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Tuesday, January 1, 2019

Insights to Succeed In Small Business Federal Government Service Contracting

Image:  Bidnet.com


INTRODUCTION

Service contracting to the federal government is a natural venue for small business. It does not require a product with a niche market or capital intensive manufacturing facilities.

Service contracting does require skilled management and labor resources capable of performing a scope of work for which the government has identified a need and for which outsourcing to an industry contractor has been selected as the means to fulfill that need. The venue demands strong human resources management, industry teaming and an enhanced business system to price, account and bill on a job cost basis under government service contracts.

Small enterprises in the commercial services market are tempted to immediately begin bidding jobs in federal government contracting, approaching them like commercial efforts. They quickly find there are major differences in the way the government contracts are marketed, proposed, priced and performed. These differences are not “Rocket Science” but it is necessary to learn about them and plan for success.

Here are 8 insights for planning your success in small business federal government service contracting:

1. UNDERSTAND THE LENGTHY SALES CYCLE

What immediately becomes apparent to the commercial small business when entering the federal contracting service contracting market is that the sales cycle is a long one and the preliminary steps are often hidden from public view.

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 FEDBIZOPPS. 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 FEDBIZOPPS. For additional details please see:

What Small Business Should Know About FEDBIZOPPS

Even if a company has had exposure to an agency, marketed on a program in advance of its announcement or become a member of an industry team to bid the job, the proposal and award process, to include negotiations and start up, can easily consume 90 to 120 days as a minimum. For major programs the process often exceeds 6 months in duration. Planning must occur for the expense associated with supporting such lengthy marketing efforts before any cash flow results.

2. APPRECIATE APPLICABLE DEFINITIONS, ROLES AND REGULATIONS

Participation in the government contacting market can involve participating as an individual, becoming a subcontractor as a company or seeking a prime contractor role. Those with product research and development support needs can participate in venues like Small Business Innovative Research (SBIR) and Mentor/Protege Programs. A GSA Schedule also provides opportunities for those in finished product sales. Please refer to the following articles for explanations of these roles and program definitions:

What Is A Small Business Federal Government Contractor?

Techniques For Product Development

Small Business Government Grants Versus Direct Contracts

Achieving and Utilizing A GSA Schedule

3. CONDUCT MARKET RESEARCH

If you are relying on FEDBIZOPPS or like sites for new business you will be very disappointed. Pre-solicitation notices do have promise, but you have to get inside an agency to find out who has the funding, the need and the decision-making authority.  It is rarely the contracting officer who posts the notice who has these responsibilities.

 
Pre-solicitations are alerts to industry, attempts to gauge industry interest or a way of "Kicking the Can Down the Road" until funding becomes available.  These notices are an indirect way of saying, "Come Visit Me and tell me about your company", or “Send Me your CAPE”. The full formal notification will come out at a time to be determined by when the agency gets the funding and how much interest there is in the contractor community. A schedule for when the formal bid notice will occur is rarely posted.


4. PROMOTE CAPABILITIES

Develop a capability statement (CAPE) to respond to government postings and mail directly to government agencies and to large corporations doing business with the government.

A capability statement is a necessity as a standalone marketing tool for dealing with government agencies and contractors. It should be short (no more than 2 pages) and hard hitting, containing all the information necessary for a government contracting officer or company buyer to place an order, as well as your registration information at local, state and federal web sites, your NAICS Codes and contact information.

Insert your CAPE in the tab at your web site where you discuss your background information and your government registrations.

See the second, vertical, Box Net “References” cube in the left margin of this site for an example of a good service contractor capabilities statement in the public domain.

5. ACQUIRE PERSONNEL STRATEGICALLY

Start up service contractors face the dual problem of establishing the enterprise with the one-time, non-recurring activities necessary to get the operation underway and at the same time acquire the core management talent and subsequent help as the business grows.

Even established companies who enter government service contracting find they cannot sustain a work force for large scale agency programs until the contracts are in hand to finance them.

A core team is an absolute necessity; it may be small and the business proposals may be few at first. But the core team product must be strategic in terms of high probability marketing to build the company base.

Supplementary help can be acquired by permanent ads at the company web site for generic skill sets, contingent hire agreements with prospective employees and similar techniques that position the resources on deck for business growth.

Small businesses commonly utilize contingent hire agreements to locate promising individuals who can bring projects or contacts with them when they join the firm. They are willing to negotiate a prospective wage and salary arrangement in advance of a proposal submission and commit to an offer of employment with benefits and commission should the program be won. They further offer to reimburse the participant for expenses and business related costs during the proposal period, if pre-approved.

The key to these arrangements is to identify target projects that both you and the candidate can go after, where the candidate is uniquely qualified to :

(1) Help win the job

(2) Contribute heavily to the proposal. Just bringing someone on who has no ability to offer targets usually does not work.

Contingent Hire Agreements

6. MAKE ASTUTE BID/NO BID DECISIONS

Government contract proposal preparation is time consuming and can be costly. Meeting the agency Request for Proposal (RFP) requirements with a responsive proposal can be well worth the effort if a winning strategy can be formulated.

When considering submitting a proposal to a given government solicitation, conduct a bid/no bid exercise. By going through that process you will begin formulating your win strategy or you will discover that you should not bid this job for lack of such a strategy. The elements of the process are in the form of questions to ask yourself against topics for key consideration at the following link:

Federal Government Contracting Proposal Preparation

Affirmative or non-affirmative answers to the topical questions and ability to fill in the blanks will drive your decision to bid or not bid a solicitation.


7. PREPARE YOUR BUSINESS SYSTEM FOR PRICING, ACCOUNTING AND BILLING

To effectively market a federal government contract a small business must sell on the basis of having a business system as well as technical performance infrastructure ready to run the job when a contract proposal is submitted. This dual requirement is where many small businesses fall short in their federal government contract start up planning.

Parallel thinking is required to plan for government project technical effort against a template of necessary business process infrastructure, driven by introducing Federal Acquisition Regulations (FAR) into the company. Key elements of the necessary business system infrastructure are discussed in the following articles:


Establishing FAR and CAS Compliant Small Business Systems

Managing Risk In Small Business Systems Development

8. PROPOSE TO WIN BY MEETING THE PAST PERFORMANCE CHALLENGE

As a small business begins the proposal submission process to federal government agencies or to prime contractors, the past performance challenge is major. By definition a start-up company in government contracting has no direct government agency past performance projects to site in meeting the requirement in requests for proposals (RFP’s) for historical references to similar projects in terms of size, duration and complexity

So how can a new organization or one that is new to government contracting muster a response to the past performance challenge?

The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record.

For further details see the following article:

The Small Business Federal Government Contracting Past Performance Challenge

SUMMARY

This writing has conveyed insights for planning participation strategically in the small business federal government service contracting market.
Consider the lengthy sales cycle and the roles your enterprise can best play in the venue. Conduct thorough market research, promote your capabilities endlessly and make astute bid/no bid decisions.

You must acquire core and supplementary help as business growth permits by using methods to preposition human resources. Prepare dynamic proposals with unique project plans to meet the past performance challenge, then execute your project plans to succeed.

Monday, December 31, 2018

Your Rights and Obligations Under a Government Contract Stop Work Order


                                                   Photo Courtesy Eyebeam dot Org

During a Federal Government Shutdown businesses may receive stop work orders from Contracting Officers. 

This article specifies the purpose of a stop work order, actions that must be taken upon receipt of the order and the relationship of the order to resumption of effort, funding constraints, contract terminations and associated business risk.

PURPOSE

The purpose of a stop work order is to immediately bring to a halt the effort on a contract and any further performance and related cost against that contract. 

It is usually necessary when unforeseen circumstances necessitate the action, such as the government shutdown or similar exigencies. An example of a clause that appears regularly in most government contracts, reserving the government's rights to stop work, is as follows:

"Stop-Work Order (Aug 1989)
(a) The Contracting Officer may, at any time, by written order to the Contractor, require the Contractor to stop all, or any part, of the work called for by this contract for a period of 90 days after the order is delivered to the Contractor, and for any further period to which the parties may agree. The order shall be specifically identified as a stop-work order issued under this clause. Upon receipt of the order, the Contractor shall immediately comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage. Within a period of 90 days after a stop-work is delivered to the Contractor, or within any extension of that period to which the parties shall have agreed, the Contracting Officer shall either—
(1) Cancel the stop-work order; or
(2) Terminate the work covered by the order as provided in the Default, or the Termination for Convenience of the Government, clause of this contract.
(b) If a stop-work order issued under this clause is canceled or the period of the order or any extension thereof expires, the Contractor shall resume work. The Contracting Officer shall make an equitable adjustment in the delivery schedule or contract price, or both, and the contract shall be modified, in writing, accordingly, if—
(1) The stop-work order results in an increase in the time required for, or in the Contractor’s cost properly allocable to, the performance of any part of this contract; and
(2) The Contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the Contracting Officer decides the facts justify the action, the Contracting Officer may receive and act upon the claim submitted at any time before final payment under this contract.
(c) If a stop-work order is not canceled and the work covered by the order is terminated for the convenience of the Government, the Contracting Officer shall allow reasonable costs resulting from the stop-work order in arriving at the termination settlement.
(d) If a stop-work order is not canceled and the work covered by the order is terminated for default, the Contracting Officer shall allow, by equitable adjustment or otherwise, reasonable costs resulting from the stop-work order.
(End of clause) "

ACTIONS

A stop work order is to be taken literally.  Under a stop work order the government makes no guarantees it will take any further deliveries whatsoever, regardless of the contract type. A stop work order means just that.  Stop work and stop incurring cost. 

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).

 I suggest clients receiving these orders close the charge numbers applicable until the stop work order is lifted with an order to resume effort and immediately notify any effected suppliers and subcontractors to do the same.

To the degree the government has made progress payments or has any other form of payment invested in the product to date it has ownership rights in the product. 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 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 CO 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 the 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. 

CONTRACT TERMINATIONS AND FUNDING CONSTRAINTS

Note that in the above cited clause the government discusses resumption of work and contract terminations as options.

Hypothetically at some future date the government could terminate the  contract without taking delivery and the contractor will then submit a termination proposal for recovery of costs and disruption. 


When a stop work order is lifted  the contract or the delivery order is open to negotiation on both price and delivery under the equitable adjustment and changes clauses in the FAR provisions of the contract.

At that time, you should inform the government that you are pleased to resume work, but under revised price and delivery conditions as specified in a proposal for equitable adjustment

You should not resume work until a contract or work order amendment is received granting the price and delivery relief to contract requirements commensurate with negotiation results under your proposal for equitable adjustment.

In short, time is money.

If your contract was adequately funded and remains so when work commences and assuming you negotiate acceptable terms and conditions you can proceed with low risk.  If the funding on the contract is low at the time of recommencement, it is recommended you request additional funding and handle that matter in accordance with the article linked below.


SUMMARY

Stop work orders are serious matters and require special handling to comply with government direction and to manage risk.  This article has discussed the principal options and equitable adjustment terms and conditions available to you if you undergo a stop work on a government contract.

Continuing effort on a contract after receipt of a stop work is high risk.

Astutely managing your options is a far better approach. 






Friday, December 28, 2018

Utilizing Contingent Hire Agreements to Strengthen Workforce Depth



Image:  "Bigstock"

An option to recruit prospective employees and associates who have previously worked in businesses that have contracted with the government is by utilizing contingent hire agreements.  Such individuals prospectively bring expertise and qualifications with them  and lend credibility to your enterprise proposals. 

A contingent hire agreement is one way to approach an experienced employee with the prospect of joining your firm at a later time when the business base is there to permit professional advancement. Under such an agreement the prospective employee agrees to contribute time and effort on a proposal for a new contract and is assured on paper by your company of a position on the project when it is awarded to your firm.  

Such arrangements are generally recognized by the government as a credible way for new or start-up businesses to grow and agencies will accept resumes of experienced professionals in proposals from small business contractors with signed contingent hire agreements even though the personnel may not yet be on the company payroll. 

Prospective employees of this type are often available from the retired or downsized ranks of  prime contractors. Be aware that government procurement integrity regulations apply. Individuals should not be considered who have a potential conflict of interest in the project you are bidding due to a former association with the buying agency in a source selection authority role as specified in FAR Section 3.104.

You can download a recommended free draft shell for this type of agreement from the right margin of this site at the BOX "References" cube.  Look for "Generic Contingent Hire Agreement"  in document list.  



Monday, December 24, 2018

Happy Holidays from the Ken Larson Free Q&A Reference Library






"Quora" Questions with Answers by Ken Larson that have undergone over 1 Million Views on Small Business Government Contracting and the U.S. Military Industrial Complex Ken Larson Reference Library on Quora

Friday, December 14, 2018

WHAT IS A SMALL BUSINESS FEDERAL GOVERNMENT “CONTRACTOR”?

Image:  SCORE.org


INTRODUCTION

There is often confusion regarding the definition of the term, “Contractor” in government work. The term is used in a conflicting manner to describe companies, individuals and business relationships. It has different connotations within corporations as opposed to government agencies, and is often confused with terms like “Subcontractor”, “Supplier” or “Vendor”.

This article defines the term, “Contractor” and discusses the regulatory factors and practical considerations related to use of the term from a small business federal government contracting perspective. 

DEFINITIONS

 1. Contractor (As Used In Corporations)
The term “Contractor” in corporations often refers to an individual, performing work for a company while not on the payroll as an employee, having no taxes, benefits or deductions taken from their pay and not covered by any form of insurance. The company issues a purchase order to the individual at an hourly rate and submits a Form 1099 to the US government reporting what the contractor is paid for services. The contractor must self-insure during the contract period and pay taxes on the money earned at the end of the tax year.

Recently there has been a dramatic decrease in the use of individuals as contractors in large government contracting corporations due to class action law suits brought by individuals who maintained they were utilized as employees without the associated benefits. The existing contractor work force was either offered permanent positions or released. Since that time, the use of contractors by large government prime contractors has been principally in specialty roles.

Corporations may also utilize the term “Contractors” when referring to companies in the manner defined by Definition 2, below. It is common for large prime contractors to use the term to describe themselves, their competition or co-equal teaming partners in joint ventures. When this 2nd definition is used it refers to a company, duly registered with the state and the federal government.

2. Contractor (As Used In Government Agencies)
The term “Contractors” in government parlance refers to businesses, not individuals. To become a contractor to a government agency, you must therefore form your own business. Government agencies do not engage individual “Contractors” as defined in 1, above. If they want individuals to perform services they put them on the agency payroll. If they want to acquire specialized outside services they contract with companies. 

3. Subcontractor

A “Subcontractor" is a company that takes on a flow-down of liability from a prime contractor to complete a major portion of a large scale job for the prime contractor's customer. The subcontractor is obligated to the prime contractually in an identical fashion as the prime is obligated to the government agency. The prime contractor issues a subcontract with a statement of work and flow down terms and conditions from the prime contract to the subcontractor. In many instances the government requires review and approval of major subcontractor selections and holds the prime contractor accountable contractually at the prime contract level for the subcontractor(s) efforts.

4. Supplier (or Vendor)
The term, “Supplier” connotes basically commercial relationships with companies that supply off the shelf parts and materials or simple, generic services. The General Services Administration (GSA) and other federal agencies also use the term to describe companies in negotiating supply schedules or in buying items under the commercial sections in the Federal Acquisition Regulation (FAR), such as FAR Part 12. Supplier contracts generally emphasize, price, delivery and matters such as warranty and do not involve -complex terms and conditions or the flow down of liability from the ordering firm prime contract.

REGULATORY FACTORS

The Federal Acquisition Regulation (FAR) clauses governing small business state that a company undertaking a small business set-aside prime contract must be capable of performing 51% of the work scope under the terms of that contract and may not subcontract (as in 3, above) any more than 49% of the effort. These FAR clauses do not limit 1099 contractors (as in 1, above).

Many small enterprises use independent contractors on call to fulfill the manpower requirements of their contracts and specify these personnel in their proposals as qualified individuals. When these clients grow in long term contracts they make such personnel permanent party if the contractors are willing. Often contingent hire agreements are used for that purpose while proposing major programs. You can download a generic agreement from the "References" Box Net cube in the left margin of this site.

Contractors (as in 1 above) may be used to the extent they are necessary to win, but bear in mind the government prefers to see permanent party, since that implies stability (the government is conditioned to the perception that individuals , as contractors come and go).

Small business should propose work scope under set aside programs in teaming agreements so that the prime (small business) is performing at least 60% of the effort with employees or contractors to avoid the appearance of a front by a larger company (even though the statutory requirement is 51%).


In many cases it is preferable for a start-up small business to become a subcontractor, rather than a prime, building past performance associated with government contracting and developing beneficial teaming relationships with experienced government contracting firms.

SUMMARY
It is possible for a small business to perform, in tandem, one or more of the "Contractor" roles discussed in this article. Sometimes multiple roles are established with the same corporation or agency. Please use the search box at this site to view articles for information related to this topic.

It is vital to understand the "Contractor" role definition for each contractual commitment to insure suitable risk analysis, a good past performance record, conflict of interest avoidance and a solid reputation in the industry.

Tuesday, December 11, 2018

Managing Government Contract Limitation of Funds and Funding Exposure

Photo:  Getty Images
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 amounts exceeding incremental funding.

Nearing the end of a government fiscal year or under a government shutdown a contractor may find delays in funding reaching all the way to congress. This situation must be managed with the government contracting officer.


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 two or more 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.

If a contract is not funded to continue and the contractor has performed to date in accordance with all required terms, the government retains the right to terminate the contract for the convenience of the government. This requires a special notification to the contractor from the government and usually occurs due to changes in government priorities. The contractor may then bill the government for all costs and obligations to date, plus any direct and indirect extraordinary costs associated with business disruption, termination administration, employee layoff cost and the like. Terminations for convenience are very expensive for the government. Nevertheless, limitation of funds and funding exposure must be carefully monitored by an astute small business.


To properly manage incremental funding, the business system must be capable of accounting monthly for all direct and indirect costs on each contract, plus commitments to suppliers and employees in the form of open purchase orders and unpaid or unposted payroll.


Your internal release document should specify the current incremental funding if your contract is not fully funded at award. Further revisions to your release documentation should convey receipt of contact amendments from the government that supply additional required funding to the contract as performance proceeds. Requests for increases in incremental funding are required when the actual booked cost plus commitments to suppliers reaches 80% of the current funding on the contact. In the event the contact is not adequately funded incrementally by the government, a revision to your internal release documentation should specify a stop work order after you have notified your customer that you plan to cease performance on the contract due to lack of sufficient funding. Notification should be provided to suppliers under your contract with a stop work to avoid their incurring additional costs for which you are not receiving funding from the government. Be specific with a stop work date to these suppliers.


In the event the contract is terminated for convenience, a new revision to your internal release document should set up a special project and identifying number for accumulating costs specifically associated with the termination. These costs will be billed separately to the government under a termination contract modification and should be carefully recorded. Both direct costs and indirect costs at all levels of the company may be charged direct to a contract termination for convenience. You can expect your suppliers to bill for cost to date and termination cost as well. You will pass on those costs to the government in your proposal for termination for convenience of the government. The government will assume ownership of all inventory and work in process on terminated cost type contracts. Termination proposals, audits, negotiations and contract closeout can be lengthy and complicated proceedings.

Saturday, December 1, 2018

Don't Overlook The Government Contract Data Requirements List (CDRL)

Image:  Defense Acquisition University 
The Contract Data Requirements List (CDRL) is usually contained in Part III, Section J of the government solicitation you are bidding and the executed contract upon award. 

The CDRL is a register of the deliverable data items. Each data item has a discrete numeric identifier, a data item description (DID) number and a delivery schedule to the customer. 

The CDRL is commonly conveyed on DD Form 1423 by the Department of Defense (DOD) specifying the delivery address, number of copies required and the reviewing and approving authority for the data item within the government agency.  It also specifies electronic addresses if electronic data delivery is necessary. Forms other than a DD Form 1423 may be used to convey data item requirements by agencies outside DOD. That form may be as simple as a listing of requirements. 

You should review the listing to insure adequate definition and understanding exist for you to commit to the data requirements when you sign your contract. Data Item Descriptions (DID's) are available at:

Data Item Description Library

Although it is unusual to negotiate separate pricing for contract data, your negotiated contract and resulting budget baseline must contain the resources to prepare and submit these items.

On contracts for new products, data item submissions represent major benchmarks on the contract schedule. Results of study, research, engineering design and development are submitted in the form of data items to the government for approval. 

Once approved, data items form the specifications for continuing effort on the contract. Key design reviews on development programs are focused on the contents of data item submissions.

Data item submissions contain reports of contract cost and schedule performance, results of status meetings and records of ongoing deliveries. Data item deliveries are key factors in demonstrating successful performance under the contract.

In some instances, the number of data items and the level of detail in each are negotiable with the government. Such negotiations have a direct impact on cost even though data items are not normally priced separately in the contract.

The cost for data item preparation and submission is usually included in the pricing in Section B of the contract within the prices for contract line item deliverable to which the data items apply.

SDRL or "Subcontract Data Requirements List" is a prime contractor flow-down of the CDRL requirements to a subcontractor. 

Generally the prime will structure the SDRL to insure that subcontractor data submissions support the prime contract CDRL technical content, schedule and other parameters. 

The prime may also take the liberty to incorporate additional requirement to support their own internal systems of quality,cost and schedule control. 

As with CDRL requirements, SDRL's should be carefully priced within the end item CLIN's to which they apply to insure cost coverage.

Monday, November 26, 2018

Assessing Department of Labor (DOL) Government Contract Wage/Rate Determinations



MANAGING COMPLIANCE WITH THE SERVICE CONTRACT AND DAVIS-BACON ACTS


INTRODUCTION:


When pricing government contracts, in particular service contracts, the small business will encounter government wage determinations under the Service Contract Act and Davis-Bacon Act. These determinations specify the minimum wages and related benefits that must be paid to all hourly employees charging time directly to a federal service contract as part of a total compensation plan.   

The Department of Labor Manages the Wage Determination program.

DOL Wage Determination Web Site


Contractor compliance with Wage Determinations  is subject to audit by the Department of Labor, Defense Contract Audit Agency, or other agency audit procedures. Failure to prove compliance may subject the contractor to debarment from all government contracts for up to three years.

Service Contract Act, as an example, requires minimum wages be paid per labor category as defined in the Directory of Occupations and listed as minimum wages per labor category on the Area Wage Determination incorporated into each contract. The wages are mandatory minimums paid employees for every hour worked on the contract as defined by The Act, both full-time and part-time. A typical Wage Determination is below: (Please Click Image to Enlarge)



MANAGEMENT CONSIDERATIONS:

When bidding a service contract with a requirement containing a Wage Determination, the labor category wages and fringe must conform, as a minimum,to the Wage Determination in the government Request for Proposal (RFP).  The personnel must be paid not less than the wages and fringe benefits specified in the determination when the contract is awarded.   


Due to competitive factors and labor market concerns the company may propose labor and fringe exceeding the Wage Determination, but the bid cannot go beneath the government specified rates.  Below is a typical conformance table for an engineering firm with the Wage Determination information on the right side and the company bid rate on the left side of the table.  (Please Click Image to Enlarge)

.

The Fringe element of the Wage Determination conformance is usually discussed in the basis of estimate for the fringe rate in the price proposal. A major project in a given location may impact on the company wide-fringe rate if existing fringes in the company do not meet the minimum requirement for the wage determination in the area being bid. This can be a deciding factor in a bid/no bid decision on a prospective project.
 
When conforming a labor category to a government wage determination,  the title of the company job need not be identical to that to which the government wage determination refers, but the company job description must be made available to an auditor for compliance mapping purposed; i.e. the role of the individual and the scope of his or her job description must very closely match the government documents. It is best to use existing company labor categories and descriptions and work any exceptions during the conformance process, conveying the results in the form of a table similar to the above in your proposal.

If a particular wage determination selected by the contracting officer in the RFP appears to be vastly out of sync with the scope of work in the prospective contract, it is best to bring this to the government's attention in the form of a question or a suggestion for improvement during the Q&A or draft RFP comments phase of the bid process.  But remember, your question, its answer and any action taken by the CO will be made available to all competitors. 

In many instances competitive labor rates, and in some cases benefits as well, will be higher than those specified in the government wage determination. Wage determination updates by the government often lag rapidly changing technical labor markets and area economic trends.

Evaluate your initial GSA Schedule and renewals against area wage determinations, since the government may choose to buy off your schedule or you may choose to use your GSA Schedule rates to bid a procurement where a wage determination applies.

Demographics in your company may play a role.  Accumulation of labor cost history driving a pay rate in one geographic location of a company for a given labor category may not meet government wage determinations if that category is used in another geographic area with a different area wage determination in a substantially different labor market.  Many larger firms maintain standard rates across multiple geographic locations to deal with this factor.  

SUMMARY

Regularly review your company labor category rates and fringe benefits for ongoing compliance with DOL Area Wage Determinations. Sample the DOL Wage Determination web site regularly as a normal function of maintaining your labor rates and fringe benefits costs.