BOOST Strategic Pricing
Get in touch with BOOST LLC’s pricing team today!
Get in touch with BOOST LLC’s pricing team today!
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.
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. 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.
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:
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]
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:
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!
Pricing terminology is confusing! Everyone uses the language differently – with different philosophies on pricing, different terms for the stages of strategic pricing and a lack of consistency for terms. All further complicated by which government agency you serve.
Here is the circle of life as it pertains to pricing in a nutshell:
Before the RFP Drops
Competitive Analysis/Price to Compete–this is looking at all external factors to understand your competition and determine what the competitive landscape will be. Think of this as coming up with a range of what would be competitive. This includes taking the following into consideration:
This is normally done well in advance of the RFP dropping and can be critical to the bid/no-bid decision. It also serves as a guide for strategic planning and vision. Are you looking at opportunities that make sense for your company?
Draft RFP/Initial RFP
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 to compare to your own approach and make adjustments to your solution and to your pricing.
Strategic Pricing/Internal Focus – this is the bottom up and top down approach towards pricing out your technical solution. When done right, this is in lockstep with the technical team from the beginning. Factors taken into consideration:
Depending on available information, relationship with the agency and when the technical solution is developed, this should be done in advance of the final RFP hitting the street (in a perfect world).
After the RFP Drops
Proposal Pricing/Cost Volume/RFP Based – the actual cost volume, narrative and documentation for the audit file. This is the hard-core spreadsheet work, section B, documentation for the cost volume, and everything associated with the proposal as it relates to cost. Ideally, this is done with as much lead time as possible. In reality, it is always one of the last items to be complete as the pricer is waiting on subcontractor submissions, final verification of the staffing plan and any other shenanigans that come up in a color review. The goal is always to have it done in time for a thorough review. The key here is compliance, compliance, compliance. Follow the RFP to the T, focus on checking boxes and keep it simple.
If you need any help with the above, please reach out to BOOST. We have SME’s and strategic pricing experts who focus on each of the above areas and can support any phase of the pricing lifecycle.