How to Make Money with the Feds

William F. Fanning
Posted on: 07/01/87
Written by: William F. Fanning

_strategic_planA lot of people have told you that the government is not a profitable client to work for. Yes, it is true that the current changes in government policies and regulations are designed to lower their costs and, thus, squeeze your profits. Many firms are still achieving very respectable to high profits doing government work, but it takes skill and good management to play the government game successfully.

Here are five tips on how to get the maximum fee from government agencies:

1. Review the proposed scope of work carefully. The Brooks Act limits design fees to a maximum of 6% of construction costs for normal design services. Your review of the scope should be to identify those services that are outside of normal design services, including review of existing conditions, design of alternatives, prototype development, etc.

2. Be sure your proposal includes time for administrative tasks to be performed by technical personnel. The government generally has very extensive paperwork requirements and you should be paid for your time on these tasks.

3. Learn how to use the allowed techniques of forward pricing (costs based on expected costs at the mid-point of a contract) and cost of facilities (an interest based on your fixed assets) to raise your cost level.

4. If you are audited, remember that your auditor may not understand all the rules applicable to A/E firms. They handle all types of firms and may try to apply a test or rule that was not intended for design service contracts.

5. If you are audited, be sure to hold an exit conference with the auditor to learn his/her proposed findings. If he/she is wrong, that is the time to straighten things out. It is very difficult to change the auditor’s findings after the report is filed.

The government market can be profitable! Some of the most profitable design firms work in the public sector. You can also achieve industry-leading profitability in this market if you learn the rules and practice within these rules.

About the Author: With thirty-five plus years of design industry experience as a manager, consultant, and writer, William Fanning has helped numerous firms throughout the country improve profitability and firm management as well as transition firm ownership. Formerly Bill was the Director of Research for the Professional Services Management Journal (PSMJ), the largest newsletter devoted to the management of design firms. 



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