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Wednesday, October 1, 2014

Making an Astute Bid/No Bid Decision



 
Image: "Complex2clear"

INTRODUCTION:
Government contract proposal preparation is time consuming and can be costly. Meeting the agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated. When considering submitting a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid this job for lack of such a strategy. The elements of the process are discussed below in the form of questions to ask yourself against topics for key consideration.  Affirmative or non-affirmative answers to the topical questions and ability to fill in the blanks below will drive your decision to bid or not bid a solicitation.

A. Customer:
Do you know this customer? Yes __ No ___
Does this customer know you? Yes___No ___
Do you have any idea of the available funding for which the customer has obtained authorization? Yes___No ____
Specify the marketing contacts which have been made with the customer thus far:
Date:
Contact:

B. Supplies and Services:
Specify the supplies and services to be delivered in the prospective contract:

Line Item (s):


Description:

Are supplies and services in the RFP Statement of work a good match for what the company sells? Yes ___No ___
Is the RFP Statement of Work specific enough to identify risks? Yes____No ____
Is the RFP schedule specific enough to determine the delivery requirements? Yes____No____
Can the delivery schedule in the RFP be met? Yes ___No _____
Specify the delivery schedule for the prospective contract:

Line Item:


Delivery Date:

C. Contract Type/Value/Start/End Date:
Does the proposed contract type (FFP, CP, T&M, etc) suit the nature of the work? Yes___ No ___
Specify the contract type for this program: _______________.
Are there any unusual terms and conditions specified in the government RFP? Yes ____No___
Specify any unusual terms and conditions: ___________________________________________

What is the Rough Order of Magnitude (ROM) value of the prospective contract? $___________.
What is the anticipated start date of the contract? ________.
What is the anticipated end date of the contract? ________.

D. Company Strengths: 

Is this prospective contract for effort in which the company has strong skills? Yes____No ____
Specify the strengths the company will utilize in meeting the product specification or statement of work:

E. Company Weaknesses:

Are there any company weaknesses in meeting the product specification or statement of work? Yes ___No ___
Specify any weaknesses for which the company must compensate and manage associated risks:

F. Teaming Arrangements (If any):
Does company plan to team with other companies in the performance of the prospective contract? Yes ___No ___
Identify the other team member companies:

Will your company be a prime or a subcontractor? Prime___Subcontractor ____
Have NDA's and Teaming Agreements been executed? Yes____No ______

G. Competition:
Is this a sole source set-aside procurement to your company? Yes____No____
If this is a competitive procurement, identify the prospective competition and their associated strengths/weaknesses:

H. Win Strategy:
Identify the proposal features and themes which will be utilized in the proposal as discriminators to win this program:

Management:

Technical:

Cost:

I
. Proposal Budget:
Estimate the man hours and dollars for proposal labor, any travel expenses, shipping, packaging, samples and other expenses associated with preparing the proposal. The government does not reimburse the contractor for proposal preparation under the subsequent contract. Proposal expenses must be included in the cost center overhead or G&A and accounted for as marketing expense allocated across the cost center or the company.

Labor Hours __
Labor Dollars $______
Material _______
Travel _______
Reproduction _______
Samples (if any) _______
Packaging/Binding/Ship _______
TOTAL $_______

J. Analysis: 

If you can answer "YES" to at least 5 of the questions under paragraphs A through D above, it is likely you should bid this procurement.


If the answers to 7 of the 10 "YES" or "NO" questions under paragraphs A through D above are "NO" it is unlikely you should bid this procurement unless the answer to G is "YES". Even then, examine your answers and carefully review whether this business is suitable for your company. 

If the answer to E is "YES", it is unlikely you will bid this procurement successfully unless the answer to G is "YES". Even then, determine how you will overcome the weaknesses you have identified in your company associated with doing this work before you decide to bid it. 

Carefully compare the competitive analysis under Item G to the win statagy under H before you make your final decision.

K. Decision: 

BID _____


No Bid _______


Sunday, September 14, 2014

A Continuing Small Business Success Story


Congratulations to Payal, Ashish and the VSolvIT team on their recent contract awards. They are one of my longest running and most successful clients.



"BLOOMBERG BUSINESS WEEK"
VSolvit LLC Wins $19.29 Million Federal Contract

VSolvit LLC, Ventura, California, has won a $19,289,983 federal contract from the U.S. Department of Agriculture's Farm Service Agency for software technical support services for the FSA mission areas of Budget and Finance, Geospatial Service Oriented Architecture services, Common Information Technology Solutions and Administrative and Executive Management Solutions. Place of performance will be in Kansas City, Missouri.

VSolvit LLC Wins $2.38 Federal Contract

VSolvit LLC announced that it has won a $2,383,881 federal contract from the U.S. Naval Supply Systems Command, Norfolk, Virginia, for technical support services for the Afloat Logistics Program.


VSolvIT, LLC Wins $10.53 Million Federal Contract


VSolvIT, LLC was awarded a $10,527,041 federal contract by the U.S. Naval Facilities Engineering and Expeditionary Warfare Center, Port Hueneme, Calif., for information technology enterprise business systems support at Naval Facilities Information Technology Center. Place of performance will be in Ventura County, Calif."





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Monday, September 1, 2014

Fixed Price Versus Cost Plus in Federal Government Contracting

                                                         Image: Available Data dot com

Below is an interesting conversation with a very astute, anonymous interviewer on Quora recently.  It is replicated here for those who may be confused at times with regard to some of the nuances between fixed price and cost plus federal government contracting

Anonymous:

Why are cost-plus-fee government contracts less profitable for defense companies than fixed cost contracts?
 

They are extremely low risk because the contractor is guaranteed reimbursement of any and all costs up to the funded ceiling on the contract.

Therefore under the guidelines for negotiation of profit based on risk, the profit range is always settled at a lower range than other types of contracts with higher risk factors. 



Anonymous:

Thank you Ken. Is the government moving more towards cost-plus contracts and away from fixed cost contracts?

 
It depends on the type of effort involved.  Cost plus is generally in very advanced development arena, where the state of the art is being pressed, the requirements are nebulous and the design baseline is tough.

Higher profit production programs where the product or service is mature, predictable and repetitive are usually the recipients of firm fixed price contracts at higher profits.

All the huge billions for services in the war zone to companies like Brown and Root for instance are cost plus due to the unknown nature of warfare.  A similar program stateside at an air force base would lock them into fixed rates for several years but at a higher profit. 

Cost type contracts are generally pursued for cash flow, "Keep the lights on and bill every month" reasons, while the higher profit programs are being pursued at the same time in the company for their ultimate volume.

Anonymous:

What about small UAVs / drones? Are those now mostly cost plus contracts?

 
During development the more complex ones are indeed.  Size in the services and the intelligence community does not necessarily equate to simplicity with micro technology, satcom and sensors involved.

When they hit production on a repetitive basis they move to more fixed price oriented and incentive oriented higher profit contract types, which of course is the real goal of the companies involved.

Anonymous:

I'm confused, I thought cost plus was for more established technology product and fixed price was for more complex technology product (because it allowed for higher returns)?

 
It is just the opposite.

Companies like Lockheed Martin will not undertake advanced technology like the F-35 without a cost plus contract because of the risk in pressing the state of the art and meeting an enormously difficult specification.  A prototype is a one of a kind item. 

A production program is potentially in the hundreds and yields less risk at a higher profit rate overall at fixed prices.

Pentagon history is replete with incidents where companies went broke on new product development on a fixed price basis. At one point the FAR disallowed fixed price product development because of that issue.

The Lockheed Skunk works went broke years ago and had to be bailed out.  The Pentagon simply plussed up their cost plus contracts and the Black Bird was the result.

The F-35 cost plus contract was finally capped by the Air Force recently and a portion of the risk shifted to Lockheed due abuse of the cost plus contracting by Lockheed Martin.

https://www.quora.com/Ken-Larson/Posts/Plane-that-Ate-The-Pentagon-The-Politically-Engineered-F-35

Companies seek a production program follow-on at a high volume and fixed prices with higher profit with lower risk to ultimately make the real bucks,  Under such an arrangement they also own the tooling.  Uncle Sam owns the tooling on a cost plus contract.

Anonymous:
 
Hi, I'm still confused.  A company I know had high gross margins because they had more fixed price business in the last two years. For this year, they will have more cost plus and are guiding to lower margins. I thought they and more cost plus this year because they are doing more retrofitting as opposed to the original technology? I am ultimately trying to understand if this is a permanent shift in their Department of Defense business... but any clarification would help!

 
It is not surprising that gross margins go down when the cost plus base increases.  I have never seen it any other way in my 40 years in the aerospace industry.  Cost plus is low risk and low profit. 

In fact, on certain cost plus contracts there is a regulated maximum ceiling on profit not to exceed 7%.

At the bottom line there is no shift in what you are observing.  It is simply the mix of business in the company driving a lower profit rate due to the low risk, hence lower profit, nature of the cost plus environment. 

If the mix were to change to a higher base of fixed price contracts (and higher risk) the opposite trend would occur.

Anonymous:
 
Is there a reason why for the last three years they had more fixed contracts but now over a sudden the mix shifts to cost plus? Does that make sense?   So to understand - this can change every year? Is there any way to predict it based on the types of products they have going forward? Is it because they are retrofitting that its cost plus and not fixed?

 
Cost plus = high tech, high risk, difficult to meet the spec, full of unknowns and a specification that is moving around all the time until the product is base lined.

Fixed Price = mature product, prototyped and tested, probably through low rate initial production and now going high quantity for fielding.  Lower risk, company willing to commit to FFP; government comfortable the company will not go broke in doing so at a fixed price.

Rule of thumb - look at your product or service complexity and technical challenge  mix, not a government trend.

Check the above mix in the company, the mix in the market, the mix in the competition, the mix in the environment the product or service will  encounter.   Then assume cost plus for high risk, pressing the state of the art procurements and fixed price for lower risk mature products or experienced services.

Anonymous:
 
Can a program start off as fixed price and then become cost plus? Or is it the opposite?
  
 
The opposite. A program generally moves from cost plus to fixed price as it matures.

The federal government generally recognizes 6 principal categories of  acquisitions. Below is an extract from the FAR for each.

It is possible  for a product to go through, or be supported by, all 6 acquisition  categories during its life cycle and many different contact types, depending on the nature of the work, the risk and the product.




Friday, August 1, 2014

Vital Tips for Project Management in Small Business Federal Government Contracting



INTRODUCTION
Good small business project management focuses the resources on a plan for contract execution, the schedule, budget and customer requirements baseline and the status of a given effort among other concurrent projects to give visibility into problem solving and management trade offs. 
If you are a small enterprise selling off-the-shelf commercial items under FAR Part 12 or marketing commercial products on a GSA schedule, you may be initially challenged by the government contracting venue. With persistence you will establish selling relationships through agencies and prime contractors. Your project management challenge is minimal.
 
A service contractor faces a far greater challenge in understanding the nature of government contact project management and succeeding at it.

PLANNING IS KEY

Strategic thinking must be applied to structuring a government service contract project management capability in your company. It must involve long term planning and designing a business system as well as establishing rates and factors to bid new work and control it while interfacing with the customer.

When one plans in detail to define the product or the service one reduces performance risk. 
The project management challenge is not to launch significant and costly resources before the specification for the product is sufficiently defined, obviating the need for costly revisions or abandonment, yet knowing when the product definition and plan are suitable for release.
Good project management starts early.

Without a well written Statement of Work (SOW) and associated supplies  and services specifications there is unacceptable risk in the future  contract and is it exceptionally high risk to bid or contract the job. 

Both the contractor and the customer must come to an understanding regarding the scope of effort to be performed. That understanding is conveyed in the Statement of Work (SOW) and confirmed in the specifications referenced therein.  A good SOW should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract

* A description of the conditions under which the contractor will be required to perform and any related environmental or location factors

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery  acceptance

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor.

* A precise description of customer furnished material or facilities required and when it will be made available to the contractor.
 
If your customer does not provide the above, offer the document during the comments period, during your proposal or during negotiations that represents a version to which your company will commit.

 
Do not let the fact the program is competitive sway you from the facts. Signing off on a poorly written SOW results in a difficult contract to manage, a high probability for disputes during the  contracting period and a poor past performance record you will have to  deal with in the future on other jobs.

PROJECT MANAGEMENT RULES OF THUMB
A secondary and related challenge is managing the baseline for the product or service to avoid scope creep, superfluous bells and whistles and other diversions that risk the basic completion objectives. 
Set a baseline for what can and cannot be achieved for the resources and time that have been committed to the job and present to the client.  Use it as a bench mark for discussion to establish a plan going forward. Then control it using sound baseline management.
Stay away from "Scope Creep" that can kill a contract, a customer relationship and a past performance record, all of which are important to your business. Stay in front of "Scope Creep" by communicating positively with the customer to control the baseline, keeping cost, schedule and technical performance integrated and synchronous.

Use the below rules of Thumb to control "Scope Creep":

KNOW - The contract value and its ceiling amount

KNOW - The incurred cost to date and commitments

KNOW - The scope of work and whether or not your current efforts are supporting it or some other objectives

KNOW - The estimated cost at completion based on where you are at today

KNOW - Your customer and who among the customer population is prone to direct out of scope effort.

 KNOW - WHEN TO SAY "NO" to "Scope Creep" and say it officially in   writing to the contracting officer specified in your contract.

For baseline management and earned value techniques in achieving the above, please see the articles linked below:




CAREFULLY SELECT YOUR PROJECT MANAGER(S) OR PERFORM THE ROLE YOURSELF

The following are the more esoteric project manager attributes necessary in the government contracting industry:

DEVELOPING the ability to cross organizational lines and make disparate groups or functional organizations work together with only a power of persuasion and a contract.

EVOLVING the art of directing resources without having them as direct reports while keeping home departments and functional bosses happy at the same time.

MANAGING to convince the executives in the company that specific project (s) are the most important in the firm.

LIVING with the prospect that if the project is late, fails or otherwise disappoints the powers that be, replacing the project manager will be the designated corrective action.

GROWING to crave the satisfaction that comes from succeeding at the above challenges and you would not have any other job because no other pursuit makes your day go as fast, grows you skills as sharp and totally occupies your intellect.