Helpful Pricing Hints
Know the Escalation: So many contractors, subcontractors, and vendors are stuck in the mindset that 2-2.5% escalation is the acceptable range. False! Take a look at the Bureau of Labor Statistics (BLS) Employment Cost Index (ECI) – like this one Employment Cost Index – March 2024 (bls.gov) – and you’ll get a better understanding of the average inflation rate. It’s reasonable to use the last 12 months average- which at this time is over 4%! Of course, escalation also depends on your contract type and acquisition strategy, but you should make a choice to reduce it to ~2% instead of assuming it can’t be higher!
Know the Type of Analysis: Knowing what type of analysis is being performed by the government customer is crucial. The type of analysis is generally based on contract type, estimated price, and competition. For example, if the Government says they are performing price realism, that means they are looking to see if a price is too low (aka not realistic). That is different than price analysis where the Government is solely determining that prices are fair and reasonable. Knowing whether the government is performing a price realism or price analysis evaluation directly impacts your pricing strategy. (See GAO case ).
Make sure the technical volume aligns!: While it is true that the cost/price/business volume and technical volume should not rely on each other, it does not mean they shouldn’t correlate. Did you propose specific key personnel in your technical volume? If yes, then they normally are the ones proposed in the cost volume. Did you state in your technical volume that you would be procuring a specific software for the effort? If yes, did you price it out? These types of inconsistencies, if not adequately addressed, can cause a reviewer to determine the cost or price is not reasonable and lost awards.
Optimize the Use of Indirects on ODCs: A common misconception is that indirect rates cannot be applied on ODCs. Unless expressly prohibited in the solicitation or award, an Offeror is generally able to propose indirect rates. It is not unallowable to propose G&A or M&SH on ODCs if that’s standard practice, although a pricing strategy would help determine if it makes sense. What’s important is making sure the assumption of applying any is in an Offeror’s proposal and consistent with an Offeror’s standard practice. And if FAR 52.212-4 Alternate I is included, make sure to fill it in with the proposed indirect price.
About The Author, Bernita Tardieu
Bernita Washington Tardieu is a seasoned legal and contracts professional with extensive experience leading strategic contracting activities with the USG, international governments, and domestic and international commercial companies. In addition to compliant full life cycle contract and procurement management, she has in depth experience with joint venture creation and management, mergers and acquisition due diligence and integration, licensing and IP protection agreements, and reseller and distributor partnerships.
