1. CON 280: Source Selection and the Administration of Service Contracts
Market Research Exhibit
IOSS Requirements

2. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Market Segmentation
Facilities support services (NAICS code , PSC code 33620)
IOSS requirements may include the following services: landscaping, housing, transportation/motor pool management, engineering, janitorial, personnel management, security protection, financial management, food services, airfield management, port support
Market Size
$22B market
Market Growth
Market is projected to be entering a period of recovery
Market Share
Over 1500 firms total
4 largest firms account for 27.6% of sales
Government Market
There has been a tendency for federal government to self-perform some of these services
Pressure to reduce costs could lead to increased outsourcing, if the financial case can be made
Source: IBIS World; Censeo Analysis

3. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Value Chain
Basic services value chain, with inputs of Time, Knowledge, Equipment, and Systems
Cost Structure
Labor is the major cost component
Cost Drivers
Local and job-specific wage rates
Use of labor-saving equipment
Pricing
May vary by specific service component
Cost plus incentive fee was the most common type of contract in the commercial sector
Encourages continuous process improvements
Promotes supplier-customer partnership
Flexibility in responding to emergency or crisis
Visibility into performance and costs
Fixed overhead rate for life of contract has been used in some contracts
50-50 share ratio has been used in some contracts
Source: IBIS World; Censeo Analysis

4. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Pricing (cont’d)
Typical Profit Margin rate: between 5% and 9%
Typical G&A rate: 7%
Typical Overhead rate (assumed to be indirect expenses/direct labor): 40%
Industry standards for the fee percentage are between 2% and 8%, depending on company performance and risk
Source: IBIS World; Censeo Analysis

5. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Small Business
Approximately 750 firms with fewer than 10 employees
There is a high percentage of small businesses in many of the service industries included in IOSS requirements (e.g., 86% of landscaping firms have fewer than 10 employees)
The small business size standard for NAICS code is $35.5 million
Industry survey suggests a reasonable small business subcontracting participation target between 20 and 50%, with most responses in the 25-35% range
Competitive Dynamics
Management/service integration expertise is a potential barrier to entry for firms that want to handle large (>$100M) requirements
Some firms provide service only within a specific geographic region
Large firms are generally better positioned to provide the full range of services required; competition among these firms may be great
Source: IBIS World; Censeo Analysis

6. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Market Trends
Decrease in small businesses serving as prime contractors (often due to the complexity of managing a large number of integrated services), with increased participation as subcontractors focused on a sub-set of the services required
Best Practices
Use of integrated service providers for IOSS requirements
Broader range of skill sets across the labor pool, so workers become fungible resources
Performance Metrics
Specific performance metrics will vary by service but are generally based on :
Customer satisfaction
Performance results
Response time (“regular” and emergency)
Up-time/availability (e.g., for motor pool)
For Government: Small Business goals
Source: IBIS World; Censeo Analysis

7. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Market Research Topics
Data
Performance Metrics (cont’d)
Sample performance thresholds include:
100% availability of essential base infrastructure services
Acceptable Quality Levels (AQLs) 99% achieved
25% base operating cost reduction over 5 year period
Source: IBIS World; Censeo Analysis

8. Market Research: IOSS Requirements (cont’d)
Potential Sources
Company
Size
Interest
Aleut Facilities Support Services
Alaska Native
Prime or Subcontractor
Applied Planning Internations Inc,
WO, SDB
Partner or Subcontractor
Arctic Slope World Services/DBA ASWS
Bechtel National, Inc
Large
C. Martin Company, Inc
8(a)
CSC Applied Technologies LLC
Del-Jen Inc
Prime
Diversitech, Inc
Dyncorp International
EG&G Technical Services, Inc
H&S Resources Corp WO
Subcontractor
ITT Systems Division
Jacobs Engineering Group, Inc
JanKell, Inc.
Kellogg Brown &Root Services, Inc
Largo, Inc.
Lockheed Martin Mission Services
ManTech
NEDCO
SDB
Northrop Grumman Technical Services
Parsons
Raytheon
Science Applications International Corp
Sierra Lobo, Inc
SIP, Inc.
TEDCO
Yang Enterprises Inc
CON 280, Day 2

9. Market Research: IOSS Requirements
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Market Research: IOSS Requirements
Key Implications for the Acquisition
Since many of the services included in IOSS requirements are in industries with a high percentage of small businesses, there may be political issues if small businesses risk being displaced by an IOSS contract
The industry is projected to be entering a period of recovery, so key players may be hungry for additional business
There is a high level of competition among large firms in the industry, which is generally good for potential buyers
If our required service levels are higher than average, we may be a more expensive customer to serve and should therefore consider changing our requirements to be better aligned with Industry