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How to Survive a DOL SCA Wage and Hour Audit

On a late Friday afternoon in May, just before I am about to leave for a three-day holiday weekend, my phone rings at the corporate office in Maryland and it is the voice of a woman who is the last person I wanted to speak to at the end of a long week – a Department of Labor auditor.  The woman seemed nice enough until she says, “a report has been made against your organization in North Carolina and I have been assigned to oversee the audit.  I will be emailing you momentarily all of the documents I will need.”  I receive the email and immediately called her back to ask, “Three days? I have three days to bring you payroll reports, rosters, and time cards for a workforce of 200 employees?” That is when she informs me if I do not comply the company will be in violation of her records request which could cause the organization to be assessed fines.  So, my team and I pulled together all SCA policies and procedures, 2 years of employee records, a month’s worth of payroll records, and time cards for 6 months for 200 employees. All over a holiday weekend.  It was a feat to be had, but the team pulled together and by Tuesday I was driving to North Carolina with 5 large bankers boxes to meet with the auditor on Wednesday morning.

Wednesday comes and the audit begins.  Two weeks later the audit is over, and I receive my findings. They were good, but not great.  The company was assessed almost $200,000 in back wages, but we were found to not be negligent in our practices, policies and procedures.  And from this experience, here is what I learned on how to survive (as best as you can):

  • Be nice and play nice with the auditor. She can make or break the findings.  By playing nice with the auditor and offering assistance, she shared the reason for the audit – someone was not happy about not receiving their vacation benefit after being away from the contract for more than six months.  I explained that the FAR clause pertaining to vacation benefits does not dictate length of separation when determining an anniversary date and vacation payout.  The company set a generous policy that was in writing as to what would constitute a separation from the contract.
  • Make sure you understand the FAR clauses. Especially those associated with SCA and wage & hour as it pertains to an SCA contract to include health & welfare benefits. By demonstrating knowledge of the FAR, we were able to justify the policies and procedures put into place and that the company put a considerable amount of thought in how to implement the corporate policies.
  • Be prepared for employees to talk to the auditor. The auditor will request that you provide a number of employees to speak with her.  Our auditor spoke with approximately 25 employees.  We were able to identify 10 employees with the remainder identified by the auditor.  The company was not aware that the auditor would speak to employees as we were told originally it was just a document request and management interview.
  • The auditor is not limited in scope. The auditor will ask questions that are within the scope of DOL wage and hour and SCA.  They are not limited to the complaint that was filed.  We found out from employees who came to us asking why the auditor asked specific questions about pay practices, how we handled policy infractions, and more.
  • The auditor will be reviewing ALL aspects of wage & hour and SCA compliance. The auditor asked questions of corporate, program management, and employees on topics such as how employees are paid, how they are compensated, are they compensated fairly under the wage determination based upon their labor category, do they work overtime, and do they receive all benefits in accordance with the SCA.  Our auditor found that even though there was no overtime required on the contract and that we had a strict no overtime policy, employees were still using their own time to do tasks such as making copies at home or buying supplies for their workspace.  It was deemed that this was in direct violation of overtime laws.
  • The auditor will assess fines, penalties, damages, and lost wages. The fines, penalties, and damages are at the discretion of the auditor (this is where the “be nice and play nice” rule applies).  Our auditor felt that since we were forthcoming with information, knew our FAR clauses and how to apply them, and there was no willful misconduct by the organization that she would not assess fines or penalties under wage and hour or SCA.  Yes, there could have been fines and penalties under both labor laws! However, the company was required to pay back wages of uncompensated overtime to 200 employees.
  • The auditor will determine the amount of lost wages and when those wages must be paid. Our auditor made a determination and created a calculation of how much potential overtime was reasonable to be paid to the employees (both current and past employees) who had worked in the prior 22 weeks. For most employees who were employed for that entire look-back period, they received just over $1,000 in back overtime wages which had to be paid out within two weeks of DOL’s notice.  If the company had been found to be negligent in violating SCA and/or wage and hour laws, punitive damages would have been assessed and paid to the employee.  To put this in perspective, punitive damages are two times the amount of lost wages.

 

This is how I survived and what I learned during a Department of Labor SCA Wage & Hour SCA audit.  If I or my team had taken the stance that DOL was the enemy, if the company was not clear or consistent in SCA policies and practices or was found negligent in our understanding and application of SCA wage and hour laws, the outcome would have been catastrophic.  The company did a review of a worst-case scenario and found that the end result would have been over $1,000,000.00 in punitive fines, damages, and back wages that would have been owed to either the DOL or to the employees.  That’s a huge chunk of change for an up and coming 8(a) business.  The company would have had to shutter their doors and more than 200 people would have lost their jobs.

 

Avoid being a “worst-case scenario” story by making yourself aware of the SCA Wage & Hour requirements on every contract. If you would like guidance on where to start and how to focus, email BOOST LLC. [email protected]

Women in GovCon | Never Go Against the Family

This week govmates hosted their institute, Women in GovCon, Never Go Against the Family. Alongside expert speakers and one-of-a-kind networking, attendees had the opportunity to get real answers to the very real questions they’ve been asking about growth, teaming, exit strategy and profit maximization.

If you missed the institute, here are a few highlights.
Join govmates today and avoid the FOMO when it comes to the next govmates institute.

Panel 1: It’s Not Personal, It’s Just Business (Growth)
Kim Pack of Wolf Den Associates, Jody Franklin of Global Services and Judy Bradt of Summit Insight

  • GSA Schedule: Have a smart vehicle portfolio.
  • WOSB Status, most businesses have a second or third classification that they leverage for business. It’s not all about the WOSB.
  • “Focus or go broke.” Do your research.
  • IDIQ: inquisitive growth strategies and new on-ramps are your options to get in with your capabilities.

Panel 2: Keep Your Friends Close, and Enemies Closer (Teaming)
Kathleen Kelley of Bean Kinney, Calvin Freeman of CACI and Amy Hernandez of BOOST LLC

  • Teaming Agreements set the stage for your relationships, but the subcontract agreement should be more specific in order for it to be enforceable.
  • Work-share with the big guys: know the Program Manager, they should be your main contact to express any work-share concerns.
  • If you’re a small business, know your skills and strengths. Know what you can specifically provide, know your worth.
  • It’s all about the RELATIONSHIP – If you lawyer up, then it’s not worth it.

Panel 3: I’m Gonna Make Him an Offer He Can’t Refuse (Exit Strategy & Profit Maximization)
Pete Ragone of SC&H, Greg Nossaman of the Mclean Group, Michael Lopes of Bernstein Wealth, Jennifer Mathis of One Degree Capital

  • There are options beyond “just selling.”
  • Build a business that can compete on its own without relying on a status or set aside.
  • Be focused on what YOU need to do. Don’t try to be all things for all people. Be mindful of your investments in the business (don’t over or underspend).
  • You can buy a CONTRACT or a COMPANY.
  • It’s never too early to set yourself up for the next steps based on a due diligence request list (HR, shareholder agreements, accounting, and others).
  • If you are looking to buy a company, don’t get so distracted that you forget about organic growth.
  • Regardless if you’re trying to buy, sell or whatever the next step is for your company, have your financials in order. Make decisions and preparations based on your goals and what you’re looking to achieve long term.

 

Thank you, one more time to the fantastic speakers, partners, and sponsors who help to make this event a success!

If you haven’t already, join govmates today!

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]

 

Orange

With apologies to the Crossfit disciples, I’ve been seeing orange lately.

As anyone who enters their 40’s discovers, the body ain’t what it used to be!  You suddenly give a lot more thought to whether your core is strong enough. Such is life.  This past August, I decided to get off my ass and start doing something (versus the three years before where I said I was going to).  Enter Orange Theory Fitness (OTF).  I’ve spent countless hours on the treadmill listening to coaches encourage me to power walk/jog/run through their stages. It occurred to me that the stages very much align with business.

Base

Base in OTF is something that you can hold for 20 minutes without an issue.  Essentially, your heart rate is up, but it’s doable without a ton of effort.

In business, this aligns with steady state.  Let’s hope it is better than status quo, as you are constantly striving to improve.  Your team knows what they are doing and is rocking it out.  Ops is meeting the mission, BD is taking meetings, you are block and tackling and in general, everyone is in “just keep swimming” stage.  It’s comfortable and it is where you start to think you’ve got this whole business thing down pat.

Things to remember during this stage:

  • Too long here equals flatlined growth and decreasing margins
  • Customer relations can get stale with the same old thing
  • Employees can get bored
  • Great for a new team to get comfortable with their responsibilities and interactions
  • Watch your cash flow and your multiplier and make sure all are aligned

Too much time in this phase and nothing changes.  Not enough time and you’ve got burnt out people.

Enter…The Push.

Push

Push is something at a pace that makes you uncomfortable.  Your heart rate is elevated, you can only hold the push for 5 mins, maybe a bit more, but it will wear you out.  It takes most or all of your focus.

A few recompetes are coming up, you’ve got a staffing shortage and your competition just beat you for a new contract.  Perhaps the large integrators are sniffing around to buy the company, or they are pushing you on margins.  Maybe you have a couple of new start programs with important customers that must transition well, and the incumbent isn’t making it easy.

Things to remember during this stage:

  • The team is up for the challenge, but they need to know when it ends.
  • Effective communication is critical. You will waste time in endless meetings or have a duplication of efforts without strong communication. Let your entire company know if folks are taxed.
  • Most of these issues are something you could have predicted. Plan ahead for how you are going to handle them.

Everyone is working hard with long hours and a surplus of meetings, but they see the reward for their efforts.

That is, unless you find yourself in an All-Out after your push.

All Out

All outs push you physically and mentally.  You are at your fastest and you leave nothing in the tank.  You will need to pull from within to get through it.  Most of the challenge is mental.  You can keep this going for only 1-3 minutes.

In business, that may look like: entering a contract win that doubles the company or losing a contract for half your company. It could be  two or three must win proposals hitting at the same time or several key personnel leaving at the same time.  It might entail a complete pivot in offerings or a cash flow shortage.  Speaking realistically, it could be a government shutdown. Are you sweating yet?

Things to remember during this stage:

  • Your leadership team had better be the A team. If you’ve been letting anyone slide during the other phases, now is when you (and the rest of the team) will regret it.  Think about this while you’re in the Base or Push phases.
  • Keep your line of communication open with your customer, your banker and your lawyer. They can help ease the transition burden, fight where you need to legally and most importantly, supply the cash for the bumpy road.
  • Break tasks into small milestones. Focus the team on the next gate to get it done.  Don’t overwhelm everyone with the size of the task that is in front of you.  Have small rewards for these accomplishments – even if it’s just better takeout in the war room.
  • Be appreciative. Understand that this will make you and your team stronger on the other side.  Reflect on what the added benefit is to your company and team.

When you’ve made it through the All Out, your team doesn’t immediately need to go to base, but rather, a rest and recovery phase.

Rest and Recovery

Immediately follows an All Out and allows you to catch your breath and focus on calming your heart rate.  Some people need a lot of rest and recovery to bounce back.  Others need just a bit before they get back to base.  There is no one size fits all answer and your time in rest and recovery may vary depending on how you feel and how much effort you gave in your All Out.

Don’t jump back into base or assume that your team can go back to normal.  Give your team and company time to recover.

Things to remember during this stage:

  • Nothing feels better than a couple of days off without email and a bonus check for your efforts. Send your team away for a long weekend (away from each other!).
  • Let your cash flow recover – make no major investments or outlay of cash.
  • Don’t make any major changes. Just sit with the experience and reflect on lessons learned.  You can change things after the rest and recovery.

Regardless of what stage you are in, keep moving forward.  And keep that core strong!

In order to better prepare in the Base and Push phases, you’ll want to have a strong team at the ready. BOOST is connected to an array of great people and smart businesses that can help to get you where you need to be. Connect with us to help support your business by emailing [email protected].

 

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!

The Gift of Expertise

Ever feel like you have no clue how to solve a problem or that there has to be an answer out there, you just don’t know it?  Do you google randomly trying to figure it out, only to not be satisfied with the results?  Or (if you are like me), do you just want someone to freaking deal with it and tell you what to do in this circumstance?  Do you feel like you know it’s important, but there are a ton of things that you’d rather be doing or should focus on?

As you plan for 2019, be thinking about what expertise you need in the new year.  What will help move your business forward and, more importantly, grow your profit?  What is worthy of your time and what isn’t?  When do you play it safe with an outside opinion?  (answer:  Anything with a ton of money on the line or employee issues – call the expert!).

Here’s a short list of items that folks waste time on by doing it themselves instead of calling an expert to save a ton of time and in the right circumstances, a ton of money:

  • Affirmative Action Plans
  • Taxes
  • GSA Schedules
  • Employee handbooks
  • Policies and Procedures (to start)
  • CMMI/ISO certification
  • Office Space/Office Moves
  • FAR Compliance
  • Proposal Price/Cost Volume development and Analysis
  • Indirect Rates development and Analysis
  • Strategic Pricing/Price to Win Analysis
  • M&A (when you don’t have a shop of your own)
  • Website development
  • Complex IT Challenges
  • Bookkeeping
  • Graphic Design
  • Payroll

This holiday season, give yourself the gift of getting crap off your plate.  Budget for using an expert in one or more of these areas next year.  Reclaim your time!

If you need a referral or recommendation to anyone providing these services, just give us a shout.

CMS-PEO Pricing Synopsis

Pricing Alert – The massive HHS/CMS PEO RFP is out!
Are you prepared to tackle the complex pricing requirements?  It might seem straight forward at first glance, but read our detailed Pricing Synopsis to look out for some challenges and pitfalls to avoid.

Abstract:  This 10 year $2B IDIQ contract has two task orders along with the IDIQ awards. However, bidders beware. Despite the use of fixed price task orders, there’s still a large amount of pricing detail and documentation required. Teams with large number of subcontractors will need dedicated management and support to ensure submission of accurate proposals.

Contract Overview

The Provider Enrollment and Oversight (PEO) Indefinite Delivery Indefinite Quantity (IDIQ) contract will provide contractor support to Centers for Medicare and Medicaid Services (CMS) to detect, prevent, and proactively deter fraud, waste and abuse in the Medicare and Medicaid programs.

CMS anticipates multiple awards with a combined ceiling of $2B over the life of the contract. The ceiling may be increased at the CMS’s discretion. A minimum of 4 awards will be reserved for small businesses (under NAICS code 541990 and a size standard of $15M). The RFP (75FCMC18R0014) is silent on the number of potential awards to other than small businesses. The maximum ordering period is five years plus (1) additional five-year option period for a total ordering period of ten years. Neither the RFP or the IDIQ Ordering Guide clarify whether the task order period of performance can extend beyond the IDIQ ordering periods.

In addition to the IDIQ contract awards, CMS will also award two Firm Fixed-Price Task Orders on an unrestricted (full and open) basis for Site Verification Services – Eastern Region and Western Region. The RFP notes that one Offeror cannot be awarded both Site Verification Services’ task orders.

IDIQ Pricing Requirements

The proposal is organized into six volumes. Volumes I through IV pertain to the IDIQ proposal. Volumes V and VI are reserved for offerors bidding on the two awardable task orders which we discuss separately. The IDIQ pricing information content is divided between Volume I – Contract Documentation and Volume III Business Proposal.

All offerors must submit basic pricing information which includes typical IDIQ level pricing requirements including accounting systems information, indirect rate information, and the submission of a sample task order pricing. The IDIQ award will be based on this information.

Adequate Accounting System

The RFP contemplates a predominant mixture of Cost Reimbursement (CR) and Firm-Fixed Price (FFP) form of task orders awarded. Offerors must have an accounting system that is deemed acceptable or adequate for determining costs Subcontractors who are anticipated to have CR contracting arrangements, including non-commercial Time and Materials type contracts, must also have an acceptable or adequate accounting system.

Rate Information

Offerors must submit indirect rate information in Volume I including both approved provisional indirect rates and any forward rate price agreements. Offerors that have no prior history of approved indirect rates must submit support documentation for the prior 3 years consisting of their current year operating budget and a forecast covering the anticipated period of performance and associated documentation on that supports the proposed rates. The RFP does not request offerors to propose any IDIQ ceiling rates for either direct labor, indirect or fixed fee rate. However, the RFP contains a clause which gives CMS the option to establish ceiling indirect rates. We think clause this has implications for pricing the sample task order discussed below.

Sample Task Order Pricing Requirements

The sample task order pricing is straightforward. Exhibit E.8 “QASP Sample Task Order Business Proposal Template” is to be priced for base and one option period. Labor is priced as fully burdened (inclusive of fee). The labor rates are then linked to a labor rate buildup backup detail for each task order period. Offerors must show the full detail of their proposed labor rate (including the erroneously termed ‘Fixed Fee’).

Curiously, the pricing template requests offerors to map proposed travel and ODCs by SOW section. However, similar mapping information for labor costs is not required. Travel cost detail must be provided for the Kick-off meeting. However, for remaining travel, CMS requests offerors to use a plug unit cost of $2,000 per trip per person. For indirect rates, the instructions specifically state to cross-reference Volume I for indirect rate basis information. Finally, a compensation plan must accompany the sample task order pricing. CMS provided a streamlined template in Exhibit E.8 reflecting the minimum information necessary to comply with FAR 52.222-46. We recommend offerors take the hint and provide just the bare minimums necessary for compliance and nothing more.

While the Exhibit E.8 is in itself not very complex, importantly, Offerors are required to provide additional, lower level, labor-hour detail under Technical Factor 3 – Key Personnel and Staffing Plan within the Technical Volume. The task order RFP requests full-time equivalent (FTE) and labor detail by CLIN, labor category, prime/subcontractor. The staffing summary must provide both full-time equivalents and labor hours. While the instructions do not request a lower level labor breakdown by individual subcontractor, subcontractors are required to provide this FTE and labor hour detail by CLIN (and 2nd tier subcontracts) in their Exhibit E.3 Subcontractor Proposal Information Checklist. Therefore, it will be important for primes to ensure their subcontractor labor data ties in three different proposal documents, Volume III Exhibit E.8 QASP Sample Task Order Business Proposal Template, Volume II – Technical Volume staffing summary, and Volume I – Exhibit E.3 Subcontractor Proposal Information Checklist. (Unfortunately, we revisit this theme of cross-volume data checking under the two larger (and real) task orders below.)

We’re not fans of RFPs that require pricing sample task orders that are not awarded. We believe they invite aggressive and potential unrealistic and irrational pricing. However, as mentioned above, there’s one RFP clause that could give bidders some pause from overly aggressive pricing of the sample task order, at least for indirect rates. Section E of Volume I instructions state, “In accordance with FAR 42.707, entitled ‘Cost Sharing Rates and Limitations on Indirect Cost Rates,’ CMS may establish indirect cost ceilings in the contract. If established, reimbursement will be limited to the negotiated indirect cost ceilings established in the contract…” We wonder what would happen if a bidder proposed aggressively low indirect rates for the sample task order (below their current approved provisional rates) and were awarded an IDIQ contract. Could CMS accept these low sample task order indirect rates and subsequently cap those rates for the life of the IDIQ? (Don’t say it can’t happen just because CMS did not make good on the threat on other contracts. I recall an Army recompete where, based on the prior contract, bidders priced the IDIQ using T&M rates with the understanding the Army would ultimately request task order pricing using those T&M rates, but issue task orders on a fixed price basis. Many bidders proposed low labor rates, assuming they could subsequently manage the labor hours on a fixed price task order to ensure adequate profit. The Army subsequently issued T&M type task orders, not fixed price, and the contract holders were stuck pricing and executing their task orders using the artificially low IDIQ T&M rates. The moral of the story: Anything is possible. Don’t assume past agency behavior is an assured prediction of future behavior).

Task Orders 1 and 2 Pricing Requirements

The IDIQ award will be based on the sample task order. CMS included two additional Firm Fixed Price (FFP) Task Order RFPs that will be awarded:  Eastern Region Site Verification Services and Western Region Site Verification services. Both are full and open competitions. Offerors are permitted to bid on either one or both. However, CMS will not award both task orders to the same offeror. The cost proposals are contained within Volume VI (VI-A Eastern region, VI-B Western Region).

Pricing for both task orders are organized similarly in Attachment J.5.C (Eastern Region) and Attachment J.6.C (Western Region). Each pricing template contains five CLINs representing separate 12-month periods of performance. Each CLIN contains an “AA” sub-CLIN for ‘Site Visits’ (sites not associated with an Independent Diagnostic Test Facility (IDTF)) and sub-CLIN“AB” for IDTF Site Visits. Each subCLIN is further divided into 4 visit types (48 hrs., 7 days, 15 days, or 30 days). While the pricing attachments appear to denote these site visits in terms of visit length, we note that each SOW denotes the 4 visit types in terms of response time. So, a “30-day site visit” as labeled in the pricing attachment appears to really mean perform the site visit within 30 days’ notice according the SOW. A 48-hour site visit would mean perform the visit within 48-hour notice. This is an important distinction and we recommend offerors confirm that the SOW’s definition of site visits types is the correct definition.

Unit Pricing Requirements

Offerors must propose unit prices per visit type with associated breakdowns of fully burdened labor, travel. ODCs, and subcontract costs. The pricing templates are designed to apply the same proposed CLIN/Site-visit type unit price to both the minimum order guarantee quantities and to the (larger) estimated quantities. Therefore, the template produces two total prices:  A ‘minimum quantity’ price and a total price based on ‘Estimated Quantity’.

Detailed Labor Tracking

As discussed under the sample task order, similar cross-volume labor detail is required for each of the awardable task orders. Similarly, it will be important for primes to ensure their subcontractor labor data ties in three different task order proposal documents, Attachment 5 (or 6) pricing template, Volume V – Technical Volume staffing summary, and Volume VI – Exhibit E.3 Subcontractor Proposal Information Checklist. Finally, we also note, the task order instructions are silent on whether the staffing summary must be built to the minimum order quantities, estimated quantities or both. CMS should clarify

Burdensome Basis of Estimates

In addition to providing the Excel pricing attachments, offerors must provide a Business Proposal Narrative. The narrative must include among other things, a Basis of Estimate. The BOEs must, “describe the BOE used to establish those estimates as fair and reasonable. This includes providing all assumptions used to establish proposed prices and any and all empirical data which can provide further support to the proposed prices as fair and reasonable. The Government needs to understand how you determined the prices per element and how that correlates with the technical approach”. We’re surprised this level of detailed documentation is needed given the work scope is somewhat standardized and offerors are proposing fixed prices. We wonder why CMS wouldn’t rely on direct comparison of offeror prices to establish price reasonableness. Regrettably, this represents a lost opportunity to streamline the time and effort required for both the bidders and for CMS.

The BOE instructions request further details for each cost element. Offerors must provide the labor category(s) that make up the “Labor” price per site visit and include information on proposed escalation of each price element as well as the level of ‘productive labor’ in 1 full time equivalent (FTE).

Similar types of information are requested to explain travel and ODC costs. For subcontractor costs, the RFP does not explicitly request similar pricing details as the prime, except it specifically states primes must include a subcontract “Certificate of Current Cost or Pricing Data; as appropriate”. Until the Contracting Officer determines adequate competition does not exist, we do not believe there’s any reason for subcontractors to submit certified cost and pricing data.

SOW Disconnect?

While each SOW (Eastern and Western) identifies the states and territories covered, each SOW also contains an extra provision to optionally expand the geographical scope of services required. SOW 3.3, paragraph 2 states, “The Contractor shall have the ability to conduct nationwide site verification services at locations in all 50 States and 6 Territories, if required by CMS and with a minimum 30-day notification. (emphasis added). We would think the ‘East Region’ contractor might object to CMS and giving ‘East Region’ work to their counterpart ‘West Region’ contractor and vice versa.

Other Pricing Quirks

SOW 3.5, paragraph 2 states, “If there are multiple providers at the same location, the Contractor shall provide one record for each provider with the appropriate provider ID and provider name attached to each record”. However, pricing is based on ‘site visits’ and appear to be location based. In this instance, multiple providers at one location appears to represent (1) site visit. We think offerors should seek clarification.

Conclusion

We’re surprised at the level of cost and pricing data and associated documentation requested for the first two task orders, even though there’s adequate price competition and fixed pricing for presumably standardized services. Bidders with a large team of subcontractors should carefully manage the proposal to ensure the labor data correctly ties out among multiple proposal documents. We also think offerors (especially small businesses) should exercise care when pricing the sample task order to ensure they don’t unintentionally sign up for low indirect rates that they may not be able to adequately accommodate during the IDIQ contract.

If you’re looking to BOOST your proposal give us a call or send us an email, [email protected] We’re able to provide pricing synopses on a variety of RFP opportunities to help you avoid pitfalls and tackle requirements the right way. 

Prepared by BOOST LLC/Michael Gallo

Opportunity identified by The Pulse of GovCon

Meet Avantika!

BOOST LLC is thrilled to announce that the team is growing.
Please give a warm welcome to Avantika Singh!
She will be supporting BOOST’s clients with her specialties in government cost/price volume expertise, strategic pricing expertise, price to win,  financial model development, financial analysis, federal contracting, metrics/measurement reviews, forecasting and more.

We took some time to get Avantika’s thoughts on the following:

Three pieces of advice for growing govcons: 

  • Always be ambitious
  • Business is meant to be grown
  • Don’t get comfortable in your own zone

What/Where is the best resource for growing your network? 

The best resource for growing the network for me has been word of mouth referrals as a consultant.  When you do good work, people trust you and recommend you, so person to person or business to business referrals have been my biggest resource.

What is your “hot take” for finding success in your industry? 

It is important to make mistakes. You don’t learn if you keep winning. Yes, it’s obviously great to win, but making mistakes and losing on a few bids gives you the best experience for long-term success.

What is the most surprising experience you’ve had working in the govcon community? 

What surprised me in this industry when I first started was how close-knit and small it really is, despite having large behemoth companies and small mom and pop shops. It seems like the same usual suspects intersect at various points, and it’s a very good community overall.  Reputation actually matters, don’t burn bridges, and collaboration is the way to go…even with competitors.

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).

Lowering Your Wrap Rate

Did you make it into your desired beach bod state this summer?  Or was time for the gym illusive?  Did you cut back on the dessert or did you enjoy a ton of gelato?

Much like dieting and maintaining good health, government contractors must maintain a “sexy” multiplier/wrap rate.  Even if you are in a less competitive field or have a unique offering for a customer with a ton of funding (if you are, good on you), you must still monitor and maintain your wrap rate.

Companies can sometimes view this exercise as an annual corporate budget, where you occasionally look at how you are doing and often look back and ponder “what were we thinking?”  This is not enough by a long shot.  Best practice is to review your financials each month and include analysis on how you are performing on your wrap rate.  Review monthly, adjust quarterly, consider a complete overhaul semi-annually.

Most companies find that they need to tighten the belt a smidge, especially as we push into the fourth quarter.  For some, it may be too late to rein it in this year, but that doesn’t mean that you shouldn’t start pushing for the 2019 indirect diet.  For others, it may be a great time to lose a few pounds before the year-end festivities.  Here are some suggestions for both year-end and next year:

  • Space – do you really use it; do you need it and what is your company culture? Larger System Integrators are shedding their bloated infrastructure.  Don’t build one unless you’ve got 5-year POP’s with all contractor site rates.  And even then, keep it lean.
  • Wellness – When was the last time you competitively shopped your benefits? Or even your broker?  Don’t get tied up in the same old “we only have a 2-5% increase, so that’s great” mentality.  Depending upon your size, self-funding in some capacity may be of interest.  Does anyone actually use the vision policy?  What about dental?  Have you considered reducing your contribution?  Not always popular but it may lead to new work.
  • Training – with all of the online options these days, does your team really need individualized training or would an online package work? You could offer this benefit to more employees at a lower overall cost.
  • Education – consider reducing the tuition reimbursement if very few people are using it. It’s nice to tout to potential new hires, but in reality, it’s not a deal-breaker.  If it is, bonus the employee out to cover the costs.
  • Business Development – is the team on track to meet their goals this year or has performance been underwhelming? It is time to take stock of what’s working and what isn’t and shed a quarter’s worth of labor costs for non-performers.  Let them go now while the job market is still firing up.  Layoffs or terminations after Veterans Day essentially mean no job until after New Year’s.  Make the hard call now.

Keep working at the wrap rate and make sure it’s as lean as you can survive on.  Not bloated, but not extra thin either – you need a little wiggle room to ensure a healthy company.