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Thursday, November 1, 2018

Managing Subcontractors And Independents As A Small Business Prime Contractor

Is It Time to Start Subbing all your Work?
Image:  Contractorsupportnetwork.com

Industry teaming is a fact of life in small business federal government contracting. Your team for a given contract pursuit may consist of several types of industry partners external to your organization. 

If you are the business lead by virtue of teaming agreements that recognize your small business set-aside designation as the qualifier for leadership, you have a management challenge. That challenge involves issuing agreements and purchase orders to independent contractors as individuals and negotiating fully executed subcontracts with firms subcontracting to you.

The techniques in managing each of these partner types are distinct. The contractual and regulatory factors are introduced in the following link:

What is a Small Business Federal Government Contractor

This article will convey guidance for a small business federal government prime contractor, in managing the external business relationships with other companies as subcontractors and independents as individuals.

EARLY AND CAREFUL PARTNER SELECTION/TEAM MANAGEMENT

Finding industry teaming partners should occur synonymous with finding an opportunity. We have previously discussed marketing federal business opportunities:

Multiple Front Marketing


What Small Business Should Know About FEDBIZOPPS

Small Business Teaming

Assuming you have located an industry partner or perhaps a mix of subcontractors and/or independent individuals you wish to engage, make sure they have the capabilities to perform the parts of the statement of work on the program you are targeting. Remember that the quality of your proposal, your probability of a win, and ultimately your past performance rating on the contract, will reflect your supplier management. The government will hold you accountable for their performance. In some cases agencies will reserve the right to approve your key personnel and subcontractors before issuing your prime contract.

Two general guidelines should be observed:

1. Do not subcontract in excess of 40% of the program to another company in terms of hours, dollars and % of total work scope. The FAR regulations specify 49% as a ceiling but it is best to reserve 60% of the effort for your company employees and independent contractors under your control to avoid appearances of a front.

2. Do not exceed 50% of the internal labor hours for your company share of the program with contractors as individuals. Government source selection boards need some assurance that the capability to lead and perform major parts of the program resides in the permanent party of the small business prime contractor.

If you exceed the 50% rule for independents, include contingent hire agreements demonstrating the point in time where they will become full time employees or will be replaced by full time employees. A contingent hire agreement may be downloaded from the Box Net References Cube in the right margin of this site.

Sign subcontractors and independents to proprietary data agreements.

Develop thorough teaming agreements with subcontractors, including an explicit statement of work attachment to each agreement quantifying, the work scope guidelines in paragraph 1, above. A teaming agreement is available for download in the Box Net references cube at this site.

The independent should also understand the specific work and hours he or she will be expected to perform on the job and such personnel should be retained on a contractor retention agreement which is also available for download in the Box Net References cube at this site.
 Teaming agreements, contingent hire agreements, contractor retention agreements and subcontractor proposals must be either included in your proposal submission to the government or made available for government fact finding.

CONTRACT DOCUMENTATION AND TRANSITION FROM PROPOSAL TO CONTRACT

During the proposal stage of the business relationship with your industry partners you will be issuing them requests for proposals (RFP’s) for their portion of the effort.

For independent contractors this may be as simple as asking them to sign contingent hire agreements or contractor retention agreements.

But you must include in the RFP’s to the companies which you propose as subcontractors the terms and conditions of your agency prime contract RFP and other specific guidance to make the proposal and subsequent contracting process work smoothly. This should include administrative guidelines and agreed upon cost targets and technical guidance.

Specify a due date for their proposals in response to your RFP in time to roll their data into your cost volume and provide guidance on the handling of fully loaded rate backup to which you do not have access to forward to the government auditors. This usually includes sealed packages provided by your subcontractors that you will not open, since they contain overhead and G&A rate information which is highly proprietary to the subcontractor.

Keep in mind that you are in a constant negotiation with these partners until you award them subcontracts to replace the teaming agreements when your team wins the program. Please see the following article for detail guidance on that point:

Contract Negotiation

Naturally the technical and management volumes of the proposal will be completed in consonance and in parallel with the subcontractor RFP cost proposal responses.

At contract award, be prepared to negotiate and execute formal subcontracts to the companies with whom you are teamed and to issue purchase orders to your independents to commence work. At that point you have achieved the contract baseline and you will commence work.
 Insure that your subcontracts and purchase orders contain limitation of funds and funding exposure protection for all parties in accordance with the following article:

Limitation of Funds and Funding Exposure

BASELINE MANAGEMENT

Please read the following article carefully on baseline management and bear in mind that work scope change sensitivity must be managed carefully and formally documented between you and your industry partners by change orders to formal subcontracts and purchase orders:

Contract Baseline Management

SUMMARY

This article has provided an overview of subcontractor and independent contractor management from the early marketing stages of a contract pursuit through proposal preparation and submission then contract award and baseline management.

Please read the reference links in the text above carefully and check the table of contents at this site for other information relevant to this topic.










Wednesday, October 24, 2018

Utilizing The Freedom of Information Act (FOIA)

Image:  ATF.gov
INTRODUCTION 

The purpose of this article is to discuss the background and administration of the Freedom of Information Act (FOIA) and suggest tips in using the FOIA as a tool in operating your business.

BACKGROUND

Extract: United States Department of Justice Web Site:


What is FOIA?

“Enacted on July 4, 1966, and taking effect one year later, the Freedom of Information Act (FOIA) provides that any person has a right, enforceable in court, to obtain access to federal agency records, except to the extent that such records (or portions of them) are protected from public disclosure by one of nine exemptions or by one of three special law enforcement record exclusions. A FOIA request can be made for any agency record. Before sending a request to a federal agency, you should determine which agency is likely to have the records you are seeking. Each agency’s website will contain information about the type of records that agency maintains.

The FOIA is a law that gives you the right to access information from the federal government. It is often described as the law that keeps citizens in the know about their government. Under the FOIA, agencies must disclose any information that is requested – unless that information is protected from public disclosure. The FOIA also requires that agencies automatically disclose certain information, including frequently requested records. As Congress, the President, and the Supreme Court have all recognized, the FOIA is a vital part of our democracy.”

POINTS OF CONTACT (POC)

The following  link is a global means to determine points of contact for a specific request.  


I Want To Make a FOIA Request

A typical POC page will look like this:

"Contacts
The Office of Management (OM) advises the public and U.S. Department of Education (ED) employees regarding FOIA requests and ED information available to the public. As the lead organization for ED's FOIA Program, OM provides training for ED officials and guidance and support to the FOIA Coordinators and FOIA Review Officers in the Department's Principal Offices and 12 regional and field offices.
Send requests via email to: EDFOIAManager@ed.gov
Send requests via fax to: (202) 401-0920
Send requests via mail to:
U.S. Department of Education
Office of Management
Office of the Chief Privacy Officer
400 Maryland Avenue, SW, LBJ 2E321
Washington, DC 20202-4536
ATTN: FOIA Public Liaison
FOIA Requester Service Center
(202) 401-8365
FOIA Director
(202) 453-6362
Gregory Smith
FOIA Public Liaison and Team Lead 
(202) 205-0733
Robert Wehausen
FOIA Analysts
(202) 401-8365
Elise Cook
Arthur Caliguiran
Christie Swafford
FOIA Appeals
(202) 401-8365
Arthur Caliguiran
Privacy Act Requests 
(202) 401-8365
Elise Cook
Website: FOIA Request Forms"

PRACTICAL USE

Although occasions may arise for use of the FOIA on legal matters, personnel issues, and records that relate to agency background and activities, the most common uses of the FOIA in government contracting are as follows:
  • Market Research
  • Copies of historical contracts issued by an agency as well as contractor proposals.
  • Specific articles supporting a protest action.
RESPONSE TIME

The FOIA require a 30 day response time to your request, but actual response times vary by agency and backlog.  Here is a link indicating the relative range of experiences of late:

If the agency determines the request will exceed $25 in costs, you should indicate in your request that you will be willing to pays those costs to receive the data. 

MAKE YOUR REQUEST  AS SPECIFIC AS POSSIBLE

Identify the document or documents specifically by name and identifying number (s).  When requesting contracts, RFP’s, change orders and similar data, always include the contract number and be specific with regard to references to all changes.  If proposals are requested include a specific request for management, technical and cost volumes. The more detail you provide the more likely the response will supply what you wish to have.

BE PREPARED FOR GOVERNMENT REDACTING

When the government receives requests for copies of contracts, proposals and similar data that contain specific in formation pertinent to another company, they are required to contact that company and ask for identification of information the firm deems proprietary.  To the extent the firm identifies such data, expect the response you receive to have the data redacted (blanked out and unreadable). 

EXPEDITING


Among the larger agencies, especially DOD and Justice, it is rare to receive the information requested in a FOIA within 30 days.  Be prepared to expedite, by email, registered letter and by visitation if necessary, depending on the importance of the request to your business. 
 
REFUSALS

Refusals by the government can be appealed if you and your legal counsel make the judgment a given request falls outside of the following exemptions permitted the government or one of three special law enforcement record exclusions detailed at the FOIA web site:

"Exemption 1: Information that is classified to protect national security.  The material must be properly classified under an Executive Order.

Exemption 2: Information related solely to the internal personnel rules and practices of an agency. 

Exemption 3: Information that is prohibited from disclosure by another federal law. Additional resources on the use of Exemption 3 can be found on the Department of Justice FOIA Resources page.

Exemption 4: Information that concerns business trade secrets or other confidential commercial or financial information.

Exemption 5: Information that concerns communications within or between agencies which are protected by legal privileges, that include but are not limited to:

Attorney-Work Product Privilege
Attorney-Client Privilege
Deliberative Process Privilege
Presidential Communications Privilege

Exemption 6: Information that, if disclosed, would invade another individual's personal privacy.

Exemption 7: Information compiled for law enforcement purposes if one of the following harms would occur.  Law enforcement information is exempt if it:

            7(A). Could reasonably be expected to interfere with enforcement proceedings 

            7(B). Would deprive a person of a right to a fair trial or an impartial adjudication 

            7(C). Could reasonably be expected to constitute an unwarranted invasion of personal privacy "

            7(D). Could reasonably be expected to disclose the identity of a confidential source

            7(E). Would disclose techniques and procedures for law enforcement investigations or prosecutions

            7(F). Could reasonably be expected to endanger the life or physical safety of any individual 

Exemption 8: Information that concerns the supervision of financial institutions.

Exclusions:

Congress has provided special protection in the FOIA for three narrow categories of law enforcement and national security records.  The provisions protecting those records are known as “exclusions.”  The first exclusion protects the existence of an ongoing criminal law enforcement investigation when the subject of the investigation is unaware that it is pending and disclosure could reasonably be expected to interfere with enforcement proceedings. 

The second exclusion is limited to criminal law enforcement agencies and protects the existence of informant records when the informant’s status has not been officially confirmed.  

The third exclusion is limited to the Federal Bureau of Investigation and protects the existence of foreign intelligence or counterintelligence, or international terrorism records when the existence of such records is classified.  Records falling within an exclusion are not  subject to the requirements of the FOIA.  So, when an office or agency responds to your request, it will limit its response to those records that are subject to the FOIA."

WHAT IF YOUR COMPANY DATA IS REQUESTED UNDER THE FOIA?

When notified by a contacting officer that copies of your company contract(s) and/or proposal(s) have been requested by another firm, identify to the officer  the pricing data, proprietary data and sensitive information you do not wish to have disclosed and formally indicate by letter the sections of the documents you wish redacted prior to release to another firm. The officer may or may not provide to you the name of the firm requesting the information. If you are involved in a re-compete effort for which you are the incumbent it is wise to inform the FOIA Officer of the agency involved that you expect to be notified when requests are made for copies of your information.  

SUMMARY

We suggest you study the FOIA site and the agency(s) you target for information.  Be specific in your requests and be prepared to expedite them. The FOIA can be a valuable tool for your business, but it usually takes patience and practice to use it effectively.



Wednesday, October 10, 2018

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 _______


Monday, October 1, 2018

Multiple Front Marketing In Small Business Federal Government Contracting



INTRODUCTION:

Your enterprise must market on several targeted government contracting fronts to be successful. Simply registering as a federal government contractor or acquiring a small business set aside designation does not mean that contracting officers will find you or that larger corporations will seek you out as a teaming partner. A GSA schedule or a multi-year IDIQ umbrella contract, purchase agreement or similar vehicle may look promising, but they are really no more than hunting licenses. The game must still be bagged (targeted sales of specific products or service projects to customers).

The prudent small business will target agencies and teaming partners that best fit its products and services, positioning itself to acquire developing information on requirements and displaying capabilities by conveying early solutions to customer decision makers. This article will suggest techniques, approaches and tools to conduct a multi-front, targeted, requirements-driven, marketing campaign for small business federal government contracting.

SELECT YOUR SMALL BUSINESS SET ASIDE DESIGNATIONS CAREFULLY

Your small business designation by North American Industrial Classification System (NAICS) Codes should be thorough and as comprehensive as possible when you register at the "System for Award Management (SAM) web site. Make sure your registration has the maximum number of codes for which you qualify, since the whole federal procurement system rides on those codes. Insure the narrative description of your services is complete as well. Please see the following link for further information on registration:

Federal Government Contracting Registration

The sub-categories of small business set-aside certifications should be chosen carefully and based on your company ownership and specific market research into which categories the agency or prime contractor favors, what their small business contracting plan includes in the way of targets and what their track record has been in awarding contracts. Good information on awards can be gleaned from the federal web site on federal government spending at:

USA Spending

You can also check the SBA small business goaling report at:

SBA Goaling Reports


For further details on each of the 7 small business set aside designations please see the following link:

Small Business Set-aside Programs

TARGET REQUIREMENTS EARLY

Government agencies, like companies, have long range plans and budget cycles. Keep abreast with the latest developments in trade magazines and journals regarding government contracting trends within agencies to develop and market solutions for anticipated requirements.

Monitor agency web sites and forecasts. Be constantly aware of the annual federal budgeting cycle, its development progress in the executive branch and its approval status in Congress. Agencies push to commit excess funding late in the fiscal year and at the same time forecast their next year needs for submittal to higher authorities. In the 1 October to September 30 fiscal year cycle, July, August and September are prime marketing periods.

Watch FEDBIZOPPS for sources sought notifications, requests for industry comments on draft RFP's and similar early indications of programs taking shape which will later be advertised in full solicitation. Go after them early enough to market and get them set aside for your small business designation and influence the development of the project with constructive input creating a presence in the eyes of the customer and prospective teaming partners.

MAKE PRUDENT BID/NO BID DECISIONS

Develop a good fit in your bid/no bid decisions. The only thing worse than losing a contract bid is winning it and performing poorly, creating negative past performance notations on your record. Know what your company can do and cannot do. Acquire skilled personnel through contingent hire agreements or incumbent work forces as you grow and carefully choose what you bid. For information on bid/no bid decisions and proposal preparation please see the following link:

Government Contracting Bid/No Bid and Proposal Preparation

EXPLORE SERVICE CONTRACTING AND TEAMING

Other than FAR Part 12 Commercial Contracting for off-the-shelf items, entry into federal government contracting for small business usually occurs through service contracting direct to an agency or teaming as a subcontractor with another firm for a major program. Even for commercial products, particularly new ones on the market, the best way to introduce your solution to a customer is to become involved in a service contact supporting the client's operations.

With regard to larger government contracting corporations to whom you could subcontract, cover the waterfront. Find out what they are bidding and aggressively market a piece of the action as a small business. Find the locations for the largest government contractors nearest you and register at their supplier business sites. Everything they buy for their facilities, their personnel and their operations counts toward the small business goals required contractually of them by their enormous government contracts.

Research their web sites and locate their small business liaison officers. Make appointments and visit them. While visiting, seek the names and titles of managers internal to their companies who manage prime contracts involving expertise your business can supply. Go after those managers.
Form teaming agreements early with good industry partners and begin to develop a winning message to the customer while he is defining his program. The following article provides further details on teaming:

Teaming in Small Business Contracting

OBTAIN A GSA SCHEDULE

The below link is an article on how to apply for and utilize a GSA schedule:


Achieving and Utilizing A GSA Schedule

There are 3 major challenges to going through the GSA schedule application process:

1. Finding an open solicitation that fits your product line

2. Establishing a good working relationship with the GSA Contracting Officer on the schedule solicitation and getting his/her assistance in working the system expediently.

3. Presenting viable, auditable cost history on what you have previously sold your products for to pass the cost/pricing audit portion of the process.

Most companies continue to bid work to the government through FAR Part 12, Commercial Contracting procedures or other contract vehicles discussed this web site while their GSA schedule application is pending. Please examine this site for articles on teaming, marketing, IDIQ contracts, negotiations, subcontracting and many others.

Remember there are thousands of companies out there going through the system, so you will have to be patient. Very few applicants get through it in any less than 6 months. A GSA Schedule is a very valuable item to achieve, but it takes time to do so and there are other forms of government contracting you can use while your application is in process.

DEVELOP A DYNAMIC CAPABILITY STATEMENT

A capability statement (CAPE) is an absolute necessity. It contains the specific information a contracting officer needs to place an order. This information includes such items as your D&B Number, your government registration numbers, your North American Industrial Classification System (NAICS) codes and the like. These items are selected or provided by you or determined by the system when you register your company for government contracting.

Your electronic capability statement (CAPE) for government contracts should be short and hard-hitting. It should be 1or 2 pages and should highlight the salient points of your products and offerings, your personnel and your qualifications. Please see the following link for an example of a capability statement:

Your Capability Statement

WRITE RESPONSIVE PROPOSALS

Writing a winning proposal is an art form. It takes practice and the more proposals you prepare and submit the more artful you will be. You will find yourself utilizing the same materials over again on successive proposals. Management approaches, personnel profiles, win strategies and other major components of a good submission will fill your library and extend your CAPE to specific solutions for specific customers.

The following link contains guidance on writing effective proposals:

Proposal Preparation

SUMMARY

Your reputation as a reputable performer in the small business federal government contracting community is important. Be selective and high performing. Agencies, past performance data bases and other companies will be observing you, recording your performance and passing the word along to others directly and indirectly.

Then insure your web site, your capability statement and your marketing plans are maintained current alive and dynamically reflective of your successes as you pursue new business and carefully develop your library of past performance records by project with accessible profiles to use in your government proposals.

Please see the following link on meeting the past performance requirements challenge in federal government contracting:

The Past Performance Challenge


ABOUT THE AUTHOR:
Ken Portrait - Copy (2)
Small to Feds is maintained by Ken Larson a Veteran of 2 tours - US Army Vietnam.
As a Volunteer Counselor, he assists many small businesses with their planning and operations processes.
 
Subsequent to his military service Ken spent over 30 years in federal government contract management and 10 years in small business consulting. He gets many inquiries from small companies wishing to enter or enhance their position in federal government contracting or grow their commercial enterprise. This site is intended to assist in answering those questions and others small businesses have in developing and operating a successful firm.
 
Those wishing a free counseling session may contact Ken at: Micro Mentor Ken Larson
 

Wednesday, September 26, 2018

New Federal Fiscal Year - Have You Managed Contract Funding Risk?




As the federal fiscal year draws to a close and the new year opens on 1 October, an astute contractor will have examined the funding status of all government contracts for risk.

Limitation of funds and funding exposure must be a vital topic for every government contractor.

THE FUNDING CHALLENGE

Many federal contracts are funded incrementally, usually based on the government fiscal year that runs from 1 October to 30 September. Although the government may negotiate dollar price ceilings for cost plus and time and materials contracts or firm, fixed total price arrangements, the contracts themselves may be incrementally funded, particularly if they extend over multiple government fiscal years. A contract may contain negotiated prices or a cost ceiling but also specify an incremental funding value.

The contractor is required to inform the government when actual costs incurred plus obligations to suppliers or payroll on a specific contract reach certain thresholds of the current incremental funding specified in the contract (usually 80%). The government is then obligated to further fund the contract. 

In the event the contract is not funded further, the contractor has the right to stop work before he exceeds the incremental funding. Some contractors choose to operate on "risk," continuing to perform on a contract while exceeding the incremental funding in booked cost and obligations. 

The government is under no obligation to reimburse the contractor for invoiced amounts exceeding incremental funding. Nearing the end of a government fiscal year, a contractor may find delays in funding reaching all the way to congress. This situation must be managed with the government contracting officer. Limitation of Funds and Funding Exposure

STOP WORK ORDER

Contractors may receive stop work orders from agencies unless their contracts were fully funded in the previous fiscal year.  The government reserves the right to 
de-obligate funding on contracts, which can effectively bring them to a halt. 


Stop work orders are serious matters and require special handling to comply with government direction and manage the associated financial risk. 

Upon receipt of a stop work order you have no guarantee of payment for any transaction date-stamped in your accounting system after the date of the stop work order (or the commencement date of a stop work order specified in a Contracting Officer's Letter).

Applicable charge numbers in the accounting system must be closed until the stop work order is lifted and any effected suppliers and subcontractors must be notified to do the same.

To the degree the government has made progress payments or has any other form of payment invested in a physical product to date it has ownership rights. If that is the case, treat the physical material work-in-process as government owned, store it as such without performing any more effort on it and await further disposition.

To the degree the government has not paid anything on the contract or delivery order they have no ownership rights to the physical product and you are free to complete it and sell it to another customer (commercial or government that has not stopped work). If the government recommences the order, quote a new price and delivery from ground zero.

At the bottom line a stop work is blunt and to the point.  Treat it as if you will never hear from this customer again to manage the risk.

To the degree you do hear from the Contracting Officer again and he or she has the funding to recommence work, be prepared to submit a proposal for what it will take to start the effort and a realistic delivery schedule to complete it, but do not build any retroactive costs incurred during the stop work period into your logic and expect to bill them; they may not come to payment fruition. 

Continuing effort on a contract after receipt of a stop work is high risk. Astutely managing your options is a far better approach.   What is a Government Contract Stop Work Order?

SUMMARY

Having a limitation of funds and funding exposure process in the company should be a standard part of doing business.  A, shrinking, remaining funding level condition on incrementally funded contracts should trigger a risk analysis and government notification process throughout the year.  The federal fiscal year-end brings an additional element of risk to the process with the annual budgeting, approval and appropriations process required by law. 









Monday, September 17, 2018

Pricing with Credibility in Small Business Federal Government Contracting

Image result for credibility
Image: "Video Blocks"


Introduction

Assuming a proposal to a government agency has an acceptable technical solution and past performance and management factors that convince the customer it is a viable candidate, then pricing may be the winning element in the source selection equation.

The mechanics of government contract pricing have been discussed previously at this site. The discussion relates how pricing should be a natural outgrowth of the organization structure, market strategy, competitive analysis, business system design and long range planning:


The above article also explains how long and short term pricing factors should be integrated with the management and technical elements of any given proposal and that a total view of the business is best presented by integrating long-term company strategy with short term proposal objectives. 

The purpose of this article is to augment the above discussion with tips on establishing and maintaining credibility in pricing to a government customer.

Certified Cost or Pricing Data

Certified cost or pricing data under the “Truth in Negotiations Act” (10 U.S.C. § 2306a) or TINA statute is proposal pricing, which for procurements greater than $750,000, is certified by the contractor as accurate, complete and current as of the date of agreement on price. (Section 811 of the fiscal year 2018 NDAA includes a provision that increases the threshold up to $2,000,000). 

The absence of a certificate does not eliminate defective pricing liability.

The statement underlined above is a key principle in relationships with the government and its auditors. TINA influences a government auditor’s thinking and it is in the back of the mind of every contract negotiator. They are taught and learn by experience to look for TINA faults.  

Thus, even if your procurement does not meet the above threshold for TINA certification you should price to establish a similar credibility with your customer, even though you may not have to sign a TINA “Certificate of Current Cost or Pricing”. Doing so is simply good risk management in business.

You may read more about cost and pricing data and the negotiation process at the following link:


Remember Historical Data is Precedent Setting

All auditors, negotiators and pricing analysts are preconditioned to utilize historical data. The last or most favorable price offered a customer for a commercial off-the- shelf product is strong support for what is currently being quoted. This is particularly true of GSA Schedule negotiations, product updates or repetitive buying situations.  If you are a commercial supplier, a quantity factor will also enter into play.  In general, orders of higher quantity than historical pricing quantities undergo downward pricing pressure by the buyer unless some other factor such as a non-recurring tooling charge, learning curve interruption, obsolescent material or other upward factors can be offered as support for a higher unit price on a higher quantity buy.

Educate Your Auditor

An auditor who is familiar with your forward pricing rates, your business system and your product lines will understand your proposal cost and pricing data better than one who has not been briefed on the big picture of your company business operation.  Take the time to conduct briefings at that level and acquaint new government personnel with your operations.  Do not assume he or she has read prior audit reports.  They may have done so but a face to face courtesy briefing is much more effective than reading some other auditors view of a specific proposal. 

This factor can be a double edged sword, however. An auditor who knows the operation extremely well can also spot deviations in cost and pricing data and require explanations for anomalies in pricing based on observed trends.

Develop a Comprehensive Basis of Estimate (BOE)

A good BOE should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract and material/subcontract quotes, labor categories and skill sets to perform the effort.

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

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery acceptance so that the cost data has boundaries.

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor so that escalation and price expiration are established. 

* A precise description of government/customer furnished material or facilities required and when it will be made available to the contractor to bound the expectations of the client with respect to elements your company cannot or will not control. 

Insure Compliance with Cost Accounting Standards (CAS) Requirements

Small businesses are generally required to meet modified CAS coverage for service contracts. This requires consistency in the manner in which a small business quotes a proposal and the manner in which costs and billings are accounted after award.  You can read about these requirements at the following link:


Insure your proposal contains no unallowable costs and that your direct labor as well as your overhead and G&A rates are applied in accordance with your latest forward pricing agreement. If you do not have a forward pricing agreement, explain precisely how your rates were developed from a CAS compliant business system perspective:


Utilize Weighted Guidelines as a Check to Prepare Support for the Profit Rate Quoted

Although policy in FAR Part 215-404-4 states that contracting officers ….” do not perform a profit analysis when assessing cost realism in competitive acquisitions”, it is wise to understand the contracting officer and his representatives are indirectly forming opinions of the risk to the contractor and the mix of cost elements in the proposal. That opinion directly effects profit negotiations and judgments.

Contractors should be aware that the Weighted Guidelines Method is mandatory for all negotiated procurements except Cost-Plus Award Fee Contracts and exceptions as approved by a higher authority. Contracting officers are to prepare their position using DD Form 1547 with associated backup and file it at the conclusion of negotiations.

Understanding the weighted guidelines method can assist in achieving a higher profit on a negotiation because a contractor can present a position at the table that logically supports the following elements required by FAR Part 215-404-4:

* Performance risk

* Contract type risk

* Facilities capital employed

Read more regarding the Weighted Guidelines Method at the following link:


Summary

A reputation for defective pricing leads to accusations of waste fraud and abuse in government contracting and is mostly about what a contractor knew regarding company prices at the time a bid was negotiated and what the contractor did not disclose in the supporting data regarding the likely cost outcome of the contract.  

Actions taken by the government and litigation resulting from defective pricing become part of the contractor past performance record and must be disclosed during competition for other programs. 

Avoid defective pricing accusations by establishing credibility with your customer through consistent, regulatory-compliant, cost and pricing in your proposal submissions and negotiations.