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5 Pricing Tips for the New Year

As we enter a new calendar year, we begin the madness of sharpening our budgets and pipelines.  Some of the focus ends up being on managing expenses and headcount, as it should, but often some quick and easy planning can help you to optimize your pricing strategy for the next year.

To get you started, here are five pricing tips for the new year:

  1. Contract Labor Bill Rate Review
    Have you had any staff turnover on your firm fixed price or time and materials contracts? If so, you may be able to capture some labor efficiencies by “greening” those positions and/or consolidating functions under higher bill rate positions. BONUS TIP: This is especially helpful if the contract is up for a re-competition and you’re the incumbent.
  2. Cost-Plus Contracts
    If your Cost-Plus contract is coming up for a re-compete, review all of the direct labor rates, and examine them against market rates (such as a survey or government rate data such as Bureau of Labor Statistics).  Bid market rates, NOT current employee rates.
  3. Subcontract Review
    Are there opportunities to bring in new subcontractors of the same quality/scope, but with better rates? This might be dependent on teaming agreements and workshare commitments. If the contract allows it, develop an active strategy around subcontractor selection and rates every year.
  4. Overhead & Infrastructure Review
    Facilities – this is a big one. Are there opportunities to renew different types of leases/facilities?  You may want to explore the trend of shared/co-working spaces. This solution can provide a lot of cost efficiencies if your contract/company policy allows it. Telecom expenses are also a major player. There are a multitude of new options that minimize the telecom costs for entire companies through third-party vendors and resellers, or cost sharing with other companies. Do your homework and save your company money in the long run.
  5. Beef Up Your Back Office Support
    Can you outsource major functions such as accounting, HR, recruiting, contracts? Believe it or not, this is becoming a good option for many mid-tier contractors. Use this opportunity to get lean without sacrificing quality and compliance standards.

The tips above are not a one-and-done type of deal. You should be reviewing internally each year as you plan operations and execution of contracts for the new year.  While much of this is common sense, seldom is it applied to affect pricing strategy/updates.  Use this information to bid sharper and smarter than your competitors and get the edge in pricing!

BOOST Featured Guest | SC&H Group

At BOOST LLC we are lucky to rub elbows with some pretty smart people and businesses. So much so, that we’re going to share them with you! Periodically we’ll feature a govcon guest/business alongside their thoughts and hot-takes relevant to their industry.

FEATURED GUEST:  Pete Ragone, SC&H Group

What is your best advice to solve the biggest problem in your industry?

Businesses aren’t just looking for a “one trick,” partner anymore. They are looking for a firm with dynamic capabilities that can evolve and serve them as their needs change. Additionally, technology continues to break down walls within organizations therefore the scope of where our expertise is needed has changed. As a result, we continue to develop offerings that address the most pressing needs of our clients. This evolution solidifies the need to hire, train and retain employees with diverse backgrounds and expertise to be able to provide our clients with the expert advice they require to succeed.

What has been the weirdest experience you’ve had working within the government contracting community?

The weirdest experience I had relates to an M&A deal I was brought in to potentially perform due diligence on behalf of the buyer. I was contacted by the buyer that they were trying to close on the deal within five days. I let the buyer know that typical due diligence requires at least 30-60 days of lead time depending on the size and scope of the seller’s business, however, I did agree to at least look at whatever internal documents were available from the seller in the data room. After reviewing the limited number of documents provided in the data room, I recommended that the buyer delay closing on the deal at least another 30 days to allow our firm to perform adequate due diligence services as there were some very large red flags that gave me great concern. Sadly, the buyer ignored my advice and closed on the deal within the five-day period. That buyer is now in the process of determining whether to declare bankruptcy less than a year after making the acquisition. In this extremely active M&A market for the government contracting industry,  I cannot stress enough to companies that are looking to acquire or sell a business to please do adequate due diligence to mitigate risk and avoid similar outcomes.

What is your “hot take” on a current industry’s trending topic?

One current industry trending topic in the government contracting industry is the use of Other Transaction Authority (OTA’s or OT arrangements) as a mechanism for the federal government to bypass typical onerous procurement rules. OT arrangements are legally binding instruments typically used to engage companies, as well as academia, for a broad range of research, development, and prototyping activities. These OT arrangements are not bound by the normal federal laws and regulations that apply to government procurement contracts (e.g. FAR/DFARS). Recently I have attended many government contracting industry conferences and seminars espousing the benefits of OT arrangements to help government contractors grow their business. However, recently the GAO has begun to investigate the use of OT arrangements for production type contracts, which is not the original intent of the legislation. Accordingly, I recommend business owners seeking to win new business via OT arrangements ensure they seek expert advice from a government contracting attorney with experience and expertise in OTs.

Where do you see yourself/your company in 5 years?

SC&H Group will continue to evolve to meet the changing needs of businesses all the while keeping a pulse on the best strategies to deploy for our clients across industries. Our growth will run parallel to ensuring our employees continue to have educational development opportunities, including insights into how innovation will play a significant role in shaping our services and our clients’ strategic plans. Additionally we will continue to be a thought leader and valued resource to business owners and executives in the government contracting industry to help them succeed in their goals to grow a profitable business, organically and/or through acquisitions, through sound business and tax advice as well as provide expert advice to owners looking for potential exit strategies (e.g. sell to PE/strategic buyer, ESOP transaction, or management-buyout).