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A Few Things CEO’s Of Growing Government Contractors Need To Know — And Have Found Out The Hard Way

November 13, 2014

By: David Robins, Chairman, Government Contracts and Grants Practice Shulman Rogers

PREMISE:
You’ve taken your company past that magical threshold. You’ve doubled or even tripled your revenue in the past few years to $10 million or $20 million or more.  You’ve even made some money.  Along the way, you did the hard stuff.  You’ve gotten a leg up on business development in the federal marketplace.  It’s still a struggle, but you believe you’ve gotten your arms around the right accounting and contracts management capabilities that are essential to avoiding issues — and getting paid what you are owed.  You’ve even had that first “aha” moment about contracts:  Contracts in general are hard; contracts with the government, with the myriad laws and rules to avoid corruption and scandal, are almost impossible.  Okay.  What’s the problem? What are you missing?

Well, maybe nothing.  After all, you are successfully growing personnel, space, staff and administrative support systems.  As you become bigger, especially if you grow quickly or significantly increase your scale — and one great contract win can do that — you abruptly realize that you not only need more, you also need different — and better.

And maybe you’re missing something else.  Maybe you’re missing the right legal advice.  Okay, you’re not surprised.  After all, we are lawyers.  We are also a former government contractor, a former General Counsel, former Department of Justice litigators and a former senior government regulator.  The legal advice you received when starting out may not be the right advice for you now.  More importantly, the way you bought legal advice along the way, a combination of your company’s lawyers and an a la carte selection of outside counsel for everything from government contracts to finance, to real estate to labor relations, may not be what you need now.   As you’ve grown bigger, you are spending more, but wondering if you’re getting better advice.  Chances are, you probably aren’t.

LESSON ONE:
Your government contract is your most important business asset.  As your contract revenues increase, your legal needs evolve from compliance to strategic business advice.  In our experience, too many lawyers take the approach that the compliance advice they give need only be “…good enough for government work….”  Your compliance advice can and should be effective for both meeting the requirements of the Federal Acquisition Regulation (FAR) and strategic business direction.  If your lawyer does not seem to be invested in making sure you are compliant while getting the best ROI for your business, you should be demanding more.

LESSON TWO:
Don’t buy more legal advice than you need.  One problem:  This is almost impossible without a deeply experienced in-house team and a strategic approach to securing legal advice.  Buying a la carte is almost certain to cost you more than it should.  It is not enough to look at your legal spend internally as a percent of revenue.  It is not enough to try to negotiate a discount of the hourly rate from each of your lawyers and call it a victory.

Your internal and external lawyers should operate as a legal team.  They should treat your government contract as your most important business asset.  Their advice should reflect an informed perspective and deep knowledge of the industry, your business, including goals and issues, and the way the government regulates, as well as the regulations themselves.  And the legal team should be willing to invest their time in getting up to speed about your company.

LESSON THREE:
Get the very best legal advice when you need it most.  Of course, the challenge is that it takes an experienced team familiar with your business and focused on your business success to recognize when the very best legal guidance is needed — especially proactively, as is often the case with partnership agreements, mergers or sales; with intellectual property matters; with compliance or audit/examination or with bid-related matters.  If you have Lesson Two down, then this lesson is much easier to master.  Unfortunately, having the vision to recognize the need for better advice in negotiating partnerships, protecting intellectual property while performing under a government contract or managing compliance issues, is often only 20/20 in hindsight.  A good way to avoid this costly misstep is to evaluate the broader capabilities of your legal advisors.  Do they have the experience, the perspective — the mindset — to invest the time and energy needed to provide strategic legal advice?  Advice that answers the questions you asked, as well as the questions you should have asked.

At this point, you are wondering how you are going to find the time to run your business and track down the right legal advisor.  We suggest that as a CEO, you meet with the lawyers before you make the final hiring decision.  Before you decide to retain them, ask yourself these questions:

  1. Is this a team with both an in-house understanding of the government contracts industry, my business and strategic goals, and a government insider’s knowledge of what is really expected and how things really work?
  2. Does this team have great ideas, a business solution-oriented approach and a roll-up-the-sleeves commitment to doing the work?
  3. In short, are these the lawyers I want in the room when tough business decisions need to be made?

If not, keep looking.   We are out there.