10 Golden Rules For Small Business Success

1. Do not promise what you cannot deliver

2. Do not overextend your resources and get a reputation for poor performance.

3. Do not tell the customer what he or she wants to hear. Tell them what they need to know. They will respect you for it.

4. Network constantly on professional sites such as Linked In, Quora, Alignable and others.  Use Groups and Q&A features to accumulate an "Expert" rating from  peers in your field. 

5. Blog like there is no tomorrow. 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.

6. 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.

7. Quote and bill what the client can afford and grow with them (in content and resources).

8. Be dedicated to working yourself out of a job with a specific customer and having your client take over by training. They will remember you and recommend you to 10 others.

9. Remember growth is a function of persistence and foresight. Know where your market is headed and get their first - then write and speak about your success indirectly by helping others. Demonstrate humility and a satisfaction in helping others succeed. They will find ways to give you credit. There are ways of tooting your horn without making peoples' lights go out.

10. Word of mouth advertising from pleased clients is a sure ticket to success.

Striking the Right Balance In Company Training Programs

As fast as things move these days if we don't train and communicate effectively we are running very high risks. Conducting business in the fast-paced modern era demands that training be sophisticated, interactive and responsive to changing times.  It should evolve out of core company processes and contain feedback mechanisms.

Some training will be global, such as policy, corporate ethics and human relations. Other training will be specialized, such as changes in law, company policy or technology by functional areas.

Principal among the topics at the head of the list for generic training in the art of something would be "Communicating Effectively" to employees to customers, to regulators;  both orally and in writing.  

RISKS

Once the span of control of the major functions begins to grow or get more complex,  the manager in charge establishes processes and a policy to insure the company succeeds. If this is overdone in many instances it can result in a bureaucratic environment that stifles innovation.

Only those firms that recognize this human weakness and take steps to minimize its impact continue to foster innovation and lean operation.
  
Functional interface points are the most sensitive. These are the critical areas where one functional organization meets another in the company.

Examples:

Engineering Design meets Manufacturing
Finance meets Estimating
Marketing meets Project Management
Accounting meets Cost Control
Human Resources meets the Hiring Manager

If management fails to understand the risk in these interfacing areas and drives the procedural and process detail too low the organizations will strangle each other with interface control issues and efficiency will suffer.

PROGRAM PREPARATION

Train with the idea that materials will be used in customer proposals and reflect internal processes for consistency.  

Make sure the company vision, mission and capability statement are common knowledge:

Capability Statement

Insist that public law compliance, fair employment, EEO and anti-discrimination, practices, government property care and other regulatory matters are reflected in process and training materials.

Convey the company travel and expense reports

Train on time card process and completion timeliness

Issue guidance on intranet and company press releases

Instruct on customer relations and customer service

Provide details on handling government and audits and insure to name focal points for these activities.

Convey negotiation techniques and skills expected to those whose roles involve committing the company

If ISO 9000, TQM, Six Sigma and other major quality and process programs apply, or are in your future, use your training program and processes to build certification preparedness. 

CONCLUSION:

Training in business is a form of communication. It is not an academic pursuit, although elements of it may include learning new information.  

   

Still, it is not schooling in the sense of personal improvement as much as it is communication of company policy and expectations

The best organizations make sure everyone from the chairman of the board to the janitor understands that training is a privilege, a right and a requirement and that it will be conducted as a matter of record for everyone.

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

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

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

THE FUNDING CHALLENGE

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

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

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

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

STOP WORK ORDER

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

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

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

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

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

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

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

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

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

SUMMARY

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

Is The Term"Talent Pool" Obsolete?

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.  Employment 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 or will not perform if they join. They will leave or be fired as usual results.

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 and fulfillment of personal values.

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.

Contract Closeout In Small Business Federal Government Contracting

INTRODUCTION

If you are an off-the-shelf or purchased-finished supplier of goods to the federal government, your contact closeout is reasonably simple. You will make delivery at a firm, fixed price to the agency to which you have contracted and submit an invoice. The government will receive and inspect the delivery and approve your invoice for payment. Assuming there are no ongoing warranties, logistics support or similar contract line items involved, the government will then closeout the contract, as will you.

Contracts involving progress billing with retention, cost type contracts and those with intellectual property, government property, classified documents, provisional billing rates and similar more complex matters require astute attention to detail and considerably more administrative support and coordination between the contractor and the government for closeout. Successful contract closeout of these types of programs is an ongoing process beginning at contract award.

This article will discuss the principal features of the closeout process in small business federal government contracting and provide references for further process detail.

THE GOVERNMENT PERSPECTIVE

Below is a synopsis from the introduction to the Defense Contract Management Agency DCMA Manual 2501-07 Contract Closeout which is a free download from the  “References" File in the Box Net cube at the right margin of this site. The synopsis and the book should be read carefully by small business federal government contractors:

“Communication and information sharing is key to timely contract closeout. Contract Closeout occurs when all the terms of a contract/order have been met and all administrative actions are completed, all disputes settled, and final payment has been made. This includes those administrative actions that are contractually required; i.e. property, patents and royalties" 

TIPS TO INSURE SUCCESSFUL CONTRACT CLOSEOUT

• Consider the type of contact under which you are operating and locate that type in the manual. Insure the processes specified are followed in your contract administration from the onset of your contact. Government contract types are discussed at the following link:  Contract Types

Note the manual discusses both the role of the government and the contractor in closeout and the stages in achieving closeout. 

• Support Cost-Type Contracts With Timely Incurred Cost Proposal Rates and Submissions – Several articles at this site have addressed the development of forward pricing rates and associated DCAA audits and submissions. Here are the most important articles with respect to contract closeout:

Establishing FAR and CAS Compliant Business Systems

DCAA Audits And Small Business Job Cost Accounting Systems

Risk Analysis and Provisional Indirect Rates 

• To close out a cost type contract that has been billed throughout its life at provisional rates, regular incurred cost submissions must be submitted by the contractor and verified by DCAA. Provisional rates must then be adjusted to audited applied actual costs and the final billing determined. This could result in net excess funding on the program that must be returned or a requirement for addition funding at closeout. In either case, the business impact could be substantial for a small enterprise.

Note the following Simplifying Techniques:

• Verify payment accuracy and report discrepancies immediately.
  
• Provide Contracting Officer with cost estimates of projected cost (usually 60 days in advance) in compliance with Limitation of Cost/Funds Clauses (FAR 52.232.20 through 21) for cost reimbursement and facilities contracts.
  
• Submit patent reports on time to the Administrative Contracting Officer when required by the patent clause.
  
• Submit Overhead Rate Proposals no later than 6 months after the end of the contractor's fiscal year.
  
• Prepare final voucher no later than 4 months after settlement of overhead rates.
  
• Consider Quick Closeout procedure when it's determined that normal closeout will be delayed.
  
• Execute government property disposition instructions expediently.”
  

SUMMARY

Becoming informed on government contract closeout steps and putting in place processes to support them in your business system is the most important general principal to remember. Consider the type of contract you are releasing for incurred cost. Bear in mind how an individual contract impacts on your business system and insure your business system supports the type of contact you are putting into play. Develop a good working relationship with your contracting officers, DCMA and DCAA.  For more on the roles of these government functions, please see the following link:

Federal Government Contracting Customer Relations

Unallowable Costs Under Federal Government Contracts

Over the years the federal government has determined that certain costs cannot be allowed in prices, cost reimbursements or settlements under contracts with the US Government.

The government is unwilling to pay for these costs as direct charges to federal government contracts or through indirect expense pools applied to federal government contracts. 

A company is not prohibited from incurring unallowable costs, but they cannot be recovered either directly or indirectly under federal government contracts. 

 UNALLOWABLE COST CATEGORIES:

The following cost categories are generally unallowable under federal government contracts:

A. Advertising Costs are allowable only if they are necessary to meet the requirements of the contract peformance.

B. Public Relations Costs are unallowable except for (1) costs specifically required by government contracts, (2) cost of communicating with the public and press pertaining to specific accomplishments which result from government contracts or (3) costs of conducting communication and liaison necessary to keep the public informed on matters of public concern such as notices of awards, financial matters, etc.

C. Alcoholic Beverage Costs are unallowable.

D. Bad Debt Costs are unallowable.

E. Automobile Costs for Personal Use are unallowable.

F. Defense and Prosecution of Criminal and Civil Proceedings, Claims Appeals and Patent Infringement are generally unallowable.

G. Donations and Contributions are unallowable.

H. Entertainment Costs are unallowable.

I. Executive Lobbying Costs Incurred in Attempting to Improperly Influence either Directly or Indirectly an Employee or Officer of the Federal Government Regarding a Contract are unallowable.

J. Fines and Penalties resulting from failure of the company to comply with federal, state, local or foreign laws and regulations are unallowable.

K. Goods and Services Cost for Personal Use are unallowable.

L. Personal Housing and Living Expenses are unallowable. (Not to be confused with direct travel costs which are allowable)

M. Insurance Costs to Protect Against Defects in Materials or Workmanship are unallowable.

N. Interest and Investment Management Costs are unallowable except for cost related to the physical custody and control of monies and securites and for interest cost paid to external parties for asests (buildings and equipment) used to support government contracts.

O. Losses on Government or Other Contracts are unallowable.

P. Membership Costs in Civic, Community Organizations, Country Clubs or Social or Dining Clubs are unallowable.

Q. Pre-Contract Costs, unless approved by the Contracting Agency are unallowable.

R. Airfare Travel Costs in Excess of the Lowest Available Commercial Discount or Standard Coach Airfare are unallowable.

Please see the following link for further details:

2 CFR Part 200 Excerpts: Unallowable Costs

To manage unallowable costs, separate accounts must be established for these type expenses and they must not be priced directly into federal government contracts during the proposal process. 

Such costs cannot be made a part of the expense pools which are applied to federal government contracts through an overhead, material handling or G&A cost allocation at accounting period close or during forward pricing rate planning.

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.

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, FEDBIZOPPS 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.

A Thank You and 4 Gifts from Ken Larson at "Smalltofeds"

        (Please click above image to enlarge)

Approaching two decades in volunteer small business consulting, I appreciate the many individuals who have contacted me for advice. You have come from several venues – through the Micro Mentor and SCORE Foundations, LinkedIn and other social media sites.  It has been a pleasure serving small business. 

My work with you has kept me active in retirement, in touch with my profession and engaged in a continuous learning mode.

Please feel free to download any of the 4 free books pictured here, as well as other useful information at the BOX in the right margin of https://www.smalltofeds.com . You may also download the books free of charge from: https://smalltofeds.academia.edu/KenLarson

Although originally written some time ago, the small business contracting books contain live links in the Adobe text to updates for any given topic at the “Small To Feds” Blog. The books have been written at the request of my clients to cover topics in the order small business generally encounters them in government contracting.

My best wishes for success to you in your small business enterprises.

 Ken Larson 

 

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.