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Copyright © RGFCC 2002 Slide 1 Crafting Compliant Government Cost Proposals RGF Consulting Corporation is registered with the National Association of State.

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Presentation on theme: "Copyright © RGFCC 2002 Slide 1 Crafting Compliant Government Cost Proposals RGF Consulting Corporation is registered with the National Association of State."— Presentation transcript:

1 Copyright © RGFCC 2002 Slide 1 Crafting Compliant Government Cost Proposals RGF Consulting Corporation is registered with the National Association of State Boards of Accountancy (NASBA), as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, NASBA phone number: Web site: Training For Success in Winning Government Contracts

2 Instructor: Robert G. Flowers, Jr. LTC USA (Ret) President, RGFCC Fort Washington, MD 2

3 3 Introduction Concept is simple, but the “Devil is in the details” Understand the process Embodies all of the elements of a good business deal Government rules are more stringent

4 Be Technically Efficient at Your Craft Be Able to GovTalk (Procurement Language) Be Familiar with the Rules of the Game Be Able to Find the Opportunities Be Able to Build Relationships (Critical) Know the Proper Avenues of Approach The Dozen Cardinal Factors 4

5 The Dozen Cardinal Factors (Con’t) Know how to Prepare Technical Proposals Adequate Financial Accounting System Adequate Time Keeping System Financial Support System in Place Your Competition Cost Proposal Process (Critical) 5

6 The Cost Proposal Process In other words – READ THE PROBLEM (RTP) Cost Proposals carry with it three pitfalls: 1. Not giving the customer what they ask 2. Giving the customer something they didn’t ask 3. Not following the instructions in the RFP 6

7 7 Procurement Cycle Requisition Purchase Request Solicitation Amendment Contract Award Modification

8 8 Crafting A Compliant Cost Proposal The Cost is the difference maker in the Proposal Process The Technical is KEY Most Contract Awards are Based on the Cost when Technical’s are equal

9 CRAFTING A COMPLIANT COST PROPOSAL The winning cost proposal generally produces the following results: Meets or exceeds profit objectives Falls short of profit objectives with marginal returns Loses money and endangers company survival 9

10 10 Essential Cost Proposal Subject Matter Familiarity Terminology (GovTalk) FAR Parts: –12 (Commercial Items) –13 (Simplified Acquisition) –14 (Sealed Bids) –15 (Negotiation) –31 (Cost Principles) –OMB Circular A-21 Truth In Negotiation Act Service Contract Act Fair Labor Standards Act Davis Bacon Act DCAA Audit Guidelines Indirect Rate Establishment Uniform Contract Format Uniform Cost Proposal Format

11 GOVTALKING The COTR/COR has asked the CO to issue a PR on a Cost Objective for services under the provisions of FAR 15 as T&M with 30 FTE’s. No GFE will be available. Vendors with wrap rates above 1.85 will be considered non-competitive. ODC elements will not be burdened with indirects. SCA will apply to this cost objective. The size standard is 6.5 Million. 11

12 DIRECT LABOR $10.00 FRINGE $3.00 OVERHEAD G&A $4.00 FEE $1.00 LOADED RATE CALCULATIONS $

13 DIRECT LABOR $10.00 FRINGE $3.00 OVERHEAD $2.00 G&A $4.00 FEE $1.00 LOADED RATE CALCULATIONS Government Billing Rate $

14 14 Key Concerns By Contracting Officers 1. How Does Your Proposal Measure Up To The RAAS Factor ? REASONABLE (Are the Cost Reasonable) ALLOCABLE (Are the Cost Elements Related to the Work) ALLOWABLE (Are All Cost Allowed Under FAR 31) SUPPORTABLE (Are cost elements adequately supported)

15 15 2. Is Your Cost Proposal ACC? ACCURATE (As of Contract signing ) CURRENT (As of Contract signing) COMPLETE (As of Contract signing) If Not ACC – Your Proposal Is: DEFECTIVE

16 16 3. Is Your Cost Proposal In Proper Sequence with the FOG Factor ? DIRECT LABOR = $100 G & A 15% X Product of DL+FRN+OH) = $20.48 FEE/PROFIT 8% X Contract Cost = O VERHEAD 5% X Product of DL+FRN = $6.50 ODC (After OH) ODC (After G&A) ODC (After Fee ) ODC ( Handling Rate) * F RINGE 30% X DL $100 = $30.00 Total Contract Cost = Total Revenue (Cost + FEE) = $ * Apply ODC Handling Rate in lieu of G&A Loading

17 17 Determining Direct Labor (Cost Chargeable Directly to a Contract) Max Annual Hrs. Vacatio n Hrs Holiday Hrs Sick HrsDL HrsVacation Repl. Tot DL to Bid Fringe Covered Elements Balance Fringe Covered Items with Max Allowable Hrs and Add Back any Replacement Time. An Agency may dictate the Direct Labor Hours to use.

18 18 Fringe Benefit Calculations Made Simple 1. PAYROLL TAX ELEMENT Fringe ItemRateMultiplierTotalMultiplier Source Social Security6.20%$322,493$19,995Direct Labor Medicare1.45%$322,493$4,676Direct Labor FUTA0.80%$56,000$4481 st $7000 PR SUTA2.53%$64,000$1,6191 st $8000 PR * VA Total Payroll Tax$26,738 *8 Employees

19 19 Fringe Benefit Calculations Made Simple Mgr & Admin0.14$189,822$266Per $100 PR Supply Tech$1.83$82,819$1,516Per $100 PR Driver$5.79$49,852$2,886Per $100 PR Total WC$4,668 Company Match2.00%$322,493$6,450Direct Labor Total Retirement$6, Workers Compensation Insurance K Plan (Matching) 4. Health & Welfare Health & Welfare (H&W) $3.16 per hr $3.16$ per month x 7 per $46,009DOL WD Total H&W$46,

20 20 Fringe Benefit Calculations Made Simple 5. Paid Non-Productive Time HOLIDAYS Labor CategoryHoursRatePer AnnumSource Project Mgr.80$31.52$2,522 DL Worksheet Sec III80$18.49$1,479 DL Worksheet Word Proc. III80$16.65$1,332 DL Worksheet Computer Prog. II80$23.05$1,844 DL Worksheet Supply Mgr.80$19.57$1,566 DL Worksheet Driver80$11.78$942 DL Worksheet Total Holiday Pay$9,685

21 21 Fringe Benefit Calculations Made Simple 5. Paid Non-Productive Time VACATIONS Labor CategoryHoursRatePer AnnumSource Project Mgr.80$31.52$2,522 DL Worksheet Sec III120$18.49$2,219 DL Worksheet Word Proc. III120$16.65$1,998 DL Worksheet Computer Prog. II80$23.05$1,844 DL Worksheet Supply Mgr.80$19.57$1,566 DL Worksheet Driver80$11.78$942 DL Worksheet Total Vacation Pay$11,091

22 22 Fringe Benefit Calculations Made Simple 5. Paid Non-Productive Time SICK LEAVE PAY Labor CategoryHoursRatePer AnnumSource Project Mgr.40$31.52$1,261 DL Worksheet Sec III40$18.49$740 DL Worksheet Word Proc. III40$16.65$666 DL Worksheet Computer Prog. II 40$23.05$922 DL Worksheet Supply Mgr.40$19.57$1,566 DL Worksheet Driver40$11.78$942 DL Worksheet Total Sick Pay$6,097

23 23 Fringe Benefit Calculations Made Simple 6. TOTAL FRINGE POOL AND RATE CALCULATION Payroll Tax Pool$26,733 Worker’s Comp Ins.$4, K Retirement Match$6,450 Health & Welfare (Ins)$46,009 Paid Time Off Total$26,873 Total Fringe Pool $ 106,733 Direct Labor Base $322,493 Fringe Rate P/B = R 33.10%

24 24 Cost ElementsProposal DollarsIndirect Rates Direct Labor$1,000,000 Fringe Rate$320, % Overhead Rate$100, % G & A Rate$270, % Fee$135, % Total$1,826,639 Computing Your Wrap Rate

25 25 Wrap Rate Computation Fringe Factor times Overhead Factor times G&A Factor times FEE Factor equals Wrap Rate1.83 Use this rate to calculate direct cost into burdened cost

26 26 INDIRECT RATE CYCLE 1.PLANNING (BUDGET) 3. ANALYSIS (CALCULATE ACTUAL RATES) 4. CONTROL (MANAGE RATES) 2. PRICING (COST PROPOSAL)

27 27 Indirect Rate Distribution Sample IDRCompanyContract AContract B Direct Labor$100$70$30 Fringe30.00%$30$21$9 (Tot Thru Frgn)$130$91$39 Overhead10.00%$13$9$4 (Tot Thru OH)$143$100$43 G&A10.00%$14$10$4 Total Cost $157$110$47 Fee/Profit10.00%$16$11$5 Tot Revenue$173$121$52

28 28 In Conclusion: Discussion


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