Baseline Management in Government Contracting

It is in the long term interests of astute contractors to assist in contract baseline management. The only way to achieve such an objective is through sound technical, cost and schedule definition and control via an iterative process with the government. This article will address that process.

SOLICITATION AND STATEMENT OF WORK BASELINE

If you are selling a straight commercial product off the shelf, the problem of baseline management is minimal, assuming your product meets the specifications required and you deliver on time. Is is during development programs for new products or service contracts involving labor supplied to the government that lack of definition and poor communication are high risks. The initial benchmark for managing this risk is in the government solicitation and statement of work.

A wise customer farms the preliminary draft solicitation and statement of work out to prospective bidders and requests comment. A wise supplier is constructive, yet critical in pointing out weaknesses in the document.

Part 1, Section C, is where the technical specifications and statement of work are located in the solicitation and will reside in your negotiated contract.Without a well written Statement of Work (SOW) and associated supplies and services specifications there is unacceptable risk in the future contract and is it exceptionally high risk to bid or contract the job. Both the contractor and the government must come to an understanding regarding the scope of effort to be performed. That understanding is conveyed in the SOW and confirmed in the specifications referenced therein. A good SOW should have the following principal attributes:

* Clear identification of the products, services, skills, materials and performance factors required to complete the contract

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

* Specific references to product specifications that govern an acceptable product or services performance outcome and delivery acceptance

* A schedule for the contract that identifies discrete delivery dates for products and specific start and end dates for supporting labor.

* A precise description of government furnished material or facilities required and when it will be made available to the contractor.

If your customer does not provide the above, offer a revision to the document during the comments period, during your proposal or during negotiations that represents a version to which your company will commit. Do not let the fact the program is competitive sway you from the facts. Signing off on a poorly written SOW results in a difficult contract to manage, a high probability for disputes during the contracting period and a poor past performance record you will have to deal with in the future on other jobs.

You should also do a complete review of the Contract Line Item (CLIN) Structure in the solicitation and cross foot SOW requirements to insure the scope is covered by the CLIN'S.

Please see the following article on how to perform this analysis:

Contract Line Items - The Heart of Your Contract

NEGOTIATION BASELINE

The following article discusses the standard template for negotiations through which government contracts generally pass:

Government Contract Negotiation

During the audit, fact-finding and subsequent negotiation steps, a growing definition of the contract occurs and a clear understanding between you and your customer evolves. If you find the process slow and unknowns frequently surfacing, that is a barometer of future difficulty unless the issues are resolved. Technical work scope, schedule, cost and terms and conditions regarding inspection and acceptance as well as payment provisions are especially sensitive.

CONTRACT AWARD BASELINE

Signing the contract represents full agreement on the proposal and conclusion of negotiations. Award is the benchmark baseline for contract performance.

BASELINE MAINTENANCE - THE CHANGES CLAUSE

During the period of performance on a development or services contract, effort does not always go as planned. The article on Earned Value Performance Measurement (EVMS) at this site is one technique to control this situation:

Earned Value Mangagment

Not all programs warrant EVMS or have the funding to perform that type of control. The simple rule of thumb is that the changes clause in your contract allows you to request additional funding and schedule relief, as well as a modification to the SOW if you are being driven by customer directed work scope change events to depart from the baseline to which you committed at contract award.

To the extent you do not remain sensitive to this provision, on a firm fixed price contract you will lose money. On a cost plus and time and materials type contract you will consume funding at a higher rate and faster than the contact baseline anticipated and your customer may or may not be able to provide additional monies when the ceiling amount on the contract is reached. At that point in time it is too late and everyone is disappointed.

The above occurrences are collectively known as "Scope Creep" in project management circles.

THE DIFFERENCE BETWEEN BUDGET AND FUNDING - (Limitation of Funds and Funding Exposure)

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 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 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.

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 un-posted 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 SUMMARY - KNOW WHERE YOUR ARE AND WHEN TO SAY "NO"

"Scope Creep" can kill a contract, a customer relationship and a past performance record, all of which are important to your business. Stay in front of "The Scope Creep" by communicating positively with your customer to control your baseline, keeping cost, schedule and technical performance integrated and synchronous.

Six rules of Thumb to control "Scope Creep":

1. KNOW - The contract value and its ceiling amount

2. KNOW - The incurred cost to date and commitments

3. KNOW - The scope of work and whether or not your current efforts are supporting it or some other objectives

4. KNOW - The estimated cost at completion based on where you are at today

5. KNOW - Your customer and who among the customer population is prone to direct out of scope effort.

6. KNOW - WHEN TO SAY "NO" to "Scope Creep" and say it officially in writing to the contracting officer specified in your contract.

Multiple-Front Marketing In Small Business Federal Government Contracting

INTRODUCTION:

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

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

SELECT YOUR SMALL BUSINESS SET ASIDE DESIGNATIONS CAREFULLY

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

Federal Government Contracting Registration

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

USA Spending

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

SBA Goaling Reports


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

Small Business Set-aside Programs

TARGET REQUIREMENTS EARLY

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

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

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

MAKE PRUDENT BID/NO BID DECISIONS

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

Government Contracting Bid/No Bid and Proposal Preparation

EXPLORE SERVICE CONTRACTING AND TEAMING

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

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

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

Teaming in Small Business Contracting

OBTAIN A GSA SCHEDULE

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

Achieving and Utilizing A GSA Schedule

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

1. Finding an open solicitation that fits your product line

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

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

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

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

DEVELOP A DYNAMIC CAPABILITY STATEMENT

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

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

Your Capability Statement

WRITE RESPONSIVE PROPOSALS

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

The following link contains guidance on writing effective proposals:

Proposal Preparation

SUMMARY

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

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

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

The Past Performance Challenge


ABOUT THE AUTHOR:

Small to Feds is maintained by Ken Larson a Veteran of 2 tours - US Army Vietnam.

As a Volunteer Counselor, he assists many small businesses with their planning and operations processes.

Subsequent to his military service Ken spent over 30 years in federal government contract management and 10 years in small business consulting. He gets many inquiries from small companies wishing to enter or enhance their position in federal government contracting or grow their commercial enterprise. This site is intended to assist in answering those questions and others small businesses have in developing and operating a successful firm.

Those wishing a free counseling session may contact Ken at:

Ken Larson MicroMentor

Unsolicited Government Contract Proposals - A Multiple Stage Challenge

INTRODUCTION

Most enterprises in government contracting encounter the possibility of submitting an unsolicited proposal.  The perceived opportunity arises as a result of observing a requirement that the company could uniquely fulfill, but for which the government has yet to issue a formal solicitation.

These opportunities are normally  large enough so they can't be sold off a GSA schedule or an existing contract delivery order, and do not fall under FAR Part 12, "Commercial Contracting”  

CHALLENGES AND STRATEGY

Since your product or service is not on the funding docket with the agency it does not have a funding I.D. Your job is to get the technical and project personnel enthused enough about it to carve out a niche in their program area and support a funding request for it. They do so by  to obtaining a solicitation I.D; money and authorization to buy from you.

The key to achieving the above is a good presentation revolving around your capability statement but supplemented by a pitch that should emphasize specifically how you understand the agency mission and that your offerings could further it.

Your objective should be to submit a hard hitting summary with a proposal in letter form, protected with the standard proprietary markings, through the contracting officer with whom you have already had discussions to the technical lead in the agency and request a meeting to make the full pitch. 

WORK YOUR PROPOSAL IN STAGES

The following link is the Federal Acquisition Regulation (FAR) guidance on unsolicited proposals:

FAR Guidance - Unsolicited Proposals

Be advised that you need to assert your rights in technical data and software on anything you give them that is product oriented because you have made an investment in it. When they start putting money into its further development you find them pressuring you for a deal on licensing and free use of it in exchange for funding and orders for services. That is the normal course of events and it can be managed.

Another approach is to carefully locate a platform provider that could use your product or services and team with them on a larger scale, bundled program that may be going to formal solicitation.

In either of the above instances, carefully protect your idea using the tips in the below article:

Protecting Intellectual Property

You will note that the FAR guidance specifies that cost and pricing data must be submitted so the proposal may be evaluated.  Naturally you must provide that ultimately, but it is recommended you do not do so with your initial proposal submission.  Simply state you will be pleased discuss with the agency the scope in terms of types and quantities of product and services, after which you will price the result of their input for planning purposes, pending a formal solicitation with funding commitment.

If the agency or a prime gets enthused, they will ask for a Rough Order of Magnitude (ROM) estimate for planning and funding purposes on what your product or services may cost. Be careful to make it conservative because those things get cast in concrete and caveat any ROM with a written statement that your ROM is not a formal commitment to a contract and that you will be pleased to commit with a formal proposal from the government through a duly authorized contracting officer under a funded solicitation.

I have had clients that have even been requested by agencies to write a statement of work for such a solicitation

The government fiscal year is a key driver in terms of available funding and getting it earmarked. Keep in mind funding for a program using your idea or a platform using it must fall within a funding cycle that begins 1 October, picks up heavily in July and August and must conclude in September.

CONCLUSION

Success in unsolicited proposals is a process:

1.   An initial unsolicited proposal submission after focused marketing is the gateway

2.   A strong presentation to the customer in person is key.

3.   Rough order of magnitude (ROM) pricing permits planning by the customer

4.   A funded solicitation is a green light for a firm contract proposal.

5    A Formal proposal submission under a funded solicitation, committing to negotiable price, schedule and delivery terms wins the contract. 

In addition to the articles linked above, please review the following 2 articles for further guidance:

Pricing Small Business Federal Government Contract Proposals

Contract Baseline Managment

What Small Business Needs to Know About SAM Contract Opportunities

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. 

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.

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.