Search This Blog

Sunday, November 10, 2019

SAM Contract Opportunities Replaces FEDBIZOPPS





             To  





IMPORTANT NOTICE:  

As of Nov. 12, 2019 Federal Business Opportunities, the website for publishing all public government procurements, will be officially decommissioned. After Veterans Day, the authoritative source for federal solicitations will be under a page on beta.SAM.gov

Please see the following article for details:

FedBizOpps Will Be Retired After Veterans Day Weekend

_______________________________________________

INTRODUCTION

This posting will provide strategic guidance on SAM Contract Opportunities and factors for using it in small business marketing to government agencies and prime contractors.

A PUBLIC DOMAIN ACQUISITIONS BULLETIN BOARD

Established as the public announcement vehicle for federal procurement, SAM Contract Opportunities is a web-based, "Public Announcement Bulletin Board" to satisfy fairness in government contracting laws mandated by US law. It is a terrific market research tool and an absolute necessity once a solicitation has gone formal to stay abreast of modifications, changes in proposal due dates, questions and answers and other necessary information that contracting officers are required to make public.

WHAT ANNOUNCEMENTS MEAN

SAM Contract Opportunities is the mandated posting point for contracting officers in all federal agencies. It is also the required notification point for GSA schedule solicitations, contract award announcements of all types and other information that is required by law for communication to the public in a fair and open manner regarding federal government procurement of supplies and services. The site contains "Sources Sought" and bidders conference notices, government requests for industry comment on draft RFP's and formally published solicitations with proposal due dates. 

A solicitation posted at SAM Contract Opportunities  generally means that a procurement has received funding and the contracting officer has been authorized to start the source selection process.

Often misunderstood, is that much has occurred in the way of marketing activities by companies in advance of notices formally published by the government on SAM Contract Opportunities. By the time the formal, solicitation is published it is too late to market for setting a procurement aside for a small business designation if it has not already been established as such. In addition, formal solicitation publication closes the window on self-marketing by HUB Zone and 8(a) firms for set asides to them individually without competition. In short, businesses have been marketing for the requirement long before it became formally announced at SAM Contract Opportunities.

Finding a solicitation that is ideal for your company for the first time on SAM Contract Opportunities is excellent market research insight into what the agency publishing the requirement is buying. However, a careful bid/no bid analysis should be conducted as to whether it is prudent to go through the expense of a proposal if the opportunity has not been a new business target for your firm earlier in the game. Please see the following article on completing a bid/no bid analysis:

Small Business Federal Government Contracting Proposal Preparation

NAVIGATING THE SITE

Start by registering at SAM. Many of the features available to users are not accessible without a registration. Begin some careful searches by key words into agency solicitations that could use your products and services. 

The data base is huge and it is best to move from specific key word selections to the more general with experience to avoid being inundated with meaningless solicitations. Some companies establish a separate email address for the SAM Contract Opportunities mailings to keep the results out of the mainstream of other business. The mailings are totally automated so there are no marketing factors to consider in setting up such an arrangement.

As you examine the solicitations, see who has indicated an interest in bidding them among your competitors and the primes you are pursuing and then target such projects for participation by your firm either as a prime yourself or as a subcontractor. Pay particular attention to "Sources Sought", Draft RFP "Request for Industry Comments" and similar announcements that indicate an early requirement taking shape.

For active solicitations that you wish to monitor, check receive updates and announcements by email. Once the solicitation reaches the formal RFP stage and a due data for a proposal has been established, if you have decided to bid the job the "Follow" feature is especially critical.

If there is a bidders conference and you intend to bid the job, make plans to attend. When questions are solicited you may ask them but remember that your question and its associated answer will be published by the government so be careful not to educate your competition to your win strategy in the process.

You do not have to indicate you are interested in bidding the job by registering as an "Interested Vendor" in order to bid a solicitation. Some companies prefer not to advertise their bid intentions, seeking to avoid competitors modeling their firm.

A MARKET RESEARCH SOURCE

If you are new to federal government contracting and wish to determine the best market for your supplies and services, observing what a given agency is buying on SAM Contract Opportunities is a key factor.

Keep in mind that the decision makers in government contracting are the technical managers and process people behind the scenes in an organization (either government agency or large company). They have the budget authority, program responsibility and accountability. These people pass their decisions on to buyers and contracting officers via signed requisitions. Buyers and contracting officers are really no more than gate keeping staff members, knowledgeable in legalities, terms and conditions and who sign on behalf of the agency or company AFTER an internal review by the executives who have technical and management responsibility.

Thus your real marketing targets are behind the gatekeepers and little is achieved by marketing to a contracting officer or buyer. This rule of thumb applies with prime contractor contracting specialists and administrators as well as government personnel. For further details on the roles of these personnel please see the following link:
`
Federal Government Contracting Customer Relations

Once again, bidding an active solicitation after it has hit SAM Contract Opportunities may be too late. The idea is to use them for market research so you can target similar projects earlier in the process. Research the technologies and services in which your targeted agencies and primes are involved through trade magazines, Internet articles, web sites, employment hiring fairs and industry conferences.

Focus your marketing campaign on finding evolving projects you can use as vehicles to approach teaming partners and agencies directly with a marketing campaign geared to your capability statement. Develop a solution to the specific needs of the project and present it to gain their attention.

Your principal challenge as a small product and services provider is finding evolving programs and projects into which your capabilities fit. Once you have found such targets it is then a matter of marketing brusquely to get into the game with eye catching solutions and capabilities.

SUMMARY

When a procurement becomes public on SAM Contract Opportunities it stays public, but many invisible strings behind the scenes are likely already attached to it by aggressive and talented companies who may have sculpted the requirement with the agency, assisted in writing the statement of work or influenced the structure of the specifications to favor their products and services. All this is good, competitive marketing practice in the government contracting venue, just as it is in the commercial marketplace.

Use SAM Contract Opportunities as discussed here in consonance with the following teaming and marketing articles:

Small Business Teaming In Government Contracting

Multiple Front Marketing In Government Contracting

Marketing A Small Business In The Federal Government Contracting Environment

SAM Contract Opportunities is an absolute necessity once you make a bid decision. It is an extensive resource prior to such decisions and if utilized prudently it can enhance your small business government contract marketing plan dramatically.

Friday, November 1, 2019

Small Business Federal Government Contract Negotiation


Image:  Oregon State University Professional and Continuing Education


I. INTRODUCTION

You have worked to establish your federal government contract business contacts. You have developed your company infrastructure and processes to accommodate the Federal Acquisition Regulation. Your company has effectively marketed and teamed on a prospective program. A proposal has been carefully prepared and submitted to the contracting officer. You have been selected as the apparent winner and you are ready for the next phase on the government contracting process - the negotiation. This article assumes that your are in the federal government services contracting business, that you plan to price your services at an hourly rate and sell them by labor categories with professional job descriptions to perform the government's statement of work and bill by the hour. This article also assumes that you are not contracting under FAR Part 12, "Commercial Contracting".

Unlike commercial business, the vast majority of federal government contracts are subject to negotiation. Even in competitive procurements, the government may award a contract based on best value (a combination of technical, cost and other factors) not necessarily to the lowest price bidder. The final price paid by the government is then subject to negotiation. Under General Services Administration (GSA) Schedules and Indefinite Delivery/Indefinate Quantity (IDIQ) Contracts, terms and conditions and labor hour pricing are agreed upon in advance but individual delivery orders are negotiated separately regarding the labor hours, material and travel cost necessary to complete a discrete scope of work. Cost Plus and Time and Material contracts are also negotiated procurements on many occasions. Only small, fixed price purchase orders and items purchased under FAR Part 12, "Commercial Contracting", are awarded solely on the basis of price.

This document will address contract negotiations under three (3) different business scenarios:

Negotiations directly with a government contracting officer pursuant to a federal government contract

Negotiations with a prime contractor for a subcontract under the prime's federal government contract

Negotiations with a subcontractor to establish a price and flow down the terms and conditions of your contract with the federal government.

II. NEGOTIATION TEMPLATE

In federal government contracting each of the above scenarios pass through the following template of negotiation steps:

A. Audit

B. Fact-finding

C. Pre-award Survey

D. Cost Negotiations

E. Final Profit Negotiations

F. Contract Award


The above template is recognized throughout the Federal Acquisition Regulation (FAR) and in the Defense Contract Audit Agency (DCAA) Handbook. All government agencies and contractors utilize it.

III. RULES OF THUMB

Your proposal represents an initial offer to a government agency or a prime contractor. Correspondingly, a subcontractor's proposal represents his initial offer to you. Government contract and subcontract negotiation is an art, not a science. You will find the above negotiation template is applied with various degrees of expertise among government agencies, prime contractors and subcontractors. Like many other aspects of business, the intellect and experience of customer or supplier personnel will vary with the agencies and the companies with whom your are dealing.

Keep in mind that your client or your subcontractor is also developing his/her position against the above template. Confirm with the other party at which step the negotiation is located and the fact that the negotiation is moving from one step to the next. If you are dealing with an agency or company representative who is unfamiliar with the process, take the time at the beginning to convey in a tactful manner your understanding of how the negotiation will proceed. Keep a careful written record of events during each step, to include information provided, offers and counter-offers made and agreements reached.

Develop a negotiation with a "target" position and a "floor" position. Your objective is to conclude the negotiation achieving a price as close to the target position as possible while never going beneath the floor.

Courtesy and politeness are mandatory. Avoid confrontations. Do not reveal your strategy in front of the other party except to objectively explain your position in terms of an incremental offer or a counter offer. Excuse yourself for outside caucuses or adjournments whenever it is necessary to study an offer, assess a situation or develop your next move.

It is always best to look at negotiations from a win/win perspective. Be honest and forthright during the audit, fact-finding and site survey steps. Look for insights into the other party's negotiation position from the questions being asked, the data being requested or the responses being obtained. Defend your cost and performance position as conveyed in your proposal with documented facts. Look for openings in your subcontractor's proposal support documentation. When cost and profit negotiations commence, offer compromises and trade-offs of value to the other party in return for acceptance of your position.


IV. NEGOTIATIONS DIRECTLY WITH A FEDERAL GOVERNMENT CONTRACTING OFFICER

Procurement Contracting Officers (PCO's) hold warrants to represent the federal government. PCO's must have internal approval of a contract within their respective agencies before they can sign a contract. Only a PCO is authorized to officially commit the government. For smaller contracts a PCO may delegate his authority to an Administrative Contracting Officer (ACO). This often occurs in larger industrial plants where the ACO is resident in the facility or in remote locations where the ACO is a member of the Defense Contract Management Area Office (DCMAO) in the city where the contract is being performed.

A. Audit - Upon receipt of your proposal the contacting officer will order a Defense Contract Audit Agency (DCAA) audit. The Request for Proposal (RFP) to which you responded may in fact have ordered a copy of your proposal be submitted to the DCAA Office nearest your location. If you are a new supplier to the government, DCAA may ask for a copy of your long-range plan containing your direct and indirect rate structure. They will verify the rates utilized in your proposal against your LRP, evaluate escalation factors utilized for long term projects and check the math. The auditor will ask for copies of major material and travel quotations and insure that government per diem rates are utilized for lodging and meals in the cost proposal. DCAA may also visit your facility and complete a "Pre-award Survey of Prospective Contractor Accounting System" form. The survey checks compliance with Cost Accounting Standards 401 and 402 to insure that the company sets up each new government contract on job cost accounting in the identical manner in which it was proposed; in effect identifying direct labor, direct material and other direct costs to each contract monthly and allocating overhead and G&A utilizing the same numerator and denominator relationships upon which the contract was originally estimated. DCAA is paid by the PCO to perform the audit. The audit does not extend to negotiations and at the audit conclusion the auditor files a report with the PCO. The report will contain information on any errors uncovered and findings on the adequacy of the accounting and long range planning systems. DCAA will not express an opinion on the cost content of the proposal in terms of a value judgment regarding prices for prospective supplies and services. If the auditor does not offer an exit interview, ask for one. Better yet, ask for a copy of the audit report to the PCO. Many DCAA offices will provide a copy to audited contractors. DCAA does not have the authority to direct a proposal revision based on audit findings. An astute contractor will immediately correct any errors found by the auditor in the proposal and examine other audit findings in preparation for negotiations.


B. Fact-finding - Assuming your proposal met the requirements specified in the RFP, fact-finding usually involves the PCO or his ACO requesting additional information. These areas of interest are early indications of where the negotiator is looking for weaknesses in your cost justifications or disconnects between your technical approach and the cost your are estimating to do the job. If you have subcontractors or major material suppliers, the government may ask for copies of your vendor proposal evaluations. The government may wish to examine cost history for the last time you performed similar efforts. Keep in mid that most government agencies put together an independent cost estimate of what they feel the item or service should cost. These s are commonly called "Should Cost Estimates". The additional requests for information during fact finding are feeding the should cost . The PCO typically has an end user for the product or service who will become the Contracting Officer's Technical Representative (COTR) when the contract is awarded. The COTR has a strong influence on the negotiations and will usually be present when negotiations commence. On many occasions, the COTR is the real internal customer at the agency. He has fiscal, technical and schedule responsibilities to his management for the program you are servicing. He simply cannot sign for the government. The PCO has the agency warrant for that function and knows the most about public law and the Federal Acquisition Regulation (FAR) as it is applied to contracts the agency undertakes. It is the COTR who is likely feeding the PCO requests for fact-finding data. Keep in mind that the COTR and the PCO are formulating their assessment of the cost and the risk associated with the program during the fact-finding process. Cost is the first item of negotiation and risk has a direct influence on the government's position on profit.

C. Pre-award Survey - A pre-award survey is an extension of fact finding in the form of a visit to a new supplier's facility. The PCO or the ACO and the COTR usually attend. In some instances the local Defense Contract Management Area Office (DCMAO) is involved. As you become a regular supplier to an agency, site survey visits will normally cease or occur only rarely. The site survey team is interested in establishing the physical presence of a new supplier, the technical capability and the human resources to perform the prospective work and the quality of the environment in which the effort will be performed. A "Pre-award Survey of Prospective Contractor" Form is completed and becomes part of the contract file. Select the person who will meet with the government survey team. This person should be empowered to speak for the company and should be completely familiar with details of the solicitation and of your company's offer. If relevant, make available one or more technicians to answer questions. Identify any disparities that may exist between the solicitation and your company's offer that should be resolved during the initial meeting with the survey team. Think about how you can demonstrate actual technical capability or the development of technical capability on the proposed contract. Make sure your plant facilities and equipment are available and operable. If they are not, be prepared to demonstrate that they can be developed or acquired in time to meet proposed contract requirements. Make sure that your labor resources have the proper skills or that personnel with the needed skills can be hired expeditiously. Gather and make available to the survey team documentation, such as previous government contracts or subcontracts or commercial orders, to demonstrate a past satisfactory performance record with regard to delivery, quality and finances. Gather financial documentation for the team financial analyst, including the company's current profit and loss summary, balance sheet, cash flow chart and other pertinent financial information. Make sure the plans are in place for vendor supplies and materials or subcontracts to assure that the final delivery schedule can be met. Make sure that these plans are verifiable. Review any technical data and publications that may be required under the proposed contract and make sure you understand them. If the contract is a type other than a firm-fixed price or if you have requested progress payments, prepare adequate accounting documentation for review. Review your quality control program and make sure that it is workable and consistent with the quality requirements stated in the contract.


D. Cost Negotiations - At the conclusion of audit, fact-finding and pre-award survey steps, the PCO and the COTR complete their should cost and open negotiations. They may make a counter offer to your price proposal at this time. Such a counter-offer reflects the government's initial position on cost and a reasonable profit. Assess how far from your negotiation target the counter-offer is and how close to your floor the government wants to take you. In the vast majority of cases you and the government determine that further negotiations are necessary. The profit issue is set aside and negotiations commence on the elements of cost, comparing the government's position to yours. This is perhaps the most important step in negotiations, since fully loaded cost makes up the vast majority of the prospective contract price. The parties address each direct and indirect cost element and factor in the cost proposal and attempt to come to an agreement on the total cost for the contract. As agreement is reached the government will adjust their cost to reflect the agreed upon amounts. You will do the same. The following discussion will address cost elements least and most likely to undergo negotiation and the associated reasons:

Cost Elements Least
Subject to Negotiation

(1) Direct Labor Rate - The contractor can supply cost history, salary surveys or other documentation to support direct labor rates.

(2) Labor Overhead & Material Handling Rates - DCAA has reviewed the company forward pricing rates

(3) G&A Rates - DCAA has reviewed the company forward pricing rates

(4) Direct Material Cost - The contractor can supply vendor quotations and demonstrate competitive bidding

(5) Travel Costs - The contractor can supply airline and rental car quotes and government per diem rates are used for lodging and meals

(6) Terms and Conditions - All clauses required by the government and public law were contained in the RFP when the solicitation was provided for contractor response. In a competitive environment very few contractors take exception to these requirements. However, if the procurement is a HUB Zone or 8(a) Set aside to your compan there may be certain terms which the government is willing to negotiate. The FAR is written for protection of the contractor as well as the government. During the draft RFP stage when contractors are asked for comments it is wise to highlight any omissions.

Cost Elements Most

Subject to Negotiation

(7) Labor Category - The government may choose to question or have an alternative assessment of the skill level and mix necessary to perform the statement of work. A mutual agreement on the labor skill mix must be achieved.

(8) Labor Hours - The government may choose to question or have an alternative assessment of the quantity of labor hours necessary to perform the statement of
work. A mutual agreement on the labor hours to do the job must be achieved.

(9) Number of Travel Trips - The government may choose to question or have an alternative assessment of the quantity of trips necessary to perform the statement of work. A mutual agreement on the number of trips must be achieved.

(10) Data Items - Some data item requirements are negotiable, such as the level of reporting in the product hierarchy for cost and schedule reporting. Agreement must be reached on these fields. Although data items are normally not quoted separately in the proposal, their preparation cost can be dramatically influenced by content requirements and heavily effect direct labor hours.

(11) Material and Labor Escalation - The government generally recognizes the consumer price index as a reasonable projection of annual labor and material cost
increases. This index has been running plus or minus 3% per year for several years. In the event the contractor proposes escalation values in excess of 3.5% per year compounded for multi-year contracts, the rationale must be supported and agreed upon.

At the conclusion of the cost negotiation, all elements of cost for the base price of the contract have been agreed upon. During the course of the cost negotiations this agreement can be reached by arriving at a fully negotiated amount for each of the above cost elements one by one, or offering and counter-offering at the total cost line until agreement is achieved. Very few contractors are willing to accept negotiated changes in cost elements IV. D. 1-5, above because the nature of these cost elements is fixed across the company for all projects or is firm in quotations by vendors, suppliers and government-mandated per diem rates.

E. Final Profit Negotiations - During the offer/counter-offer process the preliminary profit positions which may have been conveyed from one party to the other must be finalized. Under Federal Acquisition Regulations (FAR) a PCO must place in the negotiation file a memorandum on the derivation of the profit rate awarded to the contractor in the final price. The general rule of thumb from the government perspective is that once the costs for a contract have been agreed upon the profit rate is determined by the amount of risk to the contractor in the deal. In government contracting profit is rarely proposed at a higher rate than 25% and only at that level on firm, fixed price contracts where the risk to the contractor is the highest. In some time and material contracts, profit cannot be calculated on a cost base containing material, travel or subcontractor cost elements. Profit in these cases is only awarded on fully burdened labor through G&A. The following broad profit ranges apply in general to the various types of government contracts :

Contract Type

Firm, Fixed Price (FFP) - 15% to 20% profit on total cost

Time and Materials (T&M) - 5% to 15% profit on fully burdened labor cost

Cost Plus (CP) - 5% to 15% profit on fully burdened cost

The Federal Acquisition Regulation (FAR) prohibits profit awards above certain levels for certain types of contracts where the government is bearing virtually all the risk. The PCO has the authority to negotiate the profit rate with the contractor but his profit memorandum to the file must specify the logic he utilized. PCO's must therefor justify the profit by discussing risk and certain other factors in the memorandum. To assist PCO's the government has provided the "Weighted Guidelines Method" of profit determination for use by government representatives in developing a position on profit. Ask for a copy of the government's weighted guideline analysis. It lends structure to the profit negotiation process. As you will see when you analyze it the government assesses risk and certain other factors such as management/cost control, contract type, working capital and cost efficiency factors in determining the profit to award on the contact. Your job is to influence the government with regard to risk and other factors and obtain the highest possible profit considering the nature of the prospective contract and the risk involved in performing it. Remember that the PCO's opinion of the risk in the contract is being regularly influenced during all steps of the negotiation process.

Certain cost plus incentive fee and cost plus award fee arrangements are available to the government and are usually specified in the RFP. Contractors are required to provide proposal input to these arrangements. A base fee is negotiated and then an incentive fee range or an award fee pool is also negotiated. The contract requires regular awards of additional increments of fee based on the performance achievements negotiated in advance with the contractor. A "Best Value" performance fee arrangement proposed by a contractor may be a key discriminator in winning a competitive procurement.

F. Contract Award -. Agreement on a final price for the contract is determined by the total negotiated cost plus the negotiated profit. The negotiation result is documented by the contractor in the form of a letter to the PCO specifying the date negotiations were concluded and the agreed upon price. A Certificate of Current Cost and Pricing may be required if the RFP contains the FAR clause for Certified Cost and Pricing Data. The clause has serious implications with regard to avoiding defective pricing and should be carefully researched before a company or an individual signs the document.

Upon receipt of negotiation confirmation from the contractor and the Certificate of Current Cost and Pricing, if required, the PCO and his staff prepare the contract document. The document is forwarded to the contractor for review, approval and signature. The PCO then signs the contract and returns a copy of the fully executed document to the contractor. You are now authorized to commence work. The government is obligated for the full amount of the contract and will pay invoices up to the incremental funding level. Many contracts are fully funded at award. Other contracts, particularly multi-year programs, are incrementally funded by year.

You are obligated for delivery of the supplies and services specified in the negotiated and signed contract in accordance with the delivery schedule and terms and conditions contained therein.

V. NEGOTIATIONS WITH A PRIME CONTRACTOR FOR A SUBCONTRACT

You signed a teaming agreement with a prime contractor during the RFP stage of a solicitation. You prepared your proposal and submitted it to the prime contractor who incorporated it into the submission to the government. Your submission contained flowdown versions of terms and conditions from the prime's federal contract as well as a technical description of the effort you intend to perform. Your cost proposal contained fully loaded rates for the labor categories and material as well as the travel you will perform on the subcontract. The government has awarded the prime contract to our team member. You are now undertaking negotiations with the prime to convert your teaming agreement to a subcontract. The subcontract will replace the teaming agreement between you and your prime.

Most prime contractors prefer to negotiate subcontracts with their team members before they negotiate the final prime contract with the government. Therefore, you will likely be approached by your prime with a certain element of urgency to finalize your subcontract and enable him to negotiate his deal. Keep in mind that your prime contractor is preparing his cost for negotiations with the government and may be seeking to obtain cost benefits at your level which will offset elements of his proposal which he may have bid ambitiously.

A. Audit - Prime contractors do not have a right to your direct and indirect rate information. Subcontractors propose fully loaded labor and material through profit and do not disclose their rates to primes. Your teaming agreement may specify the profit rate your team member and you have agreed to apply. Other than profit, your prime does not know the make-up of your direct labor, overhead, material handling and G&A rates. Your proposal disclosed labor hours at a fully loaded rate and burdened material and travel cost. If your prime wants to audit any other cost element of your proposal he must request an assist audit through his PCO. If an assist audit is requested it will be identical to paragraph IV.A., above, except that the PCO will get a copy of the audit report but the prime contractor will get only a general statement regarding the adequacy of our rates and systems. Thus, the PCO on the procurement is in possession of more information than the prime contractor in terms of the cost elements in your proposal. This may seem a disadvantage, but it is the only way the federal government and its contractors have been able to protect proprietary information in an environment where a contractor is teaming with a company today and competing against the same company tomorrow in a different program.

B. Fact-Finding - Prime contractors have similar limitations to subcontractor proprietary data during fact-finding as they do during audit. However, as the government’s buying agent for the subcontractor supplies and services, the prime is expected by the government to conduct a thorough source selection, to include market surveys, competition, technical qualification and contract negotiation. However, prime contractors cannot demand access to what subcontractors deem proprietary data without first signing a non-disclosure agreement with that subcontractor during the teaming agreement phase. Even then, most subcontractors will not disclose closely held process information, software source code and market sensitive data to a prime. When such data are disclosed they are clearly marked company proprietary. Therefore, for fact-finding the prime will utilize end items specifications for products, warranty details, personnel resumes for labor, financial performance information from Dunn and Bradstreet and customer satisfaction information from other clients. The prime may also request a tour of your facility if you are a first time supplier. The business relationship with a prime contractor is formed during the teaming agreement stage when the parties determine that they have complimentary capabilities. Keep in mind that the teaming agreement is replaced with a subcontract when the program is awarded by the government.

C. Pre-Award Survey - Same remarks as IV.C., above. The government PCO may request the Defense Contract Management Area Office (DCMAO) to complete the survey of a major subcontractor on a program where the subcontractor has a major portion of the effort and in cases where the subcontractor is new to the defense business. The PCO will always work through the prime contractor in arranging for the survey and the prime will receive a general statement when the survey is completed that the government either concurs or does not concur with your selection as a supplier. Once again, the relationship formed with your prime contractor during the teaming agreement stage is key in determining your selection as a source.

D. Cost Negotiations - Same remarks as IV.D., above, except that you will be negotiating with a representative of the prime contractor, deemed a "Subcontract Administrator" or a "Subcontracts Manager" instead of the government. Only this person is authorized to commit the company and care should be taken not to undertake matters of negotiation with other members of the prime contractor organization without an authorized contracts representative present. The prime will not have access to your direct or indirect rates [(IV.D. (1) through IV. D. (3)], or the DCAA Audit Report or DCMA Fact-Finding Report. The other party will be viewing your labor, material and travel cost from a fully loaded standpoint and will likely focus on items IV. D. 7 through IV. D. 11, above in pursuing his negotiation target.

E. Final Profit Negotiations - The profit rate will be agreed upon with the prime as either a function of the teaming agreement or as a function of subcontract negotiations identical to IV. E. above except that you will be negotiating profit with your prime contractor instead of the government. Make use of weighted guidelines to support your proposed profit.

F. Contract Award - Identical to IV. F, above, except that you will receive your subcontract from the prime contractor and the prime's subcontract manager instead of the government and the PCO.

VI. NEGOTIATIONS WITH A SUBCONTRACTOR UNDER YOUR FEDERAL GOVERNMENT CONTRACT

You signed a teaming agreement with a subcontractor during the RFP stage of a solicitation. Your subcontractor prepared a proposal and submitted it to you. You incorporated it into the prime contract proposal to the government. You have negotiated flowdown versions of terms and conditions from your federal contract to the subcontractor as well as a technical description of the effort the subcontractor will perform. The subcontractor's cost proposal contained fully loaded rates for the labor categories and material as well as the travel he intends to perform on the subcontract. The government has awarded the prime contract to you. You are now undertaking negotiations with the subcontractor to convert your teaming agreement to a subcontract. The subcontract will replace the teaming agreement between you and your subcontractor.

It is preferable to negotiate subcontracts with team members before you negotiate your final contract with the government. Going into negotiations with the government having definitized your subcontracts reduces your risk in terms of unknowns contractually at the supplier level. It also eliminates the subcontractor wanting to know the result of your prime contract negotiations so that he can use it as a frame of reference for his negotiation position with you. The baseline when you go to the table with your subcontractor is your teaming agreement specifying his statement of work and your collective proposal to the government containing the prospective cost and price for his effort as part of the total proposal.

A. Audit - You do not have a right to subcontractor direct and indirect rate information. Subcontractors propose fully loaded labor and material though profit and do not disclose their rates to primes. Your teaming agreement may specify the profit rate you and your team member have agreed to apply. Other than profit, you do not know the specific make-up of your subcontractors direct labor, overhead, material handling and G&A rates. The subcontractors proposal has disclosed the labor hours at a fully loaded rate and burdened material and travel cost. If you wish to audit any other cost element of his proposal you must request an assist audit from DCAA through your PCO. If an assist audit is conducted, it will be held at the subcontractor identical to paragraph IV. A., above, except that the PCO will get a copy of the audit report and you will get a general statement regarding the adequacy of the subcontractor's rates and systems. Thus, the PCO on the procurement is in possession of more information than you are in terms of the cost elements in our subcontractor's proposal. This may seem a disadvantage, but it is the only way the federal government and its contractors have been able to protect proprietary information in an environment where a firm is teaming with a company today and competing against the same company tomorrow in a different program.

B. Fact-Finding - You have similar limitations to access subcontractor proprietary data during fact-finding as you do during the audit. However, as the government's buying agent for the subcontractor's supplies and services, you are expected by the government to conduct a thorough source selection, to include market surveys, competition, technical qualification and contact negotiation. However, you cannot demand access to what subcontractors deem proprietary data without first signing a non-disclosure agreement with the subcontractor during the teaming agreement phase. Even then, most subcontractors will not disclose closely held process information, software source code and market sensitive data to a prime. When such data are disclosed they are clearly marked company proprietary. Therefore, for fact finding you will utilize end item specifications for products, warranty details, personnel resumes for labor, financial performance information from Dunn and Bradstreet and customer satisfaction information from other clients. You may also request a tour of the subcontractor's facility, especially if he is a first time supplier. The business relationship with a subcontractor is formed during the teaming agreement stage when the companies determine that they have complimentary capabilities. Keep in mind the teaming agreement is replaced with the subcontract you are negotiating.

C. Pre-Award Survey - Same remarks as IV. B., above. The pre-award survey will be completed by the government and results will be supplied to the PCO. You will get a general statement that the government either concurs or does not concur with your subcontractor selection.

D. Cost Negotiations - Same remarks as IV.D., above, except that you will be negotiating with a representative of the subcontractor, deemed a "Contract Administrator" or a "Contracts Manager" instead of the government. Only this person is authorized to commit his company and care should be taken not to undertake matters of negotiation with other members of the subcontractor's organization without an authorized contracts representative present. You do not have access the subcontractor's direct or indirect rates [(IV.D. (1) through IV. D. (3)], or the DCAA Audit Report or DCMA Fact-Finding Report. You will be viewing your subcontractor's labor, material and travel cost from a fully loaded standpoint. Focus on items IV. D. 7 through IV. D. 11, above in pursuing your negotiation target. Remember you are acting in the role of the government in this negotiation.

E. Final Profit Negotiations - The profit rate will be agreed upon with the subcontractor as either a function of the teaming agreement or as a function of subcontract negotiations identical to IV. E., above except that you will be in the contracting role instead of the government. Make use of weighted guidelines to support your proposed profit.

F. Contract Award - Identical to IV. F., above, except that you will issue a subcontract to your partner.

Wednesday, October 9, 2019

The Term “Talent Pool” Is Obsolete

Image: "webrecruit.co.uk"


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. 
Values
As long as values for the organization are base-lined and maintained in the enterprise mission statement and clearly promulgated in objectives to the employees, then it becomes a management maintenance challenge with regard to employee acquisition and retention.
The fact that individual value systems may or may not align with the organization values or changes in them is a communications issue. If the conflict is too stark - people will not join a company, will not perform if they join and leave or be fired as the a usual result.
In a free society organizations and individuals have choices.  "At Will Employment Contracts" are taken literally. In not so free societies other conditions exist that impact     values.  Conditions there are dictated by governments or stark economic conditions.
With the global competition for resources and employment these days, business and governments must view the value issue in its simplest terms and not make a complex science out of it.
People, companies, jobs, resources and success will be achieved through supply and demand.  All will change to acquire the balance necessary for success
Managing Talent
The most successful organizations pair experienced personnel on a staff basis with junior ones as models. Each has individual assignments and reports to the boss but the senior party is the example in the process/experience-driven aspects of the job and is available to answer questions.
The younger individual infuses the older one with energy and new ideas much like osmosis. The result is a hybrid of old and new that works and has been put together by a team.
The above approach works extremely well, imposes on no one, results in the young and old learning by observation, satisfaction and recognition for collective efforts and reduction in the boss’s work load; a win-win all around. 
Know how much leadership to offer and how much to let the individual grow on his or her own. 
Strike the right balance between specific and generic guidance so the unique individual traits of the workers come through in the business model.
Let the employee have a role in solutions to problems, system design and success of the firm. When you do so, your talent will remain stable and grow with you.


Monday, October 7, 2019

Remember the Small Business Instant Depreciation Tax Break


Image:  "CPA Tax Adviser"
"New York Times"

“Nearly all small businesses, even the very tiniest, should consider taking advantage of the deduction.

The deduction is essentially limited to small and midsize companies. It begins phasing out when a company spends more than $2 million a year on qualifying purchases, and is eliminated entirely for those that spend more than $2.5 million.

The deduction works like this: If a company has a $90,000 profit and decides to spend $50,000 of it on new computers, the company would normally write off the cost of the equipment gradually, deducting a portion of it each year over the span of the computers’ useful life. But Section 179 allows the business to deduct the entire $50,000 cost at once in the year the equipment is purchased, reducing the company’s taxable profit to $40,000. (The deduction cannot exceed a business’s total net income.)

Section 179 was once a fairly limited tax break, with an annual cap of $25,000 or less. But in 2003, Congress temporarily raised the limit to $100,000, and in 2008, as the recession set in, it raised the cap again to $250,000. In 2010, hoping to stimulate more spending, Congress increased the limit to $500,000, allowing businesses to use the deduction toward expensive items like factory machinery and trucks.

But each increase was a temporary measure requiring annual reauthorization to prevent the cap from returning to $25,000 — and Congress developed a habit of waiting until the very last days of the year to make a decision. In 2012, it missed the calendar deadline completely and passed legislation on Jan 1, 2013, retroactively raising the deduction limit for equipment business owners had purchased the previous year.

“The uncertainty drives my clients up a tree,” said Paul Neiffer, an accountant with CliftonLarsonAllen in Yakima, Wash., who specializes in the agricultural industry. “Not knowing each year if it will be extended prevents a lot of our farmers from pulling the trigger on buying equipment.”

From now on, they will know. Signed on Friday by President Obama, the 233-page tax deal includes in its myriad tax breaks one that permanently sets the Section 179 cap at $500,000, subject to inflation adjustments.

Mr. Kortesmaki said he was confident enough that Congress would once again lift Section 179’s cap to go ahead this year with his planned capital purchases, even before the legislation was passed. But other business owners held off — and this year, the deal came too late for some, Ms. Wuebben thinks.

“You can’t plan to spend that kind of money with just two weeks left in the year,” she said. “We might see some activity this year, but the real benefit for us will come next year, when customers can plan ahead for it.”

Some companies do try to jam in qualifying purchases before the calendar year ends. Last year, Congress raised the Section 179 limit for the year on Dec. 16. The next day, the prices farm machinery sold for at auctions increased compared with just a few days earlier, according to Greg Peterson, the owner of Machinery Pete, a site that tracks equipment auction prices.

“The response is nearly Pavlovian at this point,” he said. “The farm audience had grown so used to this annual silly dance of wait-and-see on our friends in Washington.”

Making Section 179’s higher limit permanent will cost taxpayers $77 billion in foregone revenue over the next 10 years, according to a government estimate. The tax break’s aim is to stimulate spending — but does it work?

An analysis by the Congressional Research Service found that expensing allowances like Section 179 appear to “have a minor effect at best” on how much businesses spend on capital goods. Expectations for future sales growth, not tax considerations, motivates most of the investment in the kinds of assets eligible for expensing.

The main advantage of expensing allowances, the report suggests, comes from simplifying the tax accounting business owners face on their capital purchases.

Still, owners like Mr. Kortesmaki see the tax break as a crucial one for helping their small business grow a bit bigger.

“I’d rather invest that money in my business than pay taxes on it,” he said. “Having this become permanent makes my business planning for the next few years a whole lot easier.”

Small Business Gets Tax Break

Wednesday, October 2, 2019

ACHIEVING AND UTILIZING A GSA SCHEDULE


Update:  

The General Services Administration hit its [1 October 2019] deadline to consolidate 24 acquisition schedules into one set of terms and conditions for products and services.  GSA released the newly consolidated schedule solicitation on FedBizOpps. For further details please see:  GSA finishes schedule consolidation on deadline


I. INTRODUCTION

Your small business is established in the federal government contracting sector. You have become a member of the government contracting community by registering with System for Award Management (SAM). You have proposed, negotiated and have been awarded your first government contract(s) and have a successful past performance history with the government in selling your products and/or services.

On several occasions open solicitations or procurement activities have referenced a ," GSA Schedule", as a qualification criteria or as a venue by which to buy items or services you can supply. This article will discuss the GSA schedule program, how to apply for and negotiate a schedule for your company and how to utilize it as a sales and marketing tool.

II. THE GENERAL SERVICES ADMINISTRATION (GSA)

From the GSA Web site:

"Founded in 1949, GSA serves as a centralized procurement and property management agency for the federal government. GSA manages more than one-fourth of the government’s total procurement dollars and influences the management of $500 billion in federal assets, including 8,300 government-owned or leased buildings and 205,000 vehicles. GSA helps preserve our past and define our future, as a steward of more than 420 historic properties, and as manager of USA.gov, the official portal to federal government information and services. GSA’s mission to provide superior workplaces, expert technology solutions, acquisition services, purchasing and E-Gov travel solutions and management policies, at best value, allows federal agencies to focus on their core missions.

GSA’s Disaster and Emergency Operations Vendor Profile form puts small businesses on the government’s radar so they do not miss out on federal contract opportunities in a time of disaster. More than 1,500 small businesses have used the online form to identify themselves."

Putting it simply the GSA is a federal government buying agency. It performs many buying-related activities which you can read about at the GSA Web Site:

http://www.gsa.gov/portal/category/100000

GSA is empowered to accept procurement requirements from all other federal agencies, locate and source qualified bidders and negotiate pricing for supplies and services on behalf of the government. Although all federal agencies perform procurement themselves that is peculiar to their individual domains, a vast number of products and services, particularly those common among agencies, are procured by the GSA. Over the last 10 years the GSA has sought to establish economies of scale through volume buying.

III. THE GSA CONTRACTING PROCESS

To equitably compete and pre-position terms, conditions and pricing for supplies and services, the GSA divides what it procures among various commodities and services lists with generic schedule designators. The agency also assigns procurement contracting officers to each schedule who conduct regular open advertising against the schedules through solicitation. The schedule numbers and contracting officers are listed at the following web site:


Each open solicitation for a generic schedule is published at FEDBIZOPPS, the portal for all federal government solicitations over $25k. The open solicitations contain details, specifications, terms, conditions and pricing instructions for the specific items on the schedule. Contractors prepare proposals in response to the open solicitations and submit them to the schedule contracting officer. The proposals are audited and negotiated like any other federal procurement. The term of the negotiated schedule is usually multi-year and can be as long as 5 years in duration so being able to develop and hold your pricing for the period of performance is a key factor.

Upon completion of negotiation, a specific supplier is granted a company-unique schedule identifying number under the applicable generic GSA schedule. The pricing, terms, conditions and validity duration are set for the specific company and the schedule number is unique to the firm. The company schedule is then authorized by the GSA for publication on the web for use in subsequent proposals to government agencies. The company GSA schedule is listed at the GSA Advantage Web Site and becomes part of the data base which government buyers can search.

Granting a GSA schedule to a company does not constitute a sale of goods and services. It simply establishes the pricing and the contract vehicle for readily buying from that company by a federal agency. A GSA Schedule saves time and effort for the buyer and it can be presented by the seller at his web site as an expedient way to get under contract with a federal agency. The agency places the order through the GSA. The GSA adds a small fee to the price of an item or service which the contractor collects from buying agency and pays to the GSA. The fee funds continued GSA operations and services. Under competitive conditions, sellers are authorized to offer discounts from their GSA schedules in the proposals to prospective agencies. State governments are also allowed to buy off GSA schedules.

Federal agencies can put in place blanket purchase agreements (BPA's) through the GSA with specific companies for long term buying. GSA also conducts Government Wide Acquisition Contracts (GWAC's) for IT and other technologies. Recent examples of a GSA GWACS for large and small business are the Alliant and Alliant SB Programs.

IV. BASIC STEPS TO APPLYING FOR AND NEGOTIATING A GSA SCHEDULE:

A. Register Your Company in the Central Contractor Registration (CCR) Data Base
If you are not familiar with this process please utilize for guidance the menu item at this site on registering your small business for federal government contracting:

http://www.smalltofeds.com/2006/12/registering-your-small-business-for.html


B. Obtain Your "Open Ratings", Evaluation

Open Ratings is a service run by Dunn and Bradstreet that the GSA uses. It out sources what would have to be done by the GSA Staff in terms of initial past performance ratings in response to GSA Schedule Applications. Here is a web site to learn more about it:

Open Ratings


The site explains the process and shows some sample reports.

C. Locate your Generic GSA Schedule:

Examine the major generic schedules listed and determine the best match for the products and services your company offers. Note the name and contact information for the contracting officer designated for the schedule. Also note the open solicitation link to the FEDBIZOPPS. Carefully review the solicitation completely and determine that you can comply with the specifications, terms and conditions and requirements in the document.

D. Contact the Schedule Contracting Officer with Your Statement of Intent and a Concise Capabilities Statement

This is where the marketing phase of the process begins. It is best to contact the contracting officer with a statement of capabilities (CAPE). Your CAPE should be brief, concise and electronic. It should highlight the information in IV.A., B. and C. above and the management, technical and past performance elements of your products and services. Establish by letter (preferably electronic by email) your intent to submit a proposal for a GSA schedule to the contracting officer. Also confirm your anticipated proposal delivery date by telephone if possible and confirm by email. Highlight your CAPE as a qualification criterion for a company schedule award under the generic schedule you are proposing against.

E. Carefully Prepare and Submit Your GSA Schedule Proposal

Respond to each requirement carefully and in the order presented in the open solicitation. Pay particular attention to the requirements for cost and pricing data presentation. Utilize for guidance the menu items on proposal preparation and negotiation at this site. Understand that your proposal may be audited, particularly for previous pricing history related to your products and services. The contracting officer may negotiate with you the final pricing make-up of your products and services based on audit results and history. Since GSA schedules are in the public domain it is worthwhile to examine the reports available through the GSA web site on previous awards for the same or similar products or services. In addition, most companies who have GSA schedules post them at their web sites so you can get some insights into competitor pricing by looking at the fully loaded rates and their respective escalation from year to year by going to the sites and analyzing the rates located there.

F. Schedule Award

When you are awarded your GSA Schedule it should be prominently displayed at your web site and contained in your marketing literature. You can offer it to prospective federal and state customers and you can discount from it under competitive conditions. Please read the terms and conditions regarding required sales necessary on your schedule for it to remain in effect. Within a specified time frame it is necessary to have a designated dollar value of sales activity or your schedule will automatically become inactive.

Carefully follow the directions in your schedule contract for collecting the GSA fee from your agency customers as a function of pricing quotations and payment. The fee is calculated as a designated percentage over and above that which your schedule prices display. It must be collected by you as a function of your quotation to your customer.

SUMMARY

In addition to featuring your schedule prominently at your web site, your GSA rates should be included in your market literature and your schedule number should be included as a reference in your new business proposals. A GSA schedule permits a quick ordering process for your federal and state clients. In your dealings with prime contractors to which you aspire to subcontract you can reference your schedule as valid pricing which they can readily include in their proposals to government agencies. A GSA schedule facilitates teaming with other synergistic small companies in proposing large scale efforts.

Keep in mind that obtaining a GSA schedule does not guarantee new business will come to you. Very few companies await government agencies to find them by searching the GSA data base. Most small businesses actively market their schedule to targeted agencies as an expedient way to contract with them or as a qualification criterion for new business awards.