In the ever-evolving landscape of government regulations, it’s important for contractors to stay informed about things that can directly affect how they do their work and, quite frankly, make money.
The Inflation Reduction Act (IRA) is a rather new law that can have a big impact on businesses with government contracts. This article explains the top five things contractors should keep in mind about the Inflation Reduction Act, making it easier to understand and ensure compliance.
1. The Purpose of the Act
The Inflation Reduction Act, created to deal with economic challenges caused by rising inflation, aims to achieve five objectives: significantly enhance taxpayer services and facilitate the claiming of eligible tax incentives; promptly resolve taxpayer issues; focus enforcement on complex tax filings and high-dollar noncompliance; implement advanced technology and analytics for more effective operations; and attract, retain, and empower a highly skilled and diverse workforce.
The goal is to achieve all this with the approximately $80 billion the IRA will provide over the next decade.
2. Compliance Deadlines
Contractors need to pay close attention to the Internal Revenue Service website (irs.gov) to stay up to date with gradual changes of the Inflation Reduction Act, which was passed in August of 2022. Since the Inflation Reduction Act is a 10-year plan, changes will not happen immediately. The IRS has promised to post guidance for taxpayers on all credits and deductions as soon as they become available.
Make sure to check their website weekly for any and all changes.
3. Impact on Contract Prices and Budgets
The Inflation Reduction Act changes how contractors decide on contract prices and budgets. It states that contractors need to implement a more systematic approach when considering rising prices and adjust contract prices accordingly.
Contractors should assess their existing contracts and identify areas that need adjusting due to the new regulations. Also, they should adopt more robust budgeting practices to handle changes in labor and material costs. This helps them stay profitable and competitive when working in the government contract space.
4. Keeping Good Records
Contractors need to be careful in keeping records of any cost changes linked to rising inflation, as required by the Inflation Reduction Act. The act says there should be a clear and accountable system to track and explain changes in project costs. Therefore, keeping accurate records is important to show that contractors did their work properly if and when there are checks or questions.
Having compliant records also helps to foster trust and transparency in their dealings with government agencies.
5. Talking with Government Officers
Effective communication with government officers is crucial for contractors navigating the Inflation Reduction Act. Keeping an open line of communication helps both sides understand how rising inflation is affecting project costs.
Contractors should talk with government officers to discuss changes, ask questions about following the new rules and regulations, and address any concerns that come up while following the act. Building good relationships with government officers makes the process much smoother and leads to successful projects.
The Inflation Reduction Act introduces a new paradigm for contractors engaged in government contracts, emphasizing the need for proactive compliance, transparent communication, and a modernized customer experience that incorporates digital processes over manual.
By understanding the act’s purpose, adhering to new timelines, adjusting pricing and budgeting strategies, documenting cost changes meticulously, and fostering communication with government contracting officers, contractors can navigate the complexities of the Inflation Reduction Act successfully.
In doing so, they position themselves to thrive in an environment where adaptability and compliance are key to sustained success.