GOVERNMENT CONTRACTING
ESBA was engaged by a government contractor in the Information Technology (IT) business to help return the Company to profitability. The Company was relatively small, somewhat under $5 million in revenue. The company had been very profitable assembling computer equipment at their own site and with their own staff. They had opportunities, being a Small Business Administration certified 8(a) participant, to expand into other areas, including computer cabling of Government buildings. Since these contracts were spread across the United States, they made significant use of subcontractors in the local areas.
Because of lack of oversight on the contracts and inexperience with subcontractors in numerous locations, profit margins dropped drastically. They had problems with suppliers delivering the wrong materials, delivering to the wrong sites, and double charging for the same materials. Several subcontracts for both supplies and services came into dispute as the terms and conditions were not precise. Some of the work had to be redone and two subcontractors filed suit. At the same time the Company discovered that their Chief Financial Officer had overstated receivables and profits to cover cash shortages.
ESBA acted in the role of Chief Financial Officer and Crisis Manager. Because of our expertise in Government Contracting, we drafted documents for the attorneys, that delineated responsibilities under a first-tier subcontract on a prime Government contract, that brought the companies, who had filed suit, to negotiations and favorable settlement.
As part of the engagement we examined all Government contracts and billings. We discovered that several Government contracts were under-billed due to a lack of understanding of Government billing procedures. The Company has returned to profitability and is now concentrating on increasing sales and revenue.
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