Posts

BOOST Strategic Pricing

Get in touch with BOOST LLC’s pricing team today!
[email protected]

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.

Audit Files, How Important Are They?

Well, the proposal was submitted, the “all-nighters” are done, the proposal team has celebrated either with a big happy hour or a 48-hour night/day of sleep, and all is well.  It seems that way at first until the pricing specialist wakes up in the middle of the night dreaming of errors and mistakes or compliance issues (I can only speak about myself, I’m sure the rest of the proposal team has the same sort of nightmares!).  One way to avoid having post-proposal-submission-anxiety is to document and save records of everything in your pricing files.  This is critical not only for your mental health, but for the corporate audit risk as well.  DCAA can and will come back at any point to conduct audits of how the proposal rates were developed.  Here are some quick tips to be prepared and to alleviate any post-proposal submission stress (I’ve named this condition PPSS):

  1. Create an Audit folder – archive this as a part of your proposal files. Create a substructure in which you can store documents related to inputs, version control history, emails, etc.
  2. Document, document, document – any email with inputs from the proposal or management team, such as basis of estimates, changes to management plans, hours, staffing or teammates. Anything that documents the direction of the proposal, why something changed, when it changed, and the reasoning.
  3. Save all emails – no shortcuts
  4. Save all inputs from the Finance, Accounting, HR teams – These are critical, because they will be the back up required to demonstrate how your rates and assumptions were developed.
  5. Save all versions of your cost models – This way you’re able to track and see iterative changes related to inputs or assumptions, and amendments related to the RFP.
  6. Save all versions of your cost volume – Ensure track changes are on, in all the draft versions, and save the final submitted versions (gold team), in a separate folder. You need to be able to trace if and how changes were made.  This is not just about CYA, it’s about accountability. If something changed and it didn’t sync up with the technical volumes, you may be able to figure out why and remedy it if the government wants clarifications and corrections after submission.
  7. Have a dedicated folder – It is best practice to create and save this folder as you develop the proposal, but it’s OK if you don’t get to it until after submission. Just make sure it’s done either way!

 

Overall, be smart, save all the relevant documents, versions and files in an archive folder.  Don’t alter the files, lock them down and only give access to parties that require it.  This is your audit folder, this should provide all the clarifications and corrections to DCAA, should they audit your proposal.  This also provides a good way to review any proposal related mistakes or for a regular after-action review.  This will also help you (yes, you the Pricing team), get a good night’s rest because you’ll have all the history saved and be able to check on mistakes or errors or compliance issues that might be keeping you up.  You can only prevent mistakes in the future if you know what happened.  This audit file can also be used during a re-compete to pull historical data or historical assumptions that might form the pricing strategy for your new bid.  Basically, always prepare and keep an audit folder after your proposal is submitted.

 

Proposals are challenging, but the hard work makes the win so much sweeter. Let BOOST LLC help you with your pricing strategy. Email [email protected] and schedule a consultation today.

How to Manage a Pricing Schedule

Why a proper pricing proposal schedule matters.

You’ve been preparing and actively developing capture strategies for an upcoming bid and eagerly awaiting the draft or final RFP to drop. Finally, it drops! All proposal functions swing into action. The proposal manager’s first job is to develop a schedule and hold everyone accountable to it. Very seldom do we get a proposal manager to ask us for a “Pricing Schedule”. However, we always insist.  Here’s why:

Price/Cost volumes these days require a lot more facilitation and coordination with other volume leads than most people realize. 

  1. Basis of Estimates. Many cost volumes require a complete basis of estimates to be written and tied to the price tables. The question is “How is the pricing manager going to be able to do this without coordinating with the technical/management volume leads?” The Basis of Estimates (BOE) and technical schedules MUST be in sync with the cost volume timelines. We recommend that the pricing manager set this schedule. This includes giving out deadlines to the BOE writers and standardizing the BOE data calls.  This is usually a standard template organized to capture the various work breakdown structure (WBS) elements that feed the various Contract Line items (CLINS).  It is critical to understand that unless these estimates can be produced and relayed into the pricing tables in due time, the whole proposal WILL be at risk. It is never an easy task to take in estimates at the last minute and develop pricing tables and submit the proposal within a day. We recommend that the first cut of these estimates be provided to the pricing team right after red team is done on the technical volumes. Then a review and updates are to be provided after the final review of the technical volume.
  2. Subcontractors. If the RFP requires subcontractor rates and sealed bids, this must be coordinated in advance. This timeline must be set and adhered to early on. Not only for compliance, but also for finalizing rate strategies. Sealed bids also require a few extra days of preparation by your subcontractors. They need instructions and active management of this timeline. Often these rates also impact your small business plan numbers that must be submitted. All these pieces must be accurate and in sync by the time the cost volume is finalized. Pick up the phone and get everyone aligned, early.
  3. Management Review. Management reviews are a soap box item for many pricing managers. If you don’t give your pricing team enough time to cycle through the technical and rate updates, how do you expect them to be ready for a proper management review? If management has to make the final decisions on fee/profit, workshare, key personnel, and any other ways to finalize the price, they need the best models with the most accurate information in order to do so. Bad or incomplete technical estimates make for bad pricing models. Plain and simple. So, get them done in time! Organize and coordinate with the BOE writers, hold them accountable for the pricing timelines. You may also need to hold the management team accountable, so that they realize that any changes made at the last minute (yes Gold Team reviewers we’re looking at you), have cascading effects on the pricing volume.  All final decisions should be made during Green Team (which should happen a few days before Gold team, if possible).

We have seen many cost volumes developed in a rush in the final days of the proposal stage, and this puts the entire proposal at risk. Mitigate this by being aware of missed opportunities to refine/review a smartly developed and compliant proposal.  With good schedule management, the pricing volume can be a proper, accurate and complete document that will be a part of the winning proposal. Don’t make your pricing volume the reason for your proposal loss.

BOOST has pricing experts at the ready, but don’t wait until it’s too late. (See point b, above.) Get connected with us now so that when you need us you already have our number on speed dial. [email protected]

What is Price to Win?

All right govcons, here’s another fancy schmancy phrase that is pretty common in our industry and yet nobody really knows what this mysterious thing is. Price to Win (PTW)! What? Does anyone truly have a guide to THE winning number? Think about that for a second. The answer is a resounding NO. If someone did, they would be richer than Jeff Bezos. So, what is the number or how can we at least get close? After working on and consulting with the Price to Win gurus in the industry, it’s safe to say that Price to Win isn’t a miracle cure to your pricing problems.

What are pricing problems?

  • You’ve been losing proposals because of the pricing factors involved
  • Your technical and other volumes have been kicking down the door by getting excellent/good ratings, yet no wins.

Now, don’t go blaming your pricing team because of these losses. Trust us, it’s not them, it’s you, the Capture Team. A winning price is achieved by thoroughly analyzing competition, acquisition trends, budgets, price and capabilities tradeoffs. We can’t forget an accurate cost proposal development. (Notice that the cost proposal development is only one part of this process.) This process is essentially the concept of “Price to Win”.  PTW informs your pricing decisions.

A PTW process should begin the minute you identify an opportunity. It should be integrated into your bid/no bid decision.  You must understand the competitive landscape at that time of opportunity, and what it’s likely to be by the time the Request for Proposal (RFP) actually drops.  This can be quite a long window of time (a year to two in some cases). This is why Price to win is an iterative process. You must keep an eye on the ball because the landscape changes quite a bit in our industry. A current competitor might be your teammate and a current teammate might suddenly become a competitor if there is M&A activity (which is a huge trend).

What does PTW entail?

As we’ve highlighted in our Circle of Pricing before;

Price to Win – this is a bottom-up build based on the draft RFP documents and final RFP documents. The end result is to model the Total Evaluated Price (TEP).

The inputs into the TEP (for example, the technical solution), are determined during the Competitive Analysis. The outputs of the Price to Win analysis are to recommend specific strategies identified in competitors that can be incorporated into your internal pricing strategy. Price to Win should provide you with a comparison of labor categories, location, etc. that are being priced by your competitors. You can use this information against your approach and make adjustments to your solution and to your pricing.

The smartest way to conduct a thorough Price to Win analysis (that includes competitive assessments, buying trends, market cost estimation) is to hire the experts.  Hiring industry experts provide a very good lens to obtain a robust view.  You can have your internal team conduct this, but you may want to consider outsourcing.  A subject matter expert will have a better finger on the pulse of the market.  It’s worth the investment to use these experts and outsource your Price to Win function to capture the market analysis with an unbiased view.

If you’d like to learn more about how this looks for your business, contact BOOST! [email protected]

Top 3 Pricing Mistakes

The govcon industry has its own sub-industry – the proposal industry.  There are many companies, and thousands of professionals (if not more) dedicated to this profession of proposals and business development in the govcon sector.  It’s an intense career path, and it challenges professional sanity to quite an extent. This is not due to the difficulty of putting a proposal together, but because the government (yes we’re going there), makes the entire process extremely cumbersome and unnecessarily complicated. You can debate the necessity of providing cost data in 5 different formats all you want. There are brilliant proposal writers, managers and growth executives that are often caught in frustrating proposal hell because their product, aka the proposal, isn’t a function of their actual talent. Instead, it is a collection of documents that are much less of a sales pitch with compliance matrices and solutions weaved in.  Sometimes things can be made a bit easier.

There is hope! Some easy pitfalls to avoid, at least when it comes to the pricing volumes include:

  1. Incumbent bias (very common): If you’re an incumbent on a contract, your first instinct might be to bid existing contract rates.  We highly recommend against using that approach. No matter what the evaluation criteria are, whether cost is an important factor or not, the bottom line is that you must bid like a competitor. You must be very smart and understand the market landscape. The government is a buyer, their decision-making processes are rarely set up to award to incumbents without much justification. If your competitors develop an excellent solution including the best value and bid the fair market price/value, the government will need a lot of justification to award to the incumbent.
  2. Inaccurate calculations: Believe it or not, this happens a lot.  You must make sure that your actual pricing calculations are in sync with your accounting policies and procedures.  If your overhead base includes direct labor and fringe, then you must bid it that way.  If your G&A is total cost input, then you must apply it to all costs in the proposal.  Often small calculation mistakes can magnify a pricing error and it can cost you the entire bid.  Enough time for reviews and quality checks must be built into the pricing schedules, and executives must be coached about the impact of last minute changes and cascading effects on final pricing models.
  3. Non-compliance: Nothing gets you kicked out faster than a non-compliant proposal. This applies to all volumes, but particularly to the cost/price volume. This trips people up because often the instructions in section L of the RFP in regard to the cost volume are confusing and contradicting.

 

To mitigate these common mistakes we suggest that you should:

  • Shred the RFP thoroughly. No part left unturned.
  • Review all the instructions in Section L for all volumes (because there are overlaps and connections you may not even know between the cost volume and the tech volumes)
  • Note any and all questions as you review the first, second, third time. You must do this to capture every intent of the instructions.
  • Create a thorough compliance matrix for the cost volume. This step really helps flush out interdependencies on other volumes, and confusing instructions.

 

This process will give you enough time to prepare and submit questions to the government to help clarify issues ahead of time.  These 4 steps will help you to create the shell of the cost volume early on and the pieces will fit in better as you coordinate and facilitate the volume development.

As an understatement, pricing is difficult. Luckily you have BOOST pricing specialists in your corner. Let’s connect today and get ahead of these common mistakes so you can win more work! [email protected]

What is Strategic Pricing?

Over the past decade or so, we’ve all been whacked by this beast of a trend called “Low Price Technically Acceptable” (LPTA) evaluation criterion.  It’s where the government looks at one thing and one thing only. Namely, your price.  The lowest price to be clear.  As long as all of your other volumes meet the basic criteria to “pass” the gates, the evaluation comes down to who has the lowest price proposal.  Yes, ladies and gentlemen, we are now talking about a government that has and is acquiring national security services/items by trying to shop at “Walmart” or “Amazon” (whichever is cheaper).  Let that sit for a minute.

It is unlikely that this trend is going to change quickly, in fact, it will probably be around for a few more years.  It’s smart to start bidding and optimizing your pricing strategy in a holistic way. The best approach isn’t to cut rates across the board), but also to understand what happens to your business and to the market when everyone finds themselves in the same boat.

Let’s dive in to the term “strategic”.  This means you need to approach each and every bid, whether it’s an LPTA or a best value or other type of evaluation, with a healthy amount of preparation.  You must review all of your contracts, your pipeline, your teammate rates, your teaming commitments, your HR policies, recruiting capabilities, and your mission and strategy in whole.  Is going after low price contracts going to keep you in line with your corporate strategy? Are you going after these bids to increase revenue so that you have a great top line figure, and perhaps aim for an acquisition? Are you bidding for past performance?  Depending on your intent to bid, you should shape your pricing approach accordingly.

Strategic pricing should be a very integrated and well thought out function of your organization that involves smart capture practices to smart financial planning.  Your pricing team should be a part of your bid/no bid decision phase, and they should also be advisors to your financial and executive teams to submit smart, effective, and winning proposals.

Various approaches to lower your rates can include:

  1. The Easy One: lower all of your rates, across the board. If you’re the incumbent, don’t bid your existing employee rates. Why? Because your competitors aren’t going to do that, they’re going to bid at or below market rates.
  2. The Difficult One: lower your indirect rates. This is a hard one to do quickly. How do you lower an existing General and Administrative (G&A) rate? It’s a part of your business costs, you can’t suddenly drop your G&A.  Or can you? Consider the impact of adding new revenue to your existing contracts, project out new budgets and forecasts and update your bid G&A rate.  Remember, this is just to bid. First you bid, then you win. Is your corporate G&A overloaded? Are there functions in your company, such as Accounting/HR/Recruiting that you can outsource and make your backbone leaner?
  3. The Good One: Overhead rates. For every new contract, create a new contract overhead rate.  Try to bid as many costs direct.  Keep the overhead rate to 4-6% of the total contract revenue.
  4. Escalation rates: research various sources, such as GSA rates, government data as Bureau of Labor Statistics. Don’t just bid your existing policy rates, or incumbent contract raises. That might not be a competitive approach anymore.

These are some quick and dirty ways to start sharpening your pencils for the next few bids.  As you build your strategic pricing capabilities for the long term, keep simple strategies in mind, but also know that it takes a while to actually become a smart bidder.  It’s not just about the mechanics of preparing a cost volume, but a multitude of factors. Your pipeline strategy, new cost centers, perhaps new divisions, new targets for M&A activity, new bids that might diversify your portfolio, all of these impact the growth of your business.  If you bid with the right intent, your strategy should follow as such.

If you’re questioning your current strategic pricing strategies, connect with those in the know. BOOST LLC has experts to assist you in managing this part of your proposal routine. Connect today at [email protected]