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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]

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!