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Government Contractors' Newsletter |
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For the serious small government contractor |
October 2010 | |
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COST & PRICING DVD
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Greetings!
I have been keeping busy on this side having assisted 8 small firms in winning/negotiating over $25 million in new business during the governments crunch time that started in late August and continued through October.
A great deal of tactful negotiations with CO's, Auditors, and Prime Contractors, on behalf of firms was required this year as requests peaked for cost and price data, adequate accounting systems, documented policies, and support that would not have normally been requested. Keep this in mind as decisions are being made where to commit resources during your next budget period. Please don't wait until last minute. Okay? In this I know what I speak of.
Sometimes I have this picture in my mind that I am teaching government personnel how to work better with small businesses in a practical and efficient manager that meets both the "Letter" and "Spirit" of law to improve their chance of success.
I am speaking from a cost and price perspective where contracts would be let to small firms at a price that will allow them to recover all of their reasonable allowable cost and make a reasonable profit. Then I wake up! smile....
I continue to find that small businesses are being saddled with unnecessary requirements and expense, based on their size, in meeting reporting and other government requirements. This continues to impede their ability to "Fairly Compete".
Government personnel still do not seem to understand the True Relationship of Indirect Costs to business size and the expectations of pricing for adequate competition. I have dealt with many that are sensitive to this issue, but there are far to many that just don't understand the concept and what truly small businesses go through.
However, as I like to say: It is what it is, and this is the environment that was chosen to work within.
So who's it up to? That's right. Do your homework. Have someone review your numbers, proposals, and accounting system structure. Work on those policies. Continue the learning process so you can be as prepared as possible when negotiations arise. You Will Be Glad You Did!
Remember, "It's your Cost and Pricing, It's your Cost and Pricing, It's your Cost and Pricing"
Thank you, be nice, and of good character!
Paul Sr.President - PGBC, Inc. |
 The Winners and Losers: 5 Management Myths on Training
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Women: Currently Owned or Planning to Own Firms: Your SBA ruling is now final!
If you have not already heard, SBA Releases Final Women-Owned Small Business Rule to Expand Access to Federal Contracting Opportunities --- New program will be available in early 2011 for small, women-owned firms.
October 4, 2010: WASHINGTON - With the publication today of a final rule in the Federal Register, the U.S. Small Business Administration will begin implementation of its women-owned small business (WOSB) contracting program. The agency expects the program to be available for WOSBs in early 2011. Some Key Areas of the program are as follows:
- The rule is part of the Obama Administration's overall commitment to small businesses.
- This rule identifies 83 industries in which WOSBs are under-represented or substantially under-represented in the federal contract marketplace.
- The rule is also another tool to help achieve the statutory goal that 5 percent of federal contracting dollars go to women-owned small businesses.
- SBA, in conjunction with the Federal Acquisition Regulatory Council, will begin a 120-day implementation of the WOSB contracting program, including building the technology and program infrastructure to support the certification process and ongoing oversight.
- With implementation expected to take several months, the agency expects that federal agencies' contracting officers will be able to start making contracts available to WOSBs under the program in early 2011.
- The final rule authorizes a set-aside of federal contracts for WOSBs where the anticipated contract price does not exceed $5 million in the case of manufacturing contracts and $3 million in the case of other contracts.
- The proposed rule allows women-owned small businesses to self-certify as "WOSBs" or to be certified by third-party certifiers, including government entities and private certification groups.
- The final rule requires WOSBs which self-certify to submit a robust certification verification, to complete the certifications at the federal Online Representation and Certification Application ("ORCA") Web site, and also to submit a core set of eligibility-related documents to an online "document repository" to be maintained by the SBA.
- The SBA intends to engage in a significant number of program examinations to confirm eligibility of individual WOSBs.
- The SBA has the authority to request substantial additional documentation from the WOSB to establish eligibility.
- SBA intends to pursue vigorously punitive action against ineligible firms which seek to take advantage of this program and in so doing to deny its benefits to the intended legitimate WOSBs.
I expect there will be a great deal more new women owned businesses over the next year! So women, be prepared for the competition within the WOSB category by working on an adequate accounting system, understanding cost and pricing for government contracting, working on your policy manual, and continuing to learn.
You can start by scouring our online contractor community, as time permits, to read and review the many articles available on practical solutions for day to day issues that your colleagues deal with.
I pray the best for all WOSBs.
follow this link to SBA site to read full notice |
Compensatory/Comp Time
Inquiry: What would you call time that contract employees work one week but can take off the next week? This is for Gov contracts and we can't call it comp time. They don't get paid overtime for this contract so they have to take the time off. We need to track the time on the time sheet for contract reasons to name a few. Do you have any suggestions? Response: This requires an extended response. First we must determine what you mean when you say "contract employees." The answer depends on a person's interpretation of the terminology. Do you mean contract employee as you have contracted with a consultant, or are these purchased labor type employees, or do you mean they are your company exempt employees, or company non-exempt employees that are dedicated to a contract? There could be a difference based on each. In most of the cases above, except for the last one, there is typically no compensatory time off. If someone works 50 hours one week then the employee would only work 30 hours the next. Period! Nothing else to record. For a Contract Consultant, or Purchased Labor (provided by an agency), you are typically paying an hourly rate for time worked so there is only a need to record actual hours worked. Why would you want to record any other hours? Your time records will still provide reports, in hours, the variances in time each week, by person, so you will still be able to evaluate the way hours are being worked. Now for a situation where they are your "Company Employees" It is important to know if the people are Exempt or Non-Exempt (Hourly or Salary). For exempt employees it is typically straightforward: The hours they work, they record, regardless of how many or how little. If I work 50 hours one week, I record 50 hours and bill 50 hours. If I work 30 hours the next week, I record 30 hours and bill 30 hours. I am going to receive the same weekly salary regardless. For Non-Exempt Employees: It is a different story. Generally, the time they work one week, but plan on taking off the next week or even later, could be called something like "CTO" (Compensatory Time Off). According to the FLSA, non-exempt employees must be paid for all time worked unless the Employee Agrees to take compensatory time off. More on this is covered in our online community and let's see if we can get input from others who have experienced this situation...
follow this link for more
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CO asks for more than is reasonable (in your opinion)? What can you do?
Situation: A contractor is asked to reduce the price proposed due to government funding limits. The contractors' past performance is exceptional and they are in good standing with the customer. The contractor knows they cannot provide a quality product at the price the contracting officer is asking. What should they do?
First: Relationship skills! State your understanding of their constraints and you are willing to be flexible. Next, specifically identify those "Work line items" that you feel can be changed, reduced or eliminated while still providing a quality product within funding limitations. Then be sure to ask your client what they think about your suggestions!
Restate your desire to do the job and work with them on the price. However, remind them that because you know your cost, you do not want to commit to anything you know will not result in a quality product and a win-win situation. Let your customer have the opportunity to counter-offer. This is one of several approaches I successfully personally use.
Remember, you can only successfully use this win-win strategy if you "Know Your Costs". Finally, whatever the final offer on the table, a firm, management decision must be made by you. Yes or No. And be prepared to live with the results of your decision... Learn and move on. |
Reflecting the Impact of Inflation in Your Price
How do you reflect the impact of inflation in your contract price over the contract performance period? It is a true cost, and in a time of uncertainty, inflation can be difficult to determine. Let me provide some guidance for you.
There are essentially two (2) ways to reflect the impact of inflation:
1. In the most widely used method, the proposed contract price includes current estimates of Wages (Direct & Indirect Labor) and Prices (All Other Direct & Indirect costs) that are expected to be experienced during the contract period of performance (POP). The Preferred Bases for current estimates are:
(a) forecasts of future wage indices, and
(b) forecasts of future price indices.
It is important that any indices that are used be prepared by qualified, professional economists. Their predictions are based on econometric computer models of the U.S. economy (Foreign if applicable) which consider a large number of factors that influence wages and prices.
Some of these indices include the CPI, Global Insight/DRI, Specific Cost Type Quotes (i.e., Health insurance increase estimates from your insurers, etc.) [You can also do a search of selected Economic Indices for your industry on the internet for additional reference.]
Please remember these are guides, your situation may lend itself to using other inflation indices or factors due to uniqueness of the situation, company policy, historical data, etc., subject to the test of reasonableness.
2. EPAs - Alternatively, the contract proposal may be priced without escalation and an economic price adjustment (EPA) may be proposed. This is appropriate when there is serious doubt about the stability of future market or labor conditions during an extended contract performance period. When such expectations are not included in your contract price, and they can be separately identified, they may be covered by an EPA contract clause.
Use of EPAs have increased, primarily because of potential inequities that fixed-price contracting can produce in periods of economic uncertainty. These adjustment options are intended to protect both the Government and the contractor from the effects of abnormal wage and/or price changes that could cause significant losses or windfall gains for reasons beyond the control of the contracting parties.
Lets look closer at EPAs.....
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Inspirational Corner: Poise under Pressure - Can You Handle It?
I was asked to reprint this inspirational thought and provide the link. Five-question test developed to measure a person's leadership potential. Do you measure up? What about your potential managers? Well let's see:
a. Can you take a reprimand without blowing up?
b. Can you take a turndown without becoming discouraged?
c. Can you laugh with others when the joke is on you?
d. Can you keep your spirits up when things go wrong?
e. Can you keep cool in emergencies?
If your answer is yes to all five questions, you're on your way to being a leader. However, one great quality of a leader is singled out - Poise! Are you kidding? No.
"Poise is what makes you a master of situations," Dr. Laird said. "Although we call some persons natural-born leaders, usually the poise of leadership is a trait that has to be developed, and anyone can develop poise a little bit at a time."
The way to develop poise, he says, is to destroy its enemies - nervousness, anger and the habit of speaking before thinking.
It's easy to show poise when everything is going well. It's a lot tougher to maintain your poise when things are not going well. But the minute you lose your composure, the chances of defeat increase. You are giving the mental edge to your opponent. And you must remember...... |
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