'We work for free,' contractors say

Grant Thornton survey finds a large majority of government contractors do out-of-scope work for no pay

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.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.

Reader Comments

Thu, Jan 20, 2011 J. Kolodny Fallse Church

EVM does not keep us from government fiscal and acquisition management atrocities such as FBI IT systems and combat plane programs. Many think all it does is keep a bunch of EVM consultants and trainers and monitors busy. It would be a better investment, perhaps, to hire more prosecutors to check on whether govt and contractors are acting responsibly and within the law, program management and financial management statutes, and contracts.

Thu, Jan 20, 2011

As a subcontractor on an Army contract to a Billion dollar Prime we were given out of scope work and when we contacted the Prime we were told is was in our FFP scope. Later they found out is was not but too late for us and them so we had to eat the loss not the Billion Dollar Prime they have too many lawyers and the corporate officers wanted their profit and Million dollar bonuses.

Thu, Jan 20, 2011

Even contract organizations that have effective in scope/out of scope processes and procedures are often at the mercy of their government counterparts. Things legally are outside the scope of the contract are frequently requested "to be convered by the base" and both the government and contract official understand the game. As long as contracts are written with 1 year option periods these things will continue to happen.

Thu, Jan 20, 2011 Jaime Gracia Washington, DC

It is difficult to say no to the customer, as push-back will occur since everything often seems to be in scope from the government's perspective. Especially in this difficult environment, what can be done? Either provide the service, or someone else will. EVM is an outdated and non-value added service that requires contractors to create reports because they are contractually obligated, with the result of creating reports that never get read or used by the government. EVM is yet another example of creating shelf-ware, with little information on real performance. If industry does not find it cost-effective, why would the government continue to use it?

Thu, Jan 20, 2011

Yes, we are a new government contractor a small business, on our first job we found that the estimates that we were given were incorrect by the "base". The changes cost us our "profit" for the job. We didn't ask for a "change order" like we would have in commercial. We didn't want to look like a "troublemaker". As the owner of the corporation I see this as "marketing cost". In this recession government work is worth the cost.

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