Government Contractors Report Higher Revenues

More than half (53 percent) of government contractors report that their revenues have increased over the prior year, according to the 12th Annual Grant Thornton Government Contracting Survey. Less than a quarter (22 percent) say that they suffered a reduction in their revenues.

“The survey offers an in-depth look into the industry as a whole and into the day-to-day business of government contracting,” says Kerry Hall, partner in charge of Grant Thornton’s Government Contract industry practice. “It describes how the government contracting industry has flourished over the last year and how it has been impacted by the war on terror, budget pressures, compliance issues, human capital, and technology.”

Some of this year’s survey highlights include:

–Pre-tax income—Companies were profitable in all revenue ranges although pre-tax income was lower than in last year’s survey.

–Management and support headcount—Headcount of management and support activities was 13.8 percent of total headcount, compared to 16.2 percent in last year’s survey.

–Indirect cost rates—Overhead rates continued the downward trend from prior years while rates for fringe benefits and G&A held steady.

–Uncompensated overtime—37 percent of survey companies do not account for all hours worked, and as a result, are at risk for losing revenue and profits on time and material contracts.

–Revenue by contract type—Revenue from government cost reimbursable and time and material contracts increased sharply since last year’s survey.

–Identifying out-of-scope work—65 percent of survey participants reported that their procedures for identifying out-of scope work are either not effective or only somewhat effective.

–Executive compensation—Executive compensation remains the most frequent cost challenged by government auditors.

–Exit strategy—Sale of the company continues to be the most favored exit strategy. The interest in pursuing initial public offerings of company stock is lower than in last year’s survey.

–New developments—There have been recent changes in the federal regulations regarding the recovery of state and local taxes on Subchapter “S” corporations and billing subcontractor hours on time and material contracts.

–Pricing of GSA contracts—The Department of Justice has created a National Procurement Fraud Task Force to identify misrepresentations of discounting policies while negotiating GSA contracts.

To download the highlights brochure of the 12th Annual Government Contractor survey, visit: www.govinfo.bz/6777-100.