Profile: FEI's Committee on Government Business.

In this issue of Financial Executive, we continue our series of profiles of FEI's committees, which track legislative, regulatory and business developments important to financial executives.

Cooperation is the name of the game, especially when you're dealing with the federal government, says the Committee on Government Business. CGB should know, because its members, whose companies provide goods and services to the federal government in varying degrees, have to contend with its bureaucracy every day. To help foster a more productive relationship between government and industry, the committee tracks and responds to the accounting, recordkeeping and reporting issues arising from those business relationships. It also develops position statements and responds to papers written by the Cost Accounting Standards Board, as well as the Defense Contract Audit Agency and the Defense Contract Management Command, two of the most important regulatory bodies for CGB members' companies.

The committee, chaired by David M. Koonce, director of financial analysis for Martin Marietta Corp., is 37 people strong. As Koonce sees it, one of CGB's most important roles is as a forum for discussion and exchange of information. "Often, a member will ask other members for guidance on how their companies handled a particular transaction," he says. "The benefits to the membership from this kind of interaction are great, because our business and accounting decisions are different from those of purely commercial businesses." And CGB most assuredly has the Department of Defense's ear, he adds. "DOD pays attention to us and so do the government auditors, because we have a hands-on, working relationship with them to try to resolve the issues affecting our members."

CGB boasts three issues-oriented standing subcommittees -- oversight, cost-accounting standards and contractor financing. The oversight subcommittee, chaired by Harvey Miley, manager of government contracts at Eaton Corp., tracks the activities of various government oversight agencies and suggests potential topics for ad-hoc subcommittees. It's also keeping close tabs on H.R. 3477, a bill that would prevent defense contractors from being reimbursed for their environmental response costs, and it recently surveyed CGB member companies on their environmental expenditures.

The cost-accounting standards subcommittee, under chairman Ronald G. Crawford, vice president of finance and the business systems group at Textron Lycoming, focuses on preparing responses to the Cost Accounting Standards Board's position papers. The major issues on its plate are pensions, step-up of assets, organizational and accounting changes and disclosure statements.

The contractor financing subcommittee tackles problems with the progress payment system, an arrangement in which the government partially finances its contractors' in-progress work by reimbursing them a percentage of their target costs. Here, the real hot button is cash flow, because some executives feel the government tries to maximize its cash flow at the expense of the contractor, causing payment delays and other problems for contractors, explains Robert C. Miller, assistant controller at Boeing Corp. and vice chairman of CGB. To help offset this problem, the subcommittee develops methods of enhancing and protecting contractor cash flow.

The committee also forms ad-hoc subcommittees as special issues crop up. "We try to keep our ear to the ground so we can respond to these issues quickly," Miller says. "Our role is to act as a relatively unbiased resource for people on the government side who need our expertise in interpreting the regulations that affect both the government and the companies it deals with. At the same time, we try to be a watchdog for industry." The committee aims to foster a more cooperative environment between government and industry, so CGB shies away from lobbying, preferring to take a proactive rather than reactive approach to issues.

But CGB has no qualms about stepping up to the plate when members' -- and FEI's -- interests are at stake. Two years ago, a proposed amendment to the Defense Authorization Bill would have forced defense contractors to pay pension benefits and supplemental income to employees age 55 and up that they laid off after 10 or more years of service. Many contractors also have commercial businesses, and it would have been nearly impossible to create separate retirement packages for defense and nondefense employees, Koonce explains. CGB's efforts helped defeat the bill before it ever made it onto the Senate floor.

Like many other companies, government businesses see downsizing and restructuring in their future. Because of declining defense expenditures, the government is gradually cutting back its procurement system, so it's urging its contractors to consolidate their operations whenever possible. However, while the directive is clear-cut, the issue of how companies should handle the costs of restructuring are not. CGB's ad-hoc downsizing/restructuring subcommittee, headed by David Beckley, vice president and controller of Alliant Techsystems, is leading the charge on this issue. The subcommittee is working with the Department of Defense to come up with some basic rules that guide companies in accounting for the costs of restructuring, whether prompted by government actions or mergers and acquisitions.

CGB has also been a vocal proponent of acquisition reform. The committee believes the government should streamline its procurement process so that businesses can implement more efficient cost-management procedures and controls. "The bureaucracy forces you to do cost accounting in a way that's 90 degrees away from what it should be," Miller says. CGB has been hammering away at the message for several years now, but it's had a tough time getting the government's attention. "We were just starting to gain some momentum on this when the Desert Shield operation began, and by the time Desert Storm was over, we had to start over with new government people," Miller sighs.

The good news for CGB is that some of the Clinton administration's initiatives mesh with the committee's reform goals. In fact, last September, the committee, in conjunction with the Alliance for Responsible Procurement Reform, lent its support to the National Performance Review's procurement-reform initiative.

What's next on the horizon for the committee? Vice chairman Miller recently learned that the government has commissioned a study from a consulting firm to determine how much it costs businesses to contract with the government versus private industry (three times as much, he estimates) and to analyze solutions for reducing government costs. "We hope CGB will be able to get involved and provide some balance to that analysis," he notes.