of-scope work were either somewhat effective, or not effective. In 67 percent of the cases, out-of-scope work was performed without modification of existing contracts.

“Failure to properly identify out-of-scope work and seek compensation may account for low profit rates, and is a particular concern for companies working in a firm fixed-price contract environment,” Grant Thornton said in an analysis released with the report.

Also, working without pay might be dampening profits. “The failure to identify out-of-scope work effectively and seek related compensation may contribute to low profit rates,” Grant Thornton said.

Another problematic area is identifying when additional funding will be needed to complete a contract.

Under cost-reimbursable and time-and-material contracts, contractors must monitor spending against contract funding and provide the government advance notice when additional funds will be required to complete the contract.

In the survey, 52 percent of the contractors said their procedures for giving the required notices were very effective, while 48 percent said their procedures were only somewhat effective or not effective.

Grant Thornton performed the survey by asking contractors to voluntarily register on its website. The total number of contractors surveyed was not immediately available, though in past years it has been more than 100.

Other findings of the report include:

• Seventy-four percent of government contractors surveyed consider the government to be slow and inefficient in resolving contract issues, with 56 percent believing that the inefficiencies are caused by the Defense Contract Audit Agency and 18 percent blaming the contracting officer.
• Contractors surveyed filed a total of 22 bid protests during the past year, and 11 of them were sustained by the GAO or a  court hearing the bid protest.
• Forty-seven percent of contractors surveyed reported employee losses due to government insourcing.
• Twenty-eight percent reported having contracts that require use of the Earned Value Management System (EVMS). Of those with the systems, only 37 percent believe it to be a cost-effective management tool and only 25 percent would adopt EVMS voluntarily.