Understanding Gov Contracts (Podcast Transcript)Aug 23, 2022
[01:12] Richard C. Howard: Thanks, everyone for tuning in for government sales. Momentum. Richard C. Howard and Associates. Today we have an awesome podcast coming up with someone who I consider a friend and a mentor, former colleague, all of that and more, Louis Orndorff. He's going to tell you a lot more about his background, but former contracting officer for the Air Force, multiple unlimited warrants, multiple commands, someone who I've learned a ton about the actual contracting process. Once you're on contract with the government first, Lewis, why don't you introduce yourself and kind of give a little bit more information on your background, what you did for the Air Force.
[01:52] Louis Orndorff: Okay. Yeah. I'd be happy to have an interesting Air Force career over 30 years of what I call weapon systems to war zones. Buying anything from major weapons systems like fighter jets or tankers or doing some of the sustainment for those things. Down to war zones where we were in the war zones leading some of the acquisition efforts and oversight or the life support for the groups. So I've got a pretty broad range of experience, if you will, on the acquisition and contracting side. One of the key things is I've really done the full spectrum, not every possible thing in the federal acquisition, but quite a bit of the spectrum there as a squadron commander at the lower level, a lot of the basic contracting, a lot of the local commodities, a lot of the IDIQs and different types of contracts. And then as I grew through other commands and other major opportunities, I saw how the very complex RFP process comes together, how it succeeds and how it fails, both from the government side and from the contractor side. I've seen a lot of mistakes that contractors make and you just look at these and you just go, if they just had not made that mistake, it would have been a whole different outcome. But most importantly, I've seen an awful lot of how contractors succeed once they get the contract and how they fail once they get the contract. So after talking to you about what can we talk about here? I think that's a really good area to spend some time highlighting.
[03:36] Richard C. Howard: Yeah, I absolutely agree. And anyone that listens to this or sees our video and our marketing, we spend a lot of time on how to acquire the work. And companies do spend a lot of focus on that. How do I get the contract, how do I get on contract? Not as so much, though, as once you're on contract, what do you do then? Right? And it's critically important, right? I mean, you can make some pretty big mistakes if you win that contract and you didn't read the fine print. So no, I think this is going to be new to a new topic area that we can go over with anyone listening or former clients or whatever. What are some of the specifics once you're on contract that you need to be looking out for? That's great. And then so you're a contracting officer, right? You're a former contracting officer. I just want to kind of peel the onion back a little bit because a lot of companies, when they look at federal acquisitions or selling to the government, they don't realize that there are many different professions within the government as far as putting people on contract. Right. You have contracting officers like yourself, program managers, like, I was kind of managing those programs once they're on contract, you have engineers, and you have finance people. So you're a contracting officer. Could you give us just a couple of senses on what does that really mean? How does that fit within the government, the federal marketplace and the federal acquisitions kind of landscape?
[04:56] Louis Orndorff: Well, it's really all about congressional funding. If you have money that has been appropriated by congress, you have a very short list of people who can actually sign contracts and obligate the government on behalf of the government and actually spend that money. So as a program manager, you define the requirements. You can go through the whole process of selecting the right solutions, but only the contracting officer has the authority to actually obligate and commit the government, if you will. And there's a lot of details around that one. Normally the federal acquisition regulation, the contracting officer will be that member of the team that really understands the laws that are governing the whole acquisition process, whether it be multi billion dollars or $10,000 or $500. There's a lot of laws and a lot of ways to get in trouble and both on the government side as a requiring activity and on the contractor side. So contracting officers have to really understand all that and have that authority. And it's a direct line authority, which is different from a lot of other types of authority within the military. The direct line authority comes straight down through Congress, not through commanders or, you know, chain of command. So there can be you can't tell a contract to sign a contract. Nobody can force that. It's an ultimate kind of check and balance, if you will, in the process. So, contracting officers spend decades learning and studying and getting familiar with all the details about how the federal acquisition, and the supplements for the defense or other agencies, how they all come together.
[06:38] Richard C. Howard: Sure. And we mentioned, too, that you had multiple warrants. Maybe you could tell everyone a little bit about what that means for a contracting officer when you have a warrant. And if they hear that language too, as they're working with acquisitions teams, what they can know about that?
[06:54] Louis Orndorff: Well, the warrant is that actual authority, the warrant is literally a piece of paper that shows that you have the authority to obligate on behalf of the government. However, on that piece of paper, it normally comes with some limitations. A lot of times, you might have $10,000 warrant, $10 million warrant, or a warrant that limits you to construction contracts, or a warrant that limits you to various things based on the position you're in. So an unlimited warrant is without what it says, without limitations. You can execute acquisitions anywhere within the range of the farm.
[07:33] Richard C. Howard: All right. From my experience with that, with the contracting officers that work with us, it would seem like at different levels in their career, obtain different levels of those warrants.
[07:44] Louis Orndorff: Right.
[07:44] Richard C. Howard: Kind of progressing up to where you are and when they finally have that unlimited warrant or a certain level of authority that they can authorize.
[07:52] Louis Orndorff: Well, not necessarily. It actually has to do with the level of trust. You can have some junior officers who have an unlimited warrants, not common. And then you can have some senior officers who don't have a warrant at all, not because they're not trusted, but because they don't really need it. And only people who it's very limited to the people who can get a warrant first. And then the second part is, does your position require you to have a warrant at that level? Right. A lot of times you'll find warrant at 10 million or 50 million, and that's it. But that's because the position only requires that, and then anything above that, they're forced to go up the chain to higher levels of approval and authority. So that has other complexities to it, but fundamentally, it has to do with the level of trust and the position that you're put in.
[08:47] Richard C. Howard: Okay. Interesting.
[08:48] Louis Orndorff: Yeah.
[08:48] Richard C. Howard: And I didn't know a junior officer could even have the ability to obtain unlimited so you learn something new every day.
[08:55] Louis Orndorff: I had an unlimited warrant for one of the systems commands or a major command when I was a lieutenant. First lieutenant? Yeah. It was hard. I went through months and months and months of preparation and forwards and I had to take amazing levels of preparation at that point. But that set me up just an.
[09:18] Richard C. Howard: Indicator for how the rest of your career was going to go, I guess. Right, so let's get into what some businesses should be considering when they're on contract with the government. If you want to cover just maybe some initial points to consider that we talked about.
[09:35] Louis Orndorff: Yeah, absolutely. Well, I'll tell you after seeing a lot of contractors’ come on board and some of them for the very first time and they're ones you watch the most because you really want them to succeed ultimately. But this is what I've learned. If you are awarded a contract and even if you've done this before, but these are fundamentals. Read the contract because you went through a process to possibly source selection and possibly put in a proposal and you have an idea in your mind from that proposal exactly what you are going to do and that's why you won the contract. You need to kind of set that aside and start again because now that you've won the contract, your main person that you need to think about and get a meeting of the minds with, and this is where I'm going with this is with your customer. The customer in this case will be the program manager or the contract office representative. So when you get that contract and it's actually signed and before you sign it really you should read through and make sure that you have in your mind every single thing that you think it's going to take to do that. So this is kind of your own expectations of I'm reading this piece of it, what do I think I need to do in order to do that? I'm reading this piece you go through everything to include all that fine print in the back. We'll get into that a little bit if time permits. So first of all, read the contract, establish a clear understanding of what's expected. And the second piece that's very important to this is insist, absolutely insist on a kickoff meeting with the government and make sure the contracting officer is in the room and the program manager or contract officer representative is in the room. Anybody else in the room is fine. But those two people are incredibly important for the kickoff meeting. So what you want to do is go through the contract line by line and say here's what I'm reading, here's what I think that means. What do you think that means? And it's the age old literally the formation of contract is meeting of the mind because you've submitted a proposal and want a contract. There's a whole team of people who decided you're the best solution but they are not the people that you're going to be working with for the duration of the contract. So you need to make sure you have a clear meaning of the mind, with the people or the person that you're going to be working with for the duration of the contract. And if you don't do that on day one a weekend, sometimes I've had program managers come into my office after a week and say, we got it all wrong. This contractor is completely the wrong answer because XYZ and I realized, okay, well, we actually didn't sit down and do a kickoff meeting to get everybody on the same page. And it protects the contractor and it protects the government at the end of the day. So getting a clear understanding of what everybody expects and then kind of thinking through how do you do that? And part of that is a lot of program managers don't even read the full extent of the contract, but there are many pieces inside that contract. You know what I'm talking about?
[12:36] Richard C. Howard: Yeah, I know exactly what you're talking about.
[12:39] Louis Orndorff: As many times as you've been told to read the contract so that you're clear on what the contractor is supposed to be doing, you have your own idea. You get to the contractor, you guys get in a room and you take off and say, okay, let's go do this. Well, if you're not centered around the contract immediately, there's some challenges when things kind of go too far down one road and the contractor all of a sudden says, hey, wait a minute, you're asking for stuff I didn't sign up for and it's going to cost me an awful lot to do that. Now you've gotten into an arena that is going to cause some problems. So do that upfront meeting of the minds right off the bat.
[13:14] Richard C. Howard: That's a good point. We actually discussed a recent client who didn't read the contract about a month ago. They didn't read the contract all the way through and there were some ramifications. They realized that if they met the contract names on what they were supposed to provide, that would come at great financial costs to the point where they just couldn't do it. And I guess this could kind of lead to the next piece, which is how can you fail at a contract and what are the ramifications of that if you fail to meet expectations or fail to I get some fire engines going on in the background, but what could happen there for a company? What do they need to be on the lookout for?
[13:50] Louis Orndorff: Well, you might need some fire engines. Yeah, there are a couple of different things that can go wrong. One, if you don't read the contract and you find that you're trying to perform, but for some reason it's not going well and you didn't have that meeting of the minds and you start to have conflict. So there are a couple of things that can happen. It ranges from contract officer letters that basically tell you to correct whatever the efficiencies are in their different terms for that based on different types of contracts. That's kind of the easy end. Then it ranges all the way to termination of the contract. And ultimately if things really go bad, you can be far from federal being able to be eligible for federal contracts for a period of time. So the key on this one is once you get a letter from the contract officer, you're already quite a ways down the problem street, if you will. Some of the things the contracting officer can do if they don't feel like you are performing, whether it's delivering the product appropriately or providing the service appropriately or whatever, that is the disconnect. You remember you're dealing with the sovereign government. They have the ultimate trump card, if you will. They have the ability to say, I will not pay you, I will take money from you, I will penalize you, I will depart you. And ultimately if those things start to happen, you have recourse through the courts. You can get tied up in that quite a bit. But the goal is to avoid that completely. Right. If you have lack of performance and a contract officer decides that they want to penalize you financially, this is something that you don't really have a vote in. They can unilaterally decide not to pay you a portion of whatever you think is required and then your recourse is through the courts. The contracting officer knows that because it costs you a lot more to recover than it does to try to correct your performance. And if the contract officer has a solid position of why they decided to decrement your payments, there's really not much you can do. So the goal is, again, I go back to beat this drum. Consistently meeting of the minds early on will avoid all these problems.
[16:23] Richard C. Howard: Sure, yeah. And I mean I would add to that just from the program management point of view, our best companies once I had a solid relationship with is the PM and those were companies that were constantly, constantly asking, hey, how are the guy if they're providing support, how are our guys doing? If they're working on a tech development project, just making sure that they're hitting the parameters. And also just from a finding new work within the government point of view, if you have that relationship, some of our most successful clients are always asking at the end of those, hey, does anybody else need our type of service or product? And at the end of the day, I think the federal contracting world is actually a small place and a lot of people know each other. So there's a lot of work to be gained by networking. And certainly as far as pertaining to this conversation, meeting expectations, if you have that solid relationship with everyone, starting with the kick off meeting, you're definitely on the right path.
[17:18] Louis Orndorff: Absolutely.
[17:20] Richard C. Howard: Yeah. No that's great. Can you tell us about Commercial Fire Park? Twelve.
[17:25] Louis Orndorff: Well a lot of contracts are commercial contracts. So what's the difference between a commercial contract? The federal government tried a few years ago to move the very complex process of contracting closer to the way the commercial marketplace did. So they have some efforts on that front. But at the end of the day you'll see that there are just as many requirements and federal laws included in the commercial twelve contracts as there are in some of the more complicated contracts. But it does streamline it a little bit. One of the things you're finding in far part twelve contracts is a clause at the back of the contract. It's called commercial contract. It's 52 212 four and 52 212 five. These positives in the contract actually have a whole bunch of nested clauses within them. And you need to read them because some of them will drive cost. Some of them will drive time requirements for you. Some of them will drive resources. You have socioeconomic requirements, environmental requirements, labor law requirements. There are some specific details on acceptance and inspection. You need to understand those because even though it's a commercial contract, you may go to do business like you do with your commercial clients and find that the government is requiring an extraordinary amount of effort on your part in order to get that final delivery and acceptance right. There's a lot more there. All the ethics laws are in there and I can't emphasize enough, be careful when it comes to ethics. Don't think that it's a good idea to buy a coffee cup or something for your government counterpart. Just steer clear of giving them anything. Certain gifts or anything like that are absolutely inappropriate. I know in the commercial side you have a lot more flexibility of developing relationships and you can do things that are, have some money tied to it. But on the government side, with your government counterparts, you just leave that alone. So all those rules are kind of built into those clauses that are even on the commercial side.
[19:47] Richard C. Howard: Okay, just wanted to interject one question that I know a lot of businesses are thinking, especially if they're new to government sales and maybe they're on their first contract or about to close it. So obviously timelines, as we know, and anyone listening to this knows timelines for government sales are different from the commercial sales timelines, right? And it could be twelve to 18 months before you're on contract with the government. Could be longer. But let's say we're approaching being on contract, right? So a company has done the right things. They've established relationships and agencies they're selling to, they've found out about opportunities ahead of time. They're influencing those. They've got to the point where there's a solicitation, they put a proposal in, that's a solid proposal, and they're about to go on contract, or maybe they just did. Now they get paid right away, right? They can expect a payment to drop in their account in a day or two. What are the payment timelines as far as and I know they're different, but maybe just a few words on that.
[20:46] Louis Orndorff: Yeah, there's a couple of key things here. This is that part of that meeting in the mind as you are preparing to start work on the contract and you start working on the contract, you should already know that there's a payment schedule or really what points you can invoice the government. So for example, if it's a service contract and you say, okay, every 30 days or every 90 days, we'll invoice the government, there's a complicated process there because you've submitted an invoice doesn't mean it's accepted. You go through a process of accepting the invoice where the government goes to the program manager and validates that you have indeed provided the goods or service to the government. And then once that's been validated, then it will go back to the contract and officer to make sure that the amount that you're asking for is exactly lined up with the amount that is expected that you should ask for. So they validate you've earned it. They validate that it's an appropriate amount that's in the meeting of the mind. And then the clock starts ticking. At that point, the prompt payment act comes into play. And it's not really prompt, but you should see something through the payment processes within about 30 days after that.
[22:02] Richard C. Howard: Okay.
[22:02] Louis Orndorff: So sometimes people will go six to nine to twelve months, in some cases without even seeing a payment. Wow. So when you get a big contract, it doesn't mean you get a big cash flow. So there's really important to make sure that you have a really good strategy on how to keep your company moving. Now in some cases the government may withhold payment for some reason, and it may be your fault and it may not be your fault. And this is where it gets complicated because if the government withholds payment and it's not your fault, and you have some recourse to ask for some increased amounts, possibly. So I don't want to get too far down those kinds of rabbit trails. But the question really is about there is going to be a lead-time, a period of time. It may take you time to get set up in the system before you can even submit an invoice, whatever that system is. So you should really be ready to operate your company for a period of time with your existing capital before you start to expect cash flow. Yeah, that's a really good case scenario. 30 days after you submit an invoice.
[23:11] Richard C. Howard: Sure. Yeah. That's a very important point right. For any company that's looking at this, making sure they're resourced properly or they have commercial sales funding them or however they're doing. That great. Well, I don't want it to go on indefinitely here, but we did want to touch on some important clauses that you might see in a contract. Do you want to touch on those?
[23:33] Louis Orndorff: Yeah, I'll do it this way. It's important that you read the contract now. Just because you read the contract doesn't mean you really understand what you're reading. It's easy to read something and you may read right over it. So there's one, for example. It's called Basic Safeguarding and Covered Contractor Information Systems. And if you just hear those words, okay, whatever, I'm going to read that and keep moving. Well, this is part of the cyber security maturity model certifications. And in some cases, depending on what information is on your computer systems, it could be a very extraordinarily expensive certification and process to safeguard that information. So when you see these clauses, if you don't really understand them, you kind of need to stop and just make sure that you understand that in some cases you may have a clause, it's about inspection. It just may say inspection clause. Well, for most commercial companies they might be ISO 9001 certified so they get kind of like higher levels inspection. But in some cases you may be opening yourself up to like defense Contract Management agency inspectors coming into your organization plan your facility and they can drive extraordinary costs by requiring you to adhere to certain standards that you may not have realized that you now need to be with help to. Same thing with property management systems. If you have a property management clause that can be one that drives extraordinary cost, if you're not really familiar with that or have experience with that accounting system, cost contracts, all these things. While it's very exciting to get a contract, there are extremely complicated processes that you probably need to have in place for certain clauses. And if you don't understand it, then this is the time to kind of reach out and say, okay, can you help me understand this? What do I really need to do here and how important is this? And the last thing I'll say about this is it's a risk conversation. There are some clauses, you'll see the clause and go, okay, I understand what's required here. I think the risk if I do this is going to be here. If I don't do this, it's going to be here. The cost if I do it will be here. The penalty if I don't do it will be here. So as a company, it's better to make an informed decision about how to adhere to those instead of just get caught by surprise that there's a requirement and somebody's knocking on the door and they want to move in and basically oversee your production line every day and be able to start and stop it at their discretion. Right, so the key on this one is when you read those clauses, sometimes there's a lot more to them than just what it appears.
[26:34] Richard C. Howard: Yeah, I mean that's a good point and kind of a transition here as we're wrapping up is if you don't understand those or you want to make sure that you understand the contractor in completely, you can certainly reach out to us at Dodcontract.com I refer to the consortium of subject matter experts that we use, so if you want Louis to review the current contract or want to talk about that type of work, feel free to reach out and we can set something up. It's been great talking with you today, Lewis. Thanks for taking some time out of your busy.
[27:06] Louis Orndorff: It's my pleasure.
[27:08] Richard C. Howard: And I know that there's tons of contracting questions that we have, so I'm sure you'll show up in a couple of other of these podcasts for everyone. Any parting words, or parting thoughts before we close down?
[27:20] Louis Orndorff: Now, it's really exciting to get a government contract, and I'd say that the last thing I would say is don't lose sight of doing a good job on the contract you have. Your reputation actually is very important, and you build that by being successful one step at a time. I've seen some companies that they get a contract and then they get another contract and they start to lose sight of taking care of those contracts as they're searching for more and more. Protects your reputation, and you do that. You build it and protect it by doing a good job on the contract you have. Now, that doesn't mean you don't want to look forward and keep looking for more contracts, but don't forget to I like the word protect your base, and that is your reputation, and it is a small world, and if you don't do well, then that gets around. If you do well, that also gets around.
[28:13] Richard C. Howard: Yeah. Small community at the end of the day. So those are great thoughts. Thanks again for coming on the podcast. Thanks, everyone, for listening. There may be a part two to this, so stay tune for that. Great and have a great day.
[28:29] Richard C. Howard: Hey, guys, Ricky here. I hope you enjoyed this episode of government sales momentum. If you did enjoy the episode, please subscribe to the podcast and leave a review. It's very much appreciated.
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