Revenue Recognition, Acquisition Reform Focus FEI’s Committee on Government Business

by Robert Kramer

Financial Executive International’s Committee on Government Business November meeting covered a range of pressing contractor-related issues.

The cases ranged from turning on the government’s burden of proof in Truth in Negotiations Act (TINA) violations, or the right of representatives of the parties to a joint project to submit a claim on behalf of the project, to a proposed rule to shift additional risk for detecting and remedying counterfeit parts onto the contractor.

However, two themes figured prominently in the discussions held at the Washington offices of Honeywell,: first, whether and how the adoption of the new Financial Accounting Standards Board-International Accounting Standards Board joint revenue recognition standard will affect government contractors, and secondly, the possible impact of certain National Defense Authorization Act provisions on acquisition reform in the near term and the prospects for continued reform in the next fiscal year.

During the discussion of the new revenue recognition standard, companies were split on adoption of the standard early (as of January 1, 2017), as opposed to the final deadline of January 1, 2018.

Acquisition reform was taken up in two contexts: first, provisions of the FY2016 National Defense Authorization Act (NDAA) related to acquisition reform were analyzed by the group to determine their possible impact on acquisition processes.  Certain provisions that enabled rapid acquisition and deployment, including those that allowed the U.S. Secretary of Defense to authorize the senior project official to waive “any provision of law, policy, directive, or regulation” that would “unnecessarily impede the rapid acquisition and deployment of needed supplies and associated support services” (Sec. 803) and to exercise such waivers for any capability judged to be critical to the ”National Security” (Sec. 806).  

It was commented upon that, if correctly implemented, these provisions could have a profound effect on procurement processes with respect to duration and efficiency, and could set the stage for subsequent, more comprehensive reforms.  One member suggested that this increased the urgency of efforts to secure business a seat at the Federal Acquisition Regulatory Council  and Defense Acquisition Regulations Council, who would be primarily responsible for writing the regulations that implement the NDAA.

The prospects for and possible sequence of future reforms were also discussed at length.  Knowledgeable sources suggested that next year’s reform efforts would be focused on matching the technology cycle with the acquisition cycle, by making the latter more efficient through the elimination of unnecessary regulations and procedures.