Grow Your Business

To grow your business through federal government contracts, you need a winning bid and proposal strategy.

Most federal government agencies use a Request for Proposal, Request for Quote or Invitation to Bid process to find the products and services they need. More than a simple price quote, these documents outline the product specification, services, terms and conditions and other information needed to evaluate and award a contract. To be considered, your bid or proposal must respond to and comply with all the terms set by the contracting agency.

A winning bid proves that your company offers the best solution at the most competitive price. Note that most competitive does not necessarily mean cheapest. You often can justify a higher price by showing that your company charges a fair and reasonable price for a superior solution.

Bids & Proposals

In the world of federal procurement, agencies often rely on processes like Request for Proposal (RFP), Request for Quote (RFQ), or Invitation to Bid (IFB) to source the products and services they need. These aren’t just price quotes; they are comprehensive documents detailing product specifications, services, terms and conditions, and more, which form the basis for contract evaluation and awarding.

Your bid or proposal must respond to and comply meticulously with all the agency-set terms to stand out. A winning bid isn’t just about offering the lowest price; it’s about demonstrating that your company delivers superior solutions at a highly competitive price.

Your response to an RFP includes the following information. The format of that response varies from opportunity to opportunity, with some being more formal and organized than others.

Technical Volume

The technical volume addresses how you will solve the problem and includes details on the products, services, and labor categories necessary for a successful project.

Management Volume

The management volume addresses how you will manage the project and includes past performance information to show how you have completed similar projects.

Cost and Price Volume

The cost and price volume includes all the accounting information on prices and costs (when required and appropriate). The information should be presented at the level of detail requested in the RFP, which often includes hours and rates by line item, phase, and/or year.

The best prices in a proposal are developed from recent and accurately calculated indirect rates that roll up to a price that is then compared to market prices. Contractors must understand what the market will pay compared to their costs to deliver the product or service.

Basis of Estimate

Contracts subject to the submission of cost or pricing data require an acceptable basis of estimate, including hours and dollars by line item, time-phased to match the project schedule, and sufficient detail to support the effort proposed. This section will dive into the complexity of those details and show you how to maximize profit and ensure regulatory compliance by preparing an adequate basis of estimate for every contract, regardless of type, when developing your cost and price proposal.

Elements of an Adequate Basis of Estimate

A basis of estimate (BOE) is an organized set of data and narrative information that explains the logic, methodology, calculations, and assumptions used to define the tasks and determine the resources needed to accomplish the scope of work described in the RFP. Developing a credible BOE requires reliable historical and actual cost source data that you can trace back to the applicable business system, such as accounting, purchasing, material management, manufacturing, or timekeeping. The BOE narrative is important because your proposal team and the customer must be able to verify the data, calculations, and rationale you used to arrive at the cost estimate.

Methods

  • Analogous Method – You performed similar work that can serve as a basis for the proposed work.
  • Cost Estimating Relationship (CER) Method – You have an established library of statistically valid cost-estimating relationships based on historical data.
  • Task-Based/Bottom-Up – You performed similar work and can access a library of historical data.
  • Level of Effort (LOE) Method – Predefined level of support for some tasks, such as allocating hours for project management, quality assurance, or supervisors. The predefined level of effort may be identified in the RFP, SOW, or related documents.
  • Engineering Judgment Method (least desirable) – Relying on technical expertise without historical data. This method usually gets the most scrutiny because the contractor appears to have guessed or doesn’t have any meaningful data to support their basis.

BOE Preparation Notes

Each task or item in the proposal must describe the effort. The phrase “professional judgment” is not sufficient. The level of detail should be commensurate with the effort. An item with more hours and dollars should have a longer description. When relying on “similar to,” you must provide evidence and explain variances from your source.

DoD Proposal Adequacy Checklist

The Department of Defense provides a proposal adequacy checklist in DFARS 252.215-7009 required for use when identified in the RFP/RFQ. This checklist is an excellent tool for DoD and non-DoD proposals, whether required or not. Below, the items are reorganized and grouped for alignment with the cost elements.

Primary Cost Elements

  • Labor
  • Material
  • Travel
  • ODC
  • Subcontractors
  • Indirect Costs/Rates
  • Facilities Capital Cost of Money
Labor

Labor is the number one expense of most companies and usually the number one expense of any proposal. As such, the government places a lot of scrutiny on labor and labor-related expenses. Payroll records, offer letters or salary surveys must support proposed labor rates. Proposed labor categories must match those in the solicitation, which may require realignment of internal labor categories.

Remember that labor categories are defined by:

  1. Education
  2. Experience
  3. Certification

Since each company and each contract define labor categories differently (variances in the three criteria above), contractors must maintain labor category matrices across all contracts.

Material

Depending on the nature of your contract, material may include items purchased on behalf of the government, components, and raw materials that go into your manufacturing or assembly process or both. You should provide quotes to support at least 80% of the costs. For some contractors, this may be eight to ten large or expensive components of an end item. You can usually ignore labels, fasteners, and such as they are low-dollar items.

Travel

Travel costs must be calculated and presented as follows unless travel is part of a fixed-price line item or contract.

Location | Number of travelers | Number of days | Number of trips

With costs by element:

  • Estimated airfare, rental car, fuel, parking, and tolls.
  • Actual per diem and lodging (with estimated taxes and fees).

In the case of travel, it’s best to estimate on the high side so that you have plenty of dollars awarded to cover actual costs. Modifications for increased costs can take time and ultimately rely on the availability of funds.

Remember that travel costs are not marked up except for G&A, identified as allowable on a contract-by-contract basis. Profit or fee on travel is almost always forbidden on T&M and cost-type contracts but may be masked on fixed-price contracts. Remember that price analysis includes analysis of the individual elements and total price. As such, you must justify the proposed travel costs in your fixed-price proposal.

ODCs

By their very nature, other direct costs should be immaterial (low dollars). These may include supplies, hand tools, rigging, testing, or other items and services necessary to complete the work. ODCs should be supported by estimates based on historical experience, quotes, or both.

Subcontractors

Like labor, subcontractors are often a significant portion of a contract’s overall cost or price and receive a fair amount of scrutiny. Quotes, price analysis, and source selection justification must support subcontractor costs. Contractors must obtain certified cost or pricing data (CCPD) for proposals exceeding the TINA/TCPD threshold (currently $2M) unless an exception applies. Even then, the contractor may evaluate other than certified cost or pricing data, which may be the same without certification.

Per FAR 15.404-3(c), the contractor must include the CCPD and a written analysis for any proposals exceeding $15M or 10% of the prime award in their proposal. The latter is an often-overlooked requirement. The contractor could have a $3M proposal with $750K for a particular sub. While $750K is less than the TINA/TCPD threshold, it is greater than 10% of the $3M proposal ($300K), so the inclusion of CCPD or data other than certified cost or pricing data and a written analysis are required.

Since many contractors refuse to share detailed cost or pricing data with the prime, citing competitive reasons, the prime may need to request field assistance through the contracting officer or employ the services of a third party. Some subs are uncomfortable with the third party as they fear that party might share details with the prime, but it’s still a valid and often time-saving approach.

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