Smart Tips for Pricing Labor Rates

If you’re bidding on any government contract these days, whether it’s a Firm Fixed Price or Cost Plus, there is almost always a requirement to demonstrate and justify how your labor rates were developed.  Many companies may end up bidding existing employee rates (that’s fine, but may not be the smartest approach), or using free online sources such as salary.com.  We recommend a few better approaches to refine and really sharpen the bid rates. Note here that there is, of course, a cost to obtain good data.  Good data paves the way for good analysis.

Here are BOOST’s top three tips to develop and bid smart labor rates (that you can justify to the government and intelligently execute):

  1. Access: Get access to labor survey databases. This can be costly, but there are options for buying reports or gaining access. Options include: using cost-sharing with other partners buying a license directly with companies such as Economic Research Institute (ERI), Mercer, Western Management Group, proprietary survey tools from BOOST etc,. These depend on their cost and your usage.  Do not rely on free sites such as salary.com or LinkedIn. It’s possible to review them and perhaps use them as a way to triangulate, but they should not be used as primary sources of information to justify your rates.
  2. Research: Use government sources such as the Department of Labor Bureau of Labor Statistics data tables. This isn’t the most accurate way to define your rates, but it can provide a good range to compare to the other data sources and provide fidelity. Additionally, peruse GS Pay rates and add them into your analysis.  Use these resources with caution. They’re not as refined as the commercially developed salary databases mentioned above, but sometimes the government does require you to bid within these ranges.
  3. Collaborate: Get your subcontractors on data calls. When developing labor rates, you’re often required to request rate data calls from your subcontractors.
    This does two things –

1. Ensures that you’re performing a proper subcontractor rate analysis as a part of the FAR requirements.

2. Provides actual data points from various companies in the scope of the contract/work to be performed.

In a way, this is actual live market data, that you can use to compare and refine your rates.  This is an often-overlooked strategy because it’s very time-sensitive. Furthermore, you don’t usually get the data in enough time to make actual pricing comparisons and decisions on your rates.  This is why a proper timeline and pricing schedule must be implemented. That’s a story for another day!

Pricing is a monster all on its own, but with these smart tips you can start to tame the beast. The pricing experts at BOOST are experienced in helping to support your strategic pricing needs. Contact us today to better prepare and price your proposals.

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