Pricing Strategies in Government Contracting

1
Pricing Strategies in Government Contracting
NCMA Suncoast Chapter

• Carlos Tejas
• Advanced C4 Solutions, Inc
• A Veteran Owned, Disadvantaged, 8(a) Small
  Business

2
Overview

• Prop Prep
• Government Evaluation
• Roles of Pricing Team

3
Winning Proposals

• Capture Team is integrated
• Business Developer
• Proposal Manager/Staff
• Pricing Team
• Contracts Team
• Technical Team
• Developed via Basis of Estimates
• Senior Management Support
• Plan to Execute Price to Win

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Why Is It Important?

• Typical pursuit costs are projected
• .1 to 2 of expected revenue
• Depends on Proposal Requirements
• Must Win can be higher
• Affects lives

100M Solicitation 100K - 2M in Proposal Costs
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Pricing

• Pricing takes into account intelligence
  surrounding the competitive environment
• What the Customer is willing to pay
• What is the Customers budget
• What the competitors are willing to offer
• What are the Values which will give you an
  advantage without adding cost
• What is fair and reasonable

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Pricing

• Pricing takes into account intelligence
  surrounding the competitive environment
• It is not calculating the cost of the task and
  adding a fee
• It is developing the cost factors, determining
  the winning strategy, adjusting basis, creating
  the pricing to win

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Pricing
Pricing is Situational Dependent

• Pricing takes into account intelligence
  surrounding the competitive environment
• It is not calculating the cost of the task and
  adding a fee
• It is developing the cost factors, determining
  the winning strategy, adjusting basis, creating
  the pricing to win

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Winning Price Proposal

• Increase the Value of the total proposal
• Mitigates Risk to both Customer and Offeror
• Creates opportunities to increase future
  earnings
• Sets a value to free value adds

9
The Proposal

• Evaluate the Cost Volume up-front w/ Technical
  Team
• Allows the Technical Solutions and Pricing
  strategy to meet (CLINs)
• Develop WBS Strategy
• Know how the Volumes are structured
• Allows you to know how to break down the pricing

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Indirect Costs

• May be Tailored
• Requires time to prepare - strategy
• May require disclosure adjustment
• May require DCAA/DCMA notifications
• Cost Centers
• Compensation Packages

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Labor Costs

• Approved Labor Rates
• New Labor Categories
• Surveys
• Blends
• SubContractor Rates

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SubContractors

• Type of SubK
• Type of Contract
• Approved Financial System
• Cost Proposal from Subs
• Ensure you are on the same page
• Prepare Instructions

13
Everything is Game

• Cost Center
• Compensation Package, GA, Overhead

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Everything is Game

• Cost Center
• Compensation Package, GA, Overhead
• Illegal Aliens

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Everything is Game

• Cost Center
• Compensation Package, GA, Overhead
• Foreign Labor
• SubContractors
• Escalation
• New Hires

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Evaluating the Cost Proposal

• Not done by Technical Team
• Professed to not be determining factor sure,
  sure, sure, sure, sure, I believe it!
• Must be Realistic
• Mitigate Risk to both sides
• Must pass the DCAA test
• CAM (9-20X)
• Determining Adequacy of Cost or Pricing Data
• FAR 15.4

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Realism

• Dont underestimate
• The Customers expertise
• Their ability to determine the value
• Competitors wiliness to compete

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Struggle

• PM wants to perform
• Management wants to Win
• Pricers job is to win at the best executable
  cost and still pass the audit

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Struggle
Plan to Execute, Price to Win

• PM wants to perform
• Management wants to Win
• Pricers job is to win at the best executable
  cost and still pass the audit

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Plan to Execute

• Requirements
• Solutions
• WBS
• Schedules
• Processes
• Quality Assurance
• Management
• Labor Categories
• Product Costs

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Plan to Execute

• Requirements
• Solutions
• WBS
• Schedules
• Processes
• Quality Assurance
• Management
• Labor Categories
• Product Costs

• Value Adds
• Efficiencies
• Cross-Utilization
• Cost Centers
• Staffing

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Plan to Execute
Assemble the Proposal with the Win Strategy from
the start

• Requirements
• Solutions
• WBS
• Schedules
• Processes
• Quality Assurance
• Management
• Labor Categories
• Product Costs

• Value Adds
• Efficiencies
• Cross-Utilization
• Cost Centers
• Staffing

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When You are the Incumbent

• Highest Peril
• Price to keep staff
• Staff Churn
• Can be a good thing

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ODCs

• Yes, Please

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ODCs

• Shift cost to ODC if possible
• To include
• DBA
• Facility
• Labor Cost Differentials
• Hardship, Danger
• Fringe???

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Salaries

• Shift some to Bonuses/GA
• ODCs not an employee
• Vendors

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Push the Pricing Envelope

• Know the rules
• Sharpen your Pencil
• Be Ethical
• Dont Break the Envelope

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Audits

• Is the strategy worth the fight?
• CAM
• DCAA Contract Audit Manual (CAM)
• Criteria for Adequate Contract Pricing Proposals
• FAR 15.4
• DCAA/DCMA
• NCMA
• Online sources
• Consultants

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Cost Volume

• Not a book - Be Concise
• Include estimate of value for value adds
• Describe and Disclose
• Clarity a clear proposal will overcome some
  shortfalls
• Follow the CAM

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Cost Volume

• Explain,
• explain,
• to reduce
• the audit pain

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Sources

• Defense Procurement and Acquisition Policy
• http//www.acq.osd.mil/dpap/
• Defense Contract and Audit Agency
• http//www.dcaa.mil/
• DCAA Contract Audit Manual (CAM) DCAAM 7640.1
• Criteria for Adequate Contract Pricing Proposals
  
• FAR 15.4.