Survey Shows Squeeze on Contractor Profits Most federal contractors reported higher revenue but lower profit in the annual survey by the advisory firm Grant Thornton LLP. The survey of 100 companies of all sizes found half had profit rates of 5% or less, including those who lost money during their latest fiscal year. In contrast, 55% of the companies said their revenue from federal business increased. “While government contracting is usually a growth business, it appears that the business risks are growing more quickly than revenue, and deteriorating profits are one result,” Grant Thornton said. Two years ago only 37% of companies reported profit rates of 5% or less. Nearly three-quarters of companies surveyed consider the government to be slow and inefficient in resolving contract issues, with 56% blaming the inefficiencies on the Defense Contract Audit Agency and 18% saying the contracting officer was the source of the problem. DCAA has tightened some of its procedures after criticism by the Government Accountability Office. Kerry Hall, leader of Grant Thornton’s Government Contractor practice, said that finding is not unexpected: “The GAO reports and the DCAA changes that followed likely contributed to the survey findings, namely that the process of resolving contract issues is increasingly inefficient.” Contractors said executive compensation is the cost most often challenged by DCAA auditors. Grant Thornton criticized DCAA’s approach to executive compensation as “simplistic and formulaic.” Other findings of the survey: *On average, the companies surveyed reported a 36% win rate on proposals submitted on competitive contracts. *47% of companies said they had lost employees as a result of government insourcing. *The Obama administration’s emphasis on fixed-price contracts appears to be having little effect. Contractors said they received only 20% of their revenue from fixed-price contracts, a figure unchanged over the past three years. Cost-reimbursable and time-and-material contract types each accounted for 40% of revenue. *Average annual wage increases were 2.6% to 3%, continuing a modest downward trend from the two previous years.