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Post-Proposal | After Action Review

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Does your company know what happened?

The proposal was finally submitted, the team has finally gotten a night’s rest, (some having nightmares of missed compliance items and some cherishing the eventual win party)!  Either way, a lot of mental focus is disbanded after a successful proposal submission.  One of the things that many companies benefit from, but fail to do often, is an After Action Review or Lessons Learned review.  We recommend doing this often, and quickly, after the proposal is submitted.  It doesn’t have to be conducted in a formal manner, with meetings or papers.  After action reviews can be a simple non-formal format such as a survey or questionnaire to the key players of the proposal.  After action reviews should involve your proposal manager, your key subcontractors, any consultants you may have had, and most importantly your pricing lead.  Most companies forget to include lessons learned from a pricing/cost volume preparation perspective.  There are many lessons about after action reviews for GovCons to be learned on this front. Here are some basic questions to get you started:

1. Were you able to coordinate and manage your subcontractor pricing and its impacts to your proposal in a timely fashion? 

2. Was your C-level team allowed to make last-minute changes (hint: Gold team is NOT meant for changing levers such as fee/teaming ratios/labor rates) that absolutely caused a ripple effect and chaos across multiple volumes?

3. Was there enough emphasis on compliance in the Cost volume?

4. Was there enough time built in for cause and effect from pricing to other volumes?

5. Did you prepare with enough data/intelligence when it comes to deciding on wrap rates/labor rates?

 

Once the proposal is submitted it’s too late to make changes (unless errors are identified that you must inform the government about, but that’s a topic for another day).  What this does is get your proposal team ready to bid smartly and accurately for the next ones. After action reviews are all about sharpening your team, making them more efficient for your next contract Making the same mistakes is a fool’s errand in this business, it’s costly and redundant.  Don’t be that team! BOOST can help you to conduct After Action Reviews or even better, get your pricing on the right track the first time. Let’s talk: [email protected]

Introducing BOOST LLC

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BOOST was founded to support GovCons as they get to the next level. After reinventing the wheel many times and banging our heads against numerous walls, we have learned what works and what doesn’t. We love working with executives who want to see their organization grow and who value advice from those who have “been there, done that.” We want our small clients to outgrow us. We want our large clients to use us when they need us and then call us back for the next project. We want you to sell your business for the multiplier you want. We want you to be successful.

www.boostllc.net

How to Price Labor for Your GovCon

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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 obtaining good data.  Good data paves the way for good analysis, and, in learning how to price labor for your Govcon, good analysis is everything.

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. More than anything, these sources service as an initial pricing point for your labor, but how to price labor for your Govcon may vary from this data for any number of reasons.
  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, meaning you have a set spectrum within which you can determine how to price labor for your Govcon.
  3. Collaborate: Get your subcontractors on data calls. When developing labor rates, you’re often required to request rate data calls from your subcontractors. Without knowing their rates, or how they’ll fit into the equation, you won’t be properly able to price labor for your Govcon.
    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, but it’s one of the best ways to price labor for your Govcon.  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?

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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.

What is Price to Win?

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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

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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].

 

NASA Fully Integrated Lifecycle Mission Support Service 2

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We at BOOST LLC have reviewed the new DRFP for NASA FILMSS 2 and our pricing experts are providing the following insights on this solicitation. Continue reading for some challenges and pitfalls to avoid regarding this DRFP.

The lack of incumbent task order history and incumbent staff pay/seniority on this $200+M NASA IDIQ unfairly tips the scale towards the incumbent contractor. NASA should be more transparent and disclose additional information to prospective offerors to foster better competition.

Background

The NASA Ames Research Center (ARC) FILMSS 2 contract is a re-compete of FILMSS 1 (awarded to KBR/Wyle under contract # NNA14AB82C ) to provide program, science, engineering, operations and project management support for such efforts as biosciences flight development projects (e.g., mission implementation, instrument development, and technology advancement efforts), collaborative science programs (e.g., astrobiology, virtual institutes), aeronautics research projects, and various Ames offices. This contract will also provide specialized technical and professional support for Ames Mission Support work. To date, total incumbent contract obligations are $165M out of a total ceiling of $272M and we estimate total obligations to be about $200M at contract completion. Unfortunately, there is no visibility into the FILMSS 1 task order history. Steady-state burn rate was approximately $35M per year. According to The Pulse of Gov Con, the following incumbent information is available:

FILMSS 1 Incumbent Information

  • Incumbent: KBR Inc. (was Wyle Laboratories – acquired by KBR in 2016)
  • Contract Number: NNA14AB82C
  • Date Awarded: 07/29/2014
  • Completion Date: 07/31/2019
  • NAICS: 541712
  • PSC: R405
  • Pricing Type: CPFF, Full and Open Competition
  • Value Breakdown – 61% funded
    • Potential Ceiling Value: $271,939,789.00
    • Actual Dollars Obligated: $165,635,467.25

Solicitation Overview

NASA released the draft RFP on 12/21/2018. An Industry Day Conference was scheduled for Jan 9th and the final RFP release was scheduled for February 2019 with proposals due in March/April 2019. NASA has not yet released a revised schedule due to the partial Government shutdown. However, it’s likely the final RFP release won’t occur before March.

This single-award contract, to be made based on best value, is divided into four parts consisting of a fixed price transition, a 60-month IDIQ CLIN, ‘Management Core’ and ‘Core Technical Elements’. The Management and Core Technical Element CLINs each have a 24-month base period and three 12-month option periods. All CLINs, except transition are Cost-Plus-Fixed-Fee (CPFF). The CLIN 4 IDIQ minimum is $5M with an ultimate IDIQ ceiling of $185M. NASA expects approximately 30‐40 IDIQ TOs with the base period and each option period. The place of performance remains the Ames Research Center, Moffett Field, CA.

Pricing Details

Offerors are required to complete Attachment Jb1 Cost and Price Template. The template contains 17 Exhibit tabs. The pricing requirements and associated exhibits are similar to the original FILMSS 1 solicitation which include pricing for the Transition, Management Core, and Core Technical Services. However, unlike the incumbent solicitation, the FILMSS 2 draft RFP does not request additional pricing of sample task orders. Instead, the RFP instructs offerors to price out a five-year total IDIQ of 938.8K labor hours across 39 specified labor categories. Below, we summarize key requirements of each element of cost.

Direct Labor
There are 68 unique labor categories across management, core technical, and IDIQ pricing exhibits which is somewhat more than the 54 total labor categories identified in the prior contract. However, only 37 standard labor category (SLC) descriptions are currently provided in attachment Jb7. The pricing template is pre-populated with labor hours for the Technical Core (532.4K labor hours vs. 586.6K from FILMSS 1) and the IDIQ portion (938.8K labor hours) of the contract. Offerors cannot change the pre-populated total labor hours or the distribution of hours among labor categories. However, they may allocate these hours among their team. Offerors must separately determine and price Key Personnel and Core Management level of effort. As with other NASA solicitations, offerors must identify the source of all proposed direct labor rates for all labor categories. However, at the time the draft RFP was released, NASA has not included a current Wage Determination (WD) for the contract. The prior WD was 2005-2061. Offerors must also submit a total compensation plan.

For labor escalation, NASA provided suggested escalation rates on that range from 2.9% – 3.0%. NASA characterizes these rates as ‘recommendations’ and are not mandatory. The pricing template requests a single escalation rate by Contract Year and is applied to all labor categories regardless of exempt type.

Indirect Costs
Offerors must provide 3 years’ worth of historical indirect pool and base costs that comprise their indirect rates and similar forecast details for each future Contractor Fiscal Years. NASA expects offerors to separately quantify G&A cost base totals Existing Business Base, the FILMSS 2 contract, and Other Forecasted Business Base to document any favorable rate impact from a large contract win. The RFP cautions offerors that they cannot use their provisional billings rates letter as a basis for forecast indirect rates. Offerors with a negotiated Forward Rate Price Agreement may submit the signed agreement in lieu of providing the indirect cost data in Exhibits 12 and 13. There are no requested direct or indirect ceiling rate ceilings requested in the draft solicitation.

Other Direct Costs (ODCs) and Travel
Pricing requirements are trivial. The RFP instructs offerors to propose $19.47M plug for ODCs and Travel (more than double the original plug from FILMSS 1 solicitation). The plugs are unburdened and offerors are free to apply burden consistent with their accounting systems and also to apply fee as offerors see fit.

Subcontractor Pricing
Pricing requirements for subcontractors depend on whether they are a major subcontractor ($8M over 5 years or $3M in any one year) or minor subcontractor (everything else). Major subcontractors must provide pricing details and associated cost volume narrative similar to the prime and can submit their proprietary data directly to NASA. Minor subcontractor pricing is summarized in a minor subcontractor pricing exhibit (Exhibit 14). The prime is expected to provide NASA with the prime’s cost and pricing reasonableness determinations for all subcontractors. Subcontractors that are proposed as either Cost Reimbursable, Time & Material, or non-competitive fixed price type contract in excess of $2M must also submit a total compensation plan.

Summary

We think NASA needs to provide some additional information and pricing clarifications to offerors. First, provide some summary information on FILMSS 1 task order history. Second, provide basic incumbent pay rate and seniority metrics. Third, provide a current Wage Determination. Fourth, provide a reconciled list of all standard labor categories and fully populated labor categories description for all labor categories. Finally, NASA should refine the pricing template to ensure that offerors do not price in escalation for Service Contract Labor Standard covered labor categories.

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

5 Pricing Tips for the New Year

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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!

CMS-PEO Pricing Synopsis

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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