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What is Price to Win?

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Price to Win (PTW) is one of those phrases GovCon folks throw around without really understanding what it means. Some people hear the phrase and think there’s a winning number that guarantees them landing the next big contract if they find it. The truth is a little more complicated, but this guide will help you understand and leverage Price to Win strategies to solve your pricing problems and land federal contracts.

What Does Price to Win Mean?

PTW is a strategy for setting your price in a contract bid based on analyzing your competitors’ capabilities and evaluated prices. It aims to position your bid to win by offering better value for money than the competition.

In contrast to top-down Price to Compete analysis, PTW is a bottom-up build based on the draft and final Request for Proposal (RFP) documents. As soon as the draft RFP is out, PTW analysis starts from a Competitive Analysis to model rival solutions, what they’ll cost and how those contractors will price them.

PTW analysis should involve a comparison of labor categories, location and other components your competitors are pricing. The end result is the Total Evaluated Price (TEP). Along with the TEP, a thorough PTW analysis will recommend specific strategies from competitors to incorporate into your own pricing strategy.

How Does PTW Help Land Federal Contracts?

PTW helps GovCons land federal contracts by solving pricing problems and translating a Competitive Analysis into pricing to beat competing bids.

If you’ve been vying for contracts for a while, you’ve probably experienced pricing problems like:

  • 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.

Underneath these pricing problems is an analysis gap. PTW solves your pricing problems by filling that opening.

You achieve a winning price by thoroughly analyzing competition, acquisition trends, budgets, price and capabilities tradeoffs. You then balance applying your findings from this analysis with accurate cost proposal development. This process is essentially the concept of “Price to Win.”

GovCons, who leverage PTW to inform pricing decisions, have a major advantage over those who leave this robust analysis out of their cost proposal development process.

PTW Strategy Tips for GovCons

A Price to Win strategy’s result depends on how well you execute it. Here are four tips to help you price to win government contracts:

  • Start early: A PTW process should begin the minute you identify an opportunity, and you should integrate it into your bid/no bid decision.
  • Stay ahead: Understand the competitive landscape when the opportunity is announced and forecast what it’s likely to be by the time the final Request for Proposal (RFP) drops — this can be quite a long time, up to a year or two. Keep an eye on the ball because our industry’s landscape shifts constantly. A competitor may become your teammate, or a teammate might suddenly become a competitor if there is merger and acquisitions (M&A) activity.
  • Sustain profitability: Armed with the data from your PTW analysis, weigh the likelihood of winning with a certain price against the reward if you do win. Look for a sweet spot between competitive pricing and worthwhile profits. Sometimes, the best conclusion to draw from a PTW analysis is to pass on the contract and focus on a better one.
  • Source expertise: Hiring industry experts provides the lens needed for a robust view of the competition. A GovCon pricing expert will have a finger on the market’s pulse and access to data your internal team lacks. It’s worth investing in these experts to capture your PTW market analysis with an unbiased view.

Contact BOOST LLC for Strategic Pricing Solutions

Winning a federal contract bid demands more than the right technical solution — it requires pricing that fits the project budget and beats out your competitors. On a competitive landscape where rewards are high and wrong pricing calls leave you empty-handed, GovCons must leverage superior analysis for superior results. BOOST is your strategic pricing advantage for your next contract bid.

The dedicated pricing team at BOOST has the experience, expertise and resources you need to gain a competitive pricing advantage. Our Price to Win consulting service for GovCons will capture the accurate analysis you need to price your bid for the win. Our seasoned pricing buffs will help you gain key pricing insights and incorporate them into winning cost volumes.

Contact BOOST to schedule an appointment and give your bid the pricing edge it needs.

Top 3 Pricing Mistakes

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The govcon industry has its own sub-industry – the govcon 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 GovCon 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?

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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].