Techniques to Profile Your Government Contract Competition

Even though small businesses enjoy set aside opportunities in government competition, the majority of set-aside procurement bids are populated with several competitors.

Early market research, industry teaming and customer relations are necessary on the road to a set-aside win.  Marketing to Achieve a Set aside Government Contract

Once a bid target is selected, competitive analysis is vital. This is particularly true in service contracting.  As the small enterprise moves on into the full and open market, it is even more vital to know who else is bidding and their relative strengths and weaknesses.

Make a bid/no bid decision. Making an Astute Bid/No Bid Decision

If you decide to bid, develop a model of your competition as a validating tool for your proposal approach - a profile of your competitor’s likely technical solution, past performance, personnel qualifications and cost buildup.

WHO IS THE COMPETITION?

If the government is offering a bidder’s conference, go to the meeting and attend any tours offered. Then obtain the list of attendees from the solicitation contracting officer.

Examine the contract award history on the agency web site and award notices under the “Agency Listing” at the System For Award Management (SAM)  Determine who has been awarded previous contracts by the agency and who the present incumbent may be for your bid if the requirement is not a new one and is presently being performed by another company.

Make inquiries regarding the competitor through industry partners and prime contractors with whom you are associated and with whom you hold Non-Disclosure Agreements. Question them regarding the pending procurement who they believe are the bidding companies.

PROFILE YOUR COMPETITOR

Check the Competitor’s  General Services Administration (GSA) Schedule.  Most government contractors who have been in business long enough to qualify for a significant procurement also establish a GSA Schedule.  Virtually all of them post that schedule at their web site.  For products it will contain the prices through profit for items the company wishes to sell off the schedule to the government.  For services the schedule usually contains fully loaded labor rates through overhead, G&A and profit.  Examine the schedule and note the prices, comparing them to your cost build ups. GSA schedules are usually projected for a 5 year period.  Achieving and Utilizing a GSA Schedule

Consider A Freedom of Information Act (FOIA) Request. Note from company web sites, SAM award announcements, press releases and other public data the contract numbers your competitor has been awarded by the agency to whom you are bidding.  Consider similar program history in other agencies if the present bid has no recent competitor history. Then submit a FOIA request to the agency FOIA Point of Contact listed at the government web site, identifying the document or documents you are requesting 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. Utilizing the Freedom of Information Act

Obtain Competitor Dunn and Bradstreet (D&B) and Better Business Bureau (BBB) Reports. You have a D&B Number.  So do your competitors.  Use your registration at the Dunn and Bradstreet web site to order a D&B report on your competition.  It will provide detailed history of the company, its ownership, the length it has been in existence, its credit and payment history, as well as other useful information.  D&B charges a fee for the reports, but you can order them as needed and pay by the report.   Dunn and Bradstreet  A BBB report is free and may provide insights into complaints, problem resolutions and related matters from the buying public.Better Business Bureau

Make a Physical Visit. Visit your competitor’s location, particularly if it is local.  Make sure you are viewing the cost center out of which the job will be bid.  Many businesses have multiple cost centers at multiple locations to maximize competitive factors on government contracts.  Cost Center Strategic Planning  Without entering the facility, assess the size of the operation, the traffic entering and leaving and relative indirect cost factors that can be generally observed, such as square footage, headcount of employees, the size and content of the parking lot and related matters.

Post Generic Help Wanted Ads at Your Web Site and Elsewhere on the Web.  Without revealing the specific contract or program (unless you believe it will benefit you) publish job descriptions and openings for the skill sets necessary to perform the work required by the new program, even if you already have the personnel on board.  Look for interviewees who have worked for, or are presently on, the competitor’s payroll and invite them for a visit at a neutral location. Some companies even announce a job fair for the program.  Talent is fluid today. It is also being re-defined.  Thus, what used to be considered a “Pool” (either captive or available) is now a technologically-equipped, high speed resource of communicators with motivated skill sets seeking opportunity. Economic hardship has also put a hard, cynical edge on many.  Selling must occur both ways (employer and employee).  To an extraordinary degree the age in which we live is requiring us to redefine trust and the degree to which communication and expectation contribute to it. Loyalty has taken a back seat to the above.  Recruiters, companies and entrepreneurs must recognize these hard facts of life.  Is the term, "Talent Pool" Obsolete?

Develop A Cost Model of Your Competition. Make a copy of your cost model spreadsheet for the job and modify it to look like your competitor. To see examples, check the models labeled “Attachments A and B” in XLS spread sheets within the “Books by Ken” BOX in the right margin of this site.  Plug your direct costs for labor, material, ODC (travel and the like) into the competitor model, then using information developed above, evolve estimated indirect cost factors for Overhead, G&A and Profit.  Assume that all competitors will have to pay the same relative wage scale as you have determined by salary survey  to attract or retain talent and a fringe benefits package to meet government requirements for vacation, sick leave, holidays, taxes and similar expenses. Then focus on the overhead and G&A as key factors in winning the pricing criteria for the job, comparing your bid to the competitor cost model. Pricing Small Business Federal Government Contracts

SUMMARY

An effective competitor profile contains performance, historical, demographic, statistical, physical operations, human resource and cost information that is trending in nature and provides insights and comparative balance to a challenging bid. It is a key tool in performing risk analysis and making related trade off judgments in the final submission of your bid or proposal.

What Small Business Should Know About FAR And CAS

 

Federal Acquisition Regulation (FAR) 

& 

Cost Accounting Standards (CAS) 

Rules Of The Game And Developing Your Game Plan

INTRODUCTION

Small businesses consistently encounter FAR and CAS requirements upon entering or growing into federal government contracting.   The purpose of these standards is to supply uniform regulatory guidance to all companies doing business with the government and to the agencies that buy from them. 

A  basic understanding of FAR and CAS is necessary to manage government contracts  as well as design business process approaches to meet the requirements.  

The FAR applies to the full acquisition cycle for all supplies and services the federal agencies buy. 

The CAS apply to consistency in estimating, pricing, job cost accounting, billing and closeout of financial data under the contracts for supplies and services regulated by the FAR. 

FAR and CAS are not "Rocket Science" but they are different than the commercial business sector.  

HOW TO DETERMINE WHAT FAR AND CAS MEAN TO YOU

No one ever reads the full body of FAR and CAS from cover to cover.  They are reference documents, maintained by the government to oversee the contracting process.  From time to time changes to the regulations are offered for public comment at the FAR web site. 

 Such changes are more common in the FAR than in CAS.  The CAS have been constant for several years and are not as dynamic as the detail processes in the FAR. 

The below table contains the principle FAR chapter titles and each of the 19 CAS clauses.  Linked below the table are the web sites that can be utilized to explore these documents. 

(Please Click Image To Enlarge)  

Federal Acquisition Regulation

Determine the regulation basics that apply to any given job considered for bidding.  Examine a few solicitations in your area of expertise at the SAM web site:

SAM Contract Opportunities

Glance through the terms and conditions of a given solicitation and note the FAR and CAS requirements sited.  Use the links to the FAR and CAS web sites as source documents to read in detail the clauses you must understand to effectively bid the job .  

Cost Accounting Standards

Small businesses are generally required to meet modified CAS coverage. Small businesses are generally required to meet modified CAS coverage.  The business system requirements for Modified Cost Accounting Standards (CAS) Coverage are defined by the government as follows: 

Standard 9904.401, Consistency in Estimating, Accumulating, and Reporting Costs

Standard 9904.402, Consistency in Allocating Costs Incurred for the Same Purpose

Standard 9904.405, Accounting for Unallowable Costs

Unallowable Cost Guidance

Standard 9904.406, Cost Accounting Standard―Cost Accounting Period

Modified, rather, than full, CAS coverage may be applied to a covered contract of less than $50 million awarded to a business unit that received less than $50 million in net CAS-covered awards in the immediately preceding cost accounting period.

The following article contains practical business system guidance regarding building a Modified CAS Coverage Small Business System for federal government contracting:

Managing Risk In Small Business Federal Government Contracting Business System Development

If you have confusion regarding interpreting a requirement, seek assistance in the table of contents to the free book at this site offering guidance under the topic in question

SUMMARY

While assessing the impact of FAR and CAS on your company educate yourself on that what directly affects your company first in making the transition to federal government contracting and growing into the field.

Carefully  maximize your existing business processes and systems first before making changes and do not jump to instant fixes with exotic software tools a supplier or consultant has told you will make you compliant or competitive overnight in government contracting. 

FAR and CAS are generally logical bodies of regulation that have come about due to the need to control and make consistent the government and industry approaches to meeting prudent and sound contracting objectives with the necessary  transparency to govern. 

FAR and CAS do not impose business systems.  They do require that you disclose the way you meet regulatory requirements in the way you operate with your processes and tools. Plan the approach and learn to convey it to auditors, contracting officers and industry partners.

Grow into the business by exploring the venue and having it grow into you.  

Protecting Intellectual Property And Proprietary Data In Federal Government Contracting

Contractual relationships established directly with the US government or subcontracts and purchase orders under government contracts with other companies must contain provisions for the protection of intellectual property and proprietary data. This article will address the major processes by which that protection is achieved.

RIGHTS IN TECHNICAL DATA AND SOFTWARE

The Defense Federal Acquisition Regulation (DFAR) contains the most widely used provisions by a federal agency that allow a contractor, subcontractor or supplier under government contracts to assert ownership or protective rights for specific technical data and software. Keep in mind that the more a company has invested in a technology, a product or a system the higher the level of protection available under the DFAR. If the government has or will invest in the technical data and software then the level of protection that can be asserted diminishes and the government begins to assume ownership and attendant control of the related intellectual property.

It is important during the solicitation and proposal stage to assert rights in technical data and software so the business relationship is clearly understood by all parties and appropriate protective markings, licensing and related measures can be covered in the contractual documentation. The following information in the DFAR should be studied to ascertain how to appropriately assert rights during proposals to the government and to prime contactors:

SUBPART 227.71—TECHNICAL DATA AND ASSOCIATED RIGHTS

SUBPART 227.72—COMPUTER SOFTWARE, COMPUTER SOFTWARE DOCUMENTATION, AND ASSOCIATED RIGHTS

The government does not sign agreements to protect specific data, abiding instead by the DFAR-specified assertions regarding ownership and use of technical data and computer software as they are negotiated in contracts. The government will comply with specific marking and identification of proprietary data. Details on these markings are provided at the conclusion of this article.

NON-DISCLOSURE AGREEMENTS BETWEEN COMPANIES

When two companies begin an exchange of information that may lead to a mutually exclusive business arrangement under a government contract, a Non-Disclosure Agreement (NDA) is generally signed to protect proprietary data.

The first page of such an agreement is on the left in the illustration below. The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.

TEAMING AGREEMENTS BETWEEN COMPANIES

When two companies agree to form a mutually exclusive agreement to prepare a proposal as a team to a government agency a teaming agreement is generally executed. The first page of such an agreement is on the right in the illustration below . The entire document may be obtained free of charge by downloading it at the "Box Net" cubicle in the right margin of this site.

A teaming agreement remains in force until it is replaced by a subcontract from the lead company to the following company upon award of the prime contract. In the case of a joint venture, the prime contract award results in two contracts from the joint venture contract level to the respective participating company levels.

PLEASE CLICK ON ILLUSTRATION OR DOWNLOAD TO ENLARGE

PROTECTING RATE INFORMATION BETWEEN COMPANIES

It is generally recognized by all industries participating in federal government contracting that internal overhead and G&A rates and the data that support them are proprietary data. The reason for the proprietary nature of rate data between companies is that in government work firms are teaming with each other exclusively on one project and competing against each other on additional contracts or projects at the same time.

Assuming everyone pays a generally similar labor rate on the market to retain employees and that fringe costs about the same for everyone, then overhead and G&A are what wins and loses jobs and specific, company internal overhead rates are very closely held.

Companies do not disclose the details of their rates to other companies and they do not expect to see another company's proprietary rate information. So companies view each other’s rate information on a fully loaded basis, meaning the total of the base cost, any proprietary indirect cost and an agreed upon profit percent.

If a prime contractor requests that subcontractor proprietary rate information be supplied with a proposal the detail should be double wrapped and the package stamped, 'Government Eyes Only'. The prime will then hand the package off to DCAA without opening it and receive only the fully loaded result of the burdened rate pricing.

DCAA or federal agency pricing analysts perform detail audits of subcontractor rate information but prime contractors are not provided the result. An audit statement by the government that the subcontractor detail rate support is acceptable or not acceptable is all that is provided to the prime contractor.

Government auditors do not make value judgments or negotiate; they review the logic and support for rates, check the math and provide a report to the government contracting officer who will conduct the negotiations, if any.

PROTECTIVE MARKINGS FOR PROPRIETARY DATA SUBMITTED TO THE GOVERNMENT AND TO A PRIME CONTRACTOR

Your proposal data may contain rate information, proprietary data or strategic technical solutions that you would not want to fall into the hands of a competitor. The government does not sign Proprietary Data Agreements (PDA's). Examples of the government's obligation to protect your information are covered under the DFAR rights in technical data and software assertions discussed above and in the following FAR clause that requires protective markings by you on the title page of your document and on each subsequent page.FAR 15.509 Limited use of data:

(a) A proposal may include data that the offeror does not want disclosed for any purpose other than evaluation. If the offeror wishes to restrict the proposal, the title page must be marked with the following legend:

"The data in this proposal shall not be disclosed outside the Government and shall not be duplicated, used, or disclosed in whole or in part for any purpose other than to evaluate the proposal; provided, that if a contract is awarded to this offeror as a result of or in connection with the submission of these data, the Government shall have the right to duplicate, use, or disclose the data to the extent provided in the contract. This restriction does not limit the Government's right to use information contained in the data if it is obtainable from another source without restriction."

(b) The offeror shall also mark each restricted sheet with the following legend:

"Use or disclosure of proposal data is subject to the restriction on the title page of this Proposal."

(c) The coordinating office shall return to the offeror any unsolicited proposal marked with a legend different from that provided in 15.509(a). The return letter will state that the proposal cannot be considered because it is impracticable for the Government to comply with the legend and that the agency will consider the proposal if it is resubmitted with the proper legend.

Pricing Service Contracts With Credibility in Small Business Federal Government Contracting

 

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:

Pricing Service Contracts

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). 

Truth In Negotiations Act (TINA)

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:

Contract Negotiation

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:

What Small Business Should Know About FAR and CAS

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:

FAR And CAS Compliant Business Systems

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:

Weighted Guidelines

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.

Total Time Accounting In Small Business Government Service Contracting

In small business government service contracting, it is necessary to establish a written policy and procedure disclosing time keeping practices to government auditors and fact-finding teams. Included must be the company process for both pricing and accounting for overtime. In doing so, topics such as compensated and uncompensated time must be addressed.

Include in the policy/process for pricing and job cost accounting those steps required for compensated overtime to personnel who are non-exempt from the Fair Labor Standards Act (hourly who receive time and one half).

Also include the policy/ process for pricing and job cost accounting, those steps required for uncompensated overtime to personnel who are exempt from the Fair Labor Standards Act (salaried who receive pay at straight time for hours in excess of 40 and those who do not receive pay at all for hours in excess of 40) The former are usually engineers and technicians. The latter are usually management or staff).

I encourage "Total Time Accounting" to my clients to make all hours a part of the record and keeps records free from waste fraud and abuse or defective pricing allegations.

I believe the below article by Find Law contains the best approach to the issue of uncompensated overtime and I encourage my clients to make part of their policy the practice specified:

 "In our view, contractors performing labor-hour, time-and-material, or cost reimbursable contracts should avoid any timekeeping system that fails to accurately report the total time worked. Such a system under-bills clients for work performed and thereby affects a company’s bottom line. Moreover, any timekeeping system that by its very design under-reports actual hours worked invites labor mis-charging and false claim allegations.

A total time accounting system that accurately reports hours will generate the proper amount of revenue for contractors on each of their labor-hour and time-and-material contracts. Cost reimbursable contracts have an added twist. Many cost reimbursable contractors who report total time use a diluted hourly rate approach for distributing labor costs to projects. For example, if an employee is paid $1,000 per week and works 40 hours, the projects are charged $25 per hour. If the same employee works 50 hours the following week, the hourly rate is diluted and projects are charged $20 per hour. In this example the contractor gets no additional revenue for the extra 10 hours of effort — they are provided free of charge to the Government.

 Fortunately, acceptable standard cost approaches will negate this windfall to the Government and still allow the contractor to take advantage of uncompensated overtime. The most common of these approaches involves charging direct labor to projects at a standard hourly rate established annually for each direct labor employee. Actual hours are charged to projects at this standard rate.

For uncompensated overtime situations, the variance between labor charged to projects and actual compensation is credited to overhead. Such an approach allows contractors to account for their hours in an accurate, straightforward manner, bill for the hours actually worked, and effect a competitively beneficial decrease in their overhead rates. DCAA has recognized this as an acceptable method of accounting for labor costs, and we think that it generally beats just giving the Government hours of effort for free."

What Works And Does Not Work In Small Business Blogging

 

In the current business climate of high technology and Internet communications, very few small enterprises succeed without effective on-line networking.  Most grasp that reality and make it a part of the business routine.

Content can be developed to suit the target client profile. One of the shortest paths to demonstrating value to a target audience is to do so with good blogging content, networked to the max.  Much of the network blogging tools these days are free and only require some astute time to magnify a business to clients (regardless of who the clients are).

Blogging approaches can be developed as marketing brochures for multiple roles, communicated in a vast array of venues and promoted in the media ladder to the point where local and national readership and service subscription multiplies very quickly. But one must open people’s eyes and make them understand what is offered and how it can benefit them.

I have seen hundreds of small enterprises gain a foothold by using the right combination of tools. 

In assisting small business concerns in government contracting and commercial enterprises via SCORE and Micro Mentor for the last 19 years. I began exploring blogging to determine what to recommend to clients. I found very quickly that it provided vast returns as a time saver once I established the platform and set up the network.

I found that one article, written informatively can be linked to many clients and networked to help others while building credibility in the small business community. I run the blog Smalltofeds in support of my volunteer efforts.   

In order to manage high volume of inquiries in federal government contracting, I set up a Google blog as an extension of my volunteer work that blossomed into a web site. It has cost $10 a year to buy and convert it from a blog to a domain in my name and the rate has not changed in 19 years. The blog contains the basics of entering and succeeding in the venue as well my books and articles on the subject for download via "Box".

The idea is to refer clients to informative article links at the site to avoid repeating myself over and over to new business clients and still keep myself available for specific inquiries and problems.

I networked everything together and began answering questions at Q&A sites as well as registering at many of the free applications for networking on the Internet to see how that could benefit my work. Linkedin, Twitter, Pinterest,Tumblr, Wordpress, Mastadon and similar free platforms have served my site well. Roughly 30% of my clients began coming via blog networking.

The result has been heavy traffic, good efficiency in supporting in excess of 7,000 counseling cases over the last 17 years and virtually no expense to me as a volunteer working for non-profit organizations.

I also maintain a personal blog, Rose Covered Glasses  It does not receive any where near the traffic that Small to Feds receives because there is a vast difference between the two. I discovered very early that I had to separate my personal opinions from business subjects to be effective in the professional social networking venue.

Individuals who contact me or network at Small to Feds are after business advice and assistance; my books, my experience, a helpful form, insights into a fairly complex field and other problem solving information.  They are not particularly interested in my personal opinions; those who are can go to my personal blog. Not many do. Small to Feds has received slightly under 1.5 million visits, statistically. Rose Covered Glasses just broke 500,000 -- point made.

I found networking constantly on professional sites such as LinkedIn and hitting the Q&A features assists in accumulating an "Expert" rating from peers and increases referrals.

A blog is quite different than a web site. Provide good, solid information free of charge and use blog searches for synergistic businesses to team with. Teaming is an absolute necessity these days. Use blog search capability and locate similar sites, then remark and back link to them. Develop reciprocity relationships, guest blogging opportunities and similar social networking techniques.

Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in. Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will be in demand for follow up business.

Managing Provisional Indirect Rate Risk In Government Contracting

Previous discussions have addressed FAR and CAS Compliant business systems for small enterprises undertaking federal government contracting:

Establishing FAR and CAS Compliant Business System

DCAA Audits and Small Business Job Cost Accounting Systems

Chapter 51 of the free book, 'Small Business Federal Government Contracting' contains an explanation and examples of a forward pricing budget plan from which provisional rates are established and negotiated with the government. Under "Management Factors" the book goes on to explain that it is not always possible to execute the plan as anticipated.

Programs and projects will come and go, entering and leaving the business base sometimes earlier and sometimes later than planned. Expenses do not always materialize as anticipated. For these reasons actual experience in terms of indirect rates may differ (+or -) from provisional rates.

There are three important points to remember regarding provisional bidding and billing rates:

1. Provisional rates are utilized for both pricing and billing and billed rates must be reconciled to actual rates at contract closeout for cost type contracts.

2. Provisional rates are audited by DCAA and negotiated with Administrative Contracting Officers. They are the baseline frame of reference for the government in reviewing cost proposals and billings until the contractor asks for a change. Provisional rates are used for billing existing contracts and for pricing new work. Provisional rates are approved by the government on an interim basis or they would not be "Provisional" by definition. A constant frame of reference is the actual running rate being experienced by a contractor as opposed to the current provisional rate.  The difference must be reconciled on cost type contracts at contract closeout. 

3. A request for change to provisional rates must be supported by data regarding actual running rate experience and may start a series of questions by DCAA or contracting activities regarding what sort of management corrective action is planned for differences between provisional and actual running rates (particularly if a provisional rate increase is proposed under time and material or cost type contracts or prices for outstanding proposals are increased due to rate changes prior to negotiation).

There are no industry average indirect rates in federal government contracting because there are wide swings due to many factors. Company indirect rates are managed based on the competition, the market and the funding availability of the customer. Site-unique indirect rates inside government facilities are always lower than company site operation rates because the government is paying a portion of the expenses (facilities occupancy, heat, light, etc.) on work occurring inside a government facility.

Assuming a small business pays roughly the same on the open market for labor, material and ODC as the competition, and has to offer the same fringe benefits to retain employees, the remaining overhead and G and A rate expenses are principal drivers in winning new business and have the most potential to lose a job, cause funding difficulties on an existing program or be responsible for a loss on projects negotiated at fixed rates.

Below are examples of a risk analysis thought process when evaluating whether or not to make a provisional rate change:

EXAMPLE 1

One could say that it may be a poor time to change a provisional rate when there are several FFP proposals outstanding and in negotiation or a major competition is coming up.

On the other hand if there is a wide unfavorable variance between the current actual running rate experience and the existing provisional rate and the future forecasted base and expenses do not show improvement, perhaps the rate should change to avoid signing up to prospective losses or ambitious funding profiles that may mislead a customer.

EXAMPLE 2

One could say that it is a good time to change a provisional rate if several cost plus and T&M contracts are pending closeout and there is a wide disparity between billed cost and actual cost due to rates. In fact, if the government is going to owe you money at closeout, the issue should be broached as soon as possible to the contract funding authorities to insure there are enough funds on the programs to cover the final bills.

Conversely, if you will owe the government money at closeout your forecasts should project the anticipated drop in final contract pricing that will be settled in the closeout actions with the government.

For most companies a provisional rate change comes about at the end of the calendar year and the beginning of the new calendar year. Accountable personnel perform a bottoms-up projection of the anticipated business base and associated expenses by cost center. The company then submits the results to DCAA to get them approved for the new year as revised provisional rates.

Nothing mandates a specific date for a provisional rate review. DCAA audits proposals and contract closeouts, fixed price progress billings and cost-plus and time and material billings. During those audits there may be questions regarding the comparison between bidding and billing and actual running rates.

The company takes the action for provisional rate changes by requesting them from the government as a function of an annual budgeting cycle or business developments. DCAA approves them.

Throughout, the data is very company private and closely held. No other company, to include prime contractors has the right to your rates and rate supporting data. When necessary they will see only fully loaded labor, material and ODC.

The term provisional implies subject to change and approved on an interim basis by DCAA. Provisional rate changes for billing and pricing can occur more often than annually if the business is changing on a volatile basis with work coming and going from the business base in an unplanned manner and expenses increasing or decreasing with economic changes.

I have seen some corporations that had several changes a year. It is a management call, but DCAA reserves the right to review and approve each one.

A provisional rate change is a delicate matter and should be approved by a management level of the company where authority to effect cost change resides (usually the CEO and CFO).

Management must make rate change decisions based on company-unique product and service lines, work location, forecasts, customer demands, competitive factors and contract status. It is a job that should be undertaken by executives who get paid for balancing such factors and who are accountable for successful outcomes from decision results.