EEC Assignment presentation

on
“Pricing Strategies for Electrical Contracts and
Proposals”

Under the Guidance of

Mrs. Pooja M
Assistant Professor, Department of EEE, GEC, Gangavathi

Presented By:
P.SAVITHRI 3NG20EE406
Learning objectives
Planning the Pricing Strategy
Understanding the Requirements
Cost or Pricing Data
Price Analysis
Cost Analysis and Cost Realism Analysis
Indirect Rates and Competitive Rate Strategies
Best Practices
Planning the Pricing Strategy
 Identify core business areas and what opportunities to pursue
 Develop a bid/no bid decision process
• Develop a Bid and Proposal (B&P) budget
 Start the proposal activity early in the process
• Identify the proposal team
• Internal and external parties
• FAR 52.219-14 Limitation on Subcontracting
• Teaming Agreements
• Non-Disclosure Agreements
• Develop a proposal schedule
• Include due dates for the pricing team
• Prepare a compliance matrix
• Include assignments and responsible author with clear due dates
• Schedule kick-off meeting with teaming partners
Understanding the Requirements
 Obtain a clear understanding of the requirements
 Read the solicitation (and read it again, and again, and again….)
 Determine the contract type(s)
 Section B, Supplies or Services and Prices/Cost
 Section C, Statement of Work
 Section L, Instructions, Conditions, and Notices to Offerors
 Section M, Evaluation Factors for Award
 Clarifications, discussions, and negotiations
 Evaluated price vs, proposed price
Understanding the Requirements
 Pricing Policy (FAR 15.402)
 Contracting officers SHALL:
 Purchase supplies and services from responsible source at fair and
reasonable prices
 May require certified or other than cost or pricing data to make that
determination
 Price each contract separately and independently
 NOT include any amount for a specified contingency to the extent that
the contract provides for a price adjustment based on the occurrence of
that contingency
Cost or Pricing Data
 Policy on cost or pricing data
 Do not obtain more information than necessary
 Data collection and preparation is expensive

 Order of preference for type of data required

 No additional information is needed if the price is based on adequate price competition
 Information other than cost or pricing data
 (Certified) cost or pricing data

 Cost or pricing data (defined at FAR 2.101):

 Factual, not judgmental and verifiable
 More than just historical data, cost or pricing data includes all the facts that can
be reasonably expected to contribute to the soundness of estimates of future
costs and to the validity of determinations of costs already incurred
Cost or Pricing Data
 Cost or pricing data (defined at FAR 2.101):
 Include, but not limited to, such factors as
 Vendor Quotes;
 Nonrecurring costs;
 Information on changes in production methods and in production or purchasing volume;
 Data supporting projections of business prospects and objectives and related operations
costs;
 Unit-cost trends such as those associated with labor efficiency;
 Make-or-buy decisions;
 Estimated resources to attain business goals; and
 Information on management decisions that could have a signification bearing on costs.
Cost or Pricing Data
 Threshold for requiring certified cost or pricing data is >$700,000
 Exceptions to certified cost or pricing data
 Prices are based on adequate competition
 Prices agreed upon are based on prices set by law or regulation
 Commercial item acquisitions
 When a waiver is granted
 When modifying a contract or subcontract for commercial items
 Other circumstances where certified of cost or pricing data are not
required
 Exercise of an option at the price established at contract award or initial
negotiation
 Proposals used solely for overrun funding or interim billing price
adjustments
Price Analysis
Price Analysis Techniques
 Comparison to other proposals received
 Comparison of previously proposed prices for the same or similar
items or service
 Commercial items or services
 Prices set by law or regulation
 Catalog prices
 Independent Government Cost Estimates (IGCE)
 Price Analysis alone may not be sufficient for
 Sole source procurements, including FFP
 Modifications or changes to existing contracts
Cost Analysis and Cost Realism Analysis
Cost Analysis
 The review and evaluation of separate cost elements and profit or fee
proposed to determine a fair and reasonable price or to determine cost
realism, and
 The application of judgment to determine how well the proposed costs
represent what the cost of the contract should be assuming reasonable
economy and efficiency
Cost Analysis and Cost Realism Analysis
Cost Realism Analysis
Examination of proposed costs and/or prices to ensure
the price the government will pay is consistent with the
requied contract effort
Performed on cost reimbursement contracts to
determine the most probable cost of performance for
each offeror
May differ from the proposed cost and should reflect
the Government’s best estimate of the cost of any
contract that is most likely to result from the offeror’s
proposal
Cost Analysis and Cost Realism Analysis
 Two Objectives of Cost Realism Analysis
 Determine if the proposed cost/price realistically reflects the effort
required to perform the contract
 Consider the risk in the award decision, i.e., if the offeror refuses to
make changes, the contracting officer must assess the risk to the
Government when making the award decision
Indirect Rates and Competitive Rate
Strategies
 Direct Costs
 Direct labor
 Subcontract Costs
 Travel
 Material
 Other Direct Costs (ODCs)

 Indirect Costs
 Fringe
 Overhead
 General and Administrative (G&A)

 Unallowable costs
 Indirect Rate Calculation = Cost pools/allocation base
 Pools are defined by placing costs in logical groupings, e.g.,
fringe costs, overhead costs, G&A costs, unallowable, etc.
Indirect Rates and Competitive Rate
Strategies
 Indirect Rate Development
 Develop estimate on an account by account basis
• Identify increases in direct and indirect wages
• Identify increases to statutory fringes based on increased wages
• Additional 401k, medical, dental, vision, worker’s compensation
• Additional office space, dues and subscriptions, training, phones, etc.
• Provide forecast of indirect rates for all years, converted from contractor fiscal
year to contract year
• Explain how indirect costs and rates are computed
• Explain how indirect rates are applied
• Provide cost breakdowns, trends, and budgetary data
Indirect Rates and Competitive Rate
Strategies
 Create multiple fringe rates
 Create service centers
 Create multiple overhead rates
 Changes from total cost input G&A to value added G&A
 Redefine the treatment of costs from indirect to direct
 Rate ceilings
Best Practices
 Read RFP carefully to ensure it dosen’t violate CAS or FAR
 G&A on travel is allowable if it is consistent with the offeror’s accounting
practices
 Review solicitation website often for changes
 Prepare, update, and delivery proposal using a compliance matrix that is
updated as changes to the solicitation are made
 Clearly align technical proposal with cost/price proposal
 reduce math errors or inconsistencies in the cost/price proposal by
 Using rounding
 Use of an independent party to verify cost proposal on a calculator
 Negotiate proper subcontract types
 Beware of fixed fee dilution
 Be audit ready
 Due date/time
Thank you