By replacing their aging disparate systems with NetSuite and working with a knowledgeable implementation partner, government contractors get the transparency and accountability they need to be able to navigate the complexities of federal contracting.
Government contracting is big business. In 2020, defense prime contract spending reached a record high of $447 billion and represented about two-thirds of all federal contract spending. Dominated by well-known companies like Lockheed Martin, Raytheon, General Dynamics and Boeing, the aerospace, defense and government services industry present ample opportunity for high-growth companies selling products and services to a broad range of agencies.1
With revenues ranging from $10 million to $200 million, high-growth government contractors may also benefit from President Biden’s 2022 budget request, which includes $754 billion in discretionary defense spending for next year alone.2
Companies wanting to do more work with the U.S. government need robust enterprise software systems that can support their multifaceted operations. They not only need unified front- and back-office systems, but these companies must also adhere to government contracting requirements related to time tracking, cost accounting standards and cost allocations based on usage, among other considerations.
This guide explores the current state of technology among high-growth government contractors operating in the aerospace, defense and energy sectors and explains how a unified cloud Enterprise Resource Planning (ERP) platform supported by an expert implementation partner can help organizations affordably and efficiently embrace new opportunities.
Right Out of the Gate
When they’re starting out, many government contractors rely on basic financial solutions like QuickBooks or QuickBooks Time (formerly TSheets). These solutions may suffice up until the point where the company wins a large government contract and suddenly realizes that its existing tools can’t adequately manage the associated compliance, costing and time reporting requirements. “The organization that’s been running on QuickBooks can’t manage cost allocations, project-level cost tracking or time tracking,” said Asela Wijesiri, Director, Government Contracting Advisory at MorganFranklin Consulting, a NetSuite Alliance Partner. “They just don’t have that sophistication.”
To manage their growing businesses, government contractors have historically looked to on-premises ERP systems that manage functions like project management, reporting and source-to-pay as their software of choice. “A lot of those ERP systems are now old, clunky and haven’t been brought up to scale,” said Michael Fitzgerald, MorganFranklin’s Managing Director, Accounting and Transaction Services.
“They also lack the reporting, controls and compliance capabilities that you’d get in a unified cloud-based solution that manages these and other requirements on one platform from a business systems perspective.”
High-growth businesses that are in the early stages of government contracting also need an expert implementation partner that understands the nuances of their situation and what it takes to succeed in this highly regulated space.
“You can’t just go out and blindly implement a new software system without understanding those nuances and implications,” Fitzgerald cautioned. “You could wind up having to make extensive changes, adjustments, customizations and/or incur high costs on the back-end; that’s never ideal for any organization.”
Deep Expertise and Hands-On Knowledge
For its government contracting customers, MorganFranklin supports NetSuite with deep expertise in the aerospace, defense and green energy sectors. Having helped government contractors successfully implement NetSuite, the company understands the business, accounting and compliance requirements that these organizations manage on a daily basis.
“We help them identify how to better establish their technology infrastructures to be compliant with government requirements such as time charging and cost accounting practices,” said Wijesiri, “and also understand which costs can be recovered and how that can happen in a very efficient manner.”
With more than 20 years of combined experience working in the aerospace, defense and government services industry, MorganFranklin’s team helps government contractors set up processes that can withstand audits and/or defend those companies in the case of an investigation.
By adding automation to its customers’ processes, MorganFranklin also helps those companies do more with less right at a time when they’re coming under increased pressure to comply with new rules and requirements. By putting the proper automated controls in place and conducting optimization assessments, MorganFranklin ensures that the ERP system can manage current requirements while also enabling the company’s future growth.
“We examine the system both from a capability perspective for the organization and in terms of how it can transform the contractor’s business activities in a way that meets the company’s long-term financial objectives,” Fitzgerald explained. These points are especially relevant in the aerospace industry, where manufacturers are using innovations like 3D printing and additive manufacturing to substantially drive down production costs. For example, rockets that once took 8-10 years and thousands of hours in a large manufacturing facilities are now being produced in 18 months or less using 3D-printed components.
Managing these accelerated processes while staying profitable and adhering to government contracting regulations is extremely difficult using aging ERP systems and basic systems like QuickBooks. Knowing this, MorganFranklin also focuses on cost reduction and operational agility in every one of its NetSuite implementations.
“We’re continually looking at how we can take archaic business practices that existed within the aerospace and defense industry and transform them into more 21st century approaches,” said Fitzgerald. “We do this with the goal of helping our customers get up to par and competitive with the changes that we’re seeing in the market.”
A System Based on Transparency
With an average implementation time of three to nine months using NetSuite as the foundation, MorganFranklin helps government contractors be more cost transparent when fulfilling their contracts.
“We help them build out a system based on transparency and mold their organizational processes in a way that supports a more efficient, cost-effective operation that pays for itself in terms of implementation costs.”
Asela Wijesiri, Director, Government Contracting Advisory, MorganFranklin Consulting
Once the system is live, NetSuite gives government contractors a complete picture of their end-to-end operational processes and enables accurate reporting and compliance with their contractual obligations. MorganFranklin adds its own flavor to the process by leveraging its team members’ firsthand experience with cost recovery on government contracts. This requires a holistic view of business processes, automation and the refining of business practices, while also implementing a robust cloud ERP in the process.
Wijesiri calls this holistic approach a “key differentiator” for MorganFranklin. “I’ve worked for government contracting firms where outside implementation teams came in to install the system and showed us how to run it,” he recalled. “They gave us no guidance on the accounting treatment, cost or recovery treatment. We bring that full depth and breadth of experience and know-how to the table in every NetSuite implementation.”
Grabbing the Opportunities
The opportunities in the government contracting sector are plentiful but successfully managing these contracts requires a finesse that basic technology systems, on-premises and industry-built solutions can’t effectively handle. With the U.S. introducing new regulations, reporting requirements and compliance rules every year, staying abreast of these changes while also maintaining profitability can put extreme pressure on growing government contractors.
To remain competitive over time, these companies need a unified ERP system supported by an implementation partner that truly knows the industry when it comes to the nuances of government contracting. The organizations that succeed are those that remain scalable and efficient over time. The ones that ignore these realities will quickly fall behind. For example, NetSuite’s Project Accounting allows for discrete tracking of project actuals and billings to support the project management lifecycle. This creates a more efficient process of tracking and drives greater visibility to meet compliance demands.
“To remain cost-effective and competitive in this evolving environment,” said Fitzgerald, “companies have to regularly transform their business processes, improve their data and reporting and ensure that their systems are driving additional insights and decision-making within the business.”
NetSuite allows for enhanced flexibility in the creation of reporting that addresses the complex requirements for government contractors.
By replacing their aging disparate systems with NetSuite, companies can attain the high level of transparency and accountability that the federal government requires while also ensuring their own organizations’ future success.
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