Bid & Proposal Cost: How can Government and Industry work to get Better Bang for your Buck?

Transcription

1

2 Bid & Proposal Cost: How can Government and Industry work to get Better Bang for your Buck? Breakout Session #: F05 Presented by: Gail Guseman Deloitte Consulting, LLP Date: July 23, 2013 Time: 4:00 pm - 5:15 pm

3 Gail Guseman: Deloitte Consulting experience in large systems integration, software lifecycle, change management, business process reengineering, strategic planning, complex software implementation, customer relationship management, and call center management. Functional domain experience in acquisition, procurement, contract management, financial management, and human resources. Large engagement manager with 25 years of experience supporting Defense and Federal Civilian clients. Experience strategic planning, project planning and execution, large team management and program profitability. PMP and ITIL v3 certified. 2 MS Technology Management. Copyright 2012 Deloitte Development LLC. All rights reserved.

4 Agenda 1. What is the Opportunity? 2. What is Bid & Proposal? 3. Environment Observations 4. DoD Better Buying Power 2.0: Observations 5. Considerations 6. Discussion 3

5 What is the Opportunity? Thesis: B&P dollars are not spent effectively and Government ultimately pays The end-to-end process of requirements generation to delivery of capability is the root cause for contracting challenges Policy sometimes creates more problems in execution than the anticipated value 4

6 What is Bid & Proposal? Federal Acquisition Requirements (FAR) Definition B&P Costs: Bid and proposal (B&P) costs means the costs incurred in preparing, submitting, and supporting bids and proposals (whether or not solicited) on potential Government or non- Government contracts. The term does not include the costs of effort sponsored by a grant or cooperative agreement, or required in the performance of a contract. Source: Cost Accounting Standard (CAS) Sec Definition of B&P)Costs: Bid and proposal (B&P) cost means the cost incurred in preparing, submitting, or supporting any bid or proposal which effort is neither sponsored by a grant, nor required in the performance of a contract. Source: Controlling B&P costs is important to Industry and Government because everyone pays for it in the long run through increased overhead and higher rates 5

7 Size and Scope of Government Contracting 8% of Contracts were Cancelled in 2012 How big is Federal Contracting? 82,000 Solicitations released in % reduction in cost of Contract Obligations yields $51.7M in savings Federal FY12 Contract Obligations $517 Billion 41,844 Size of Federal Contracting Workforce Number of Contract Actions in FY12 The Average Contractor handled 74 Contract Actions in FY12 3,093,000 6,500 Number of Cancelled Solicitations Source: Deltek 6

8 Cost vs. Price Legend Profit B&P Bid and Proposal G&A General & Administrative SST Supplies, Space and Technology Price SST G&A Fringe Benefits B&P Cost Cost: What it costs industry Price: What customer s are willing to pay Direct Labor Unallowable Costs 7

9 Maturity of Government Contracting Model Industry Perspective 1990 s: Formal IFBs Limited communication 2000 s: Performance Based Contracting Promotes communication 2010 s: Better Buying Power Limited communication Impacts of Current Buying Trends Increased Protests, More protests upheld, Increased cost of bidding More duplication of contracting actions Less use of strategic sourcing and GWACs/IDIQs Commercial Procurement Innovation: Extensive use of Data Analytics to forecast future needs and gain market insight High communication and collaboration Strategic Sourcing, Strategic Partnerships produce both savings and value Source: Gartner 8

10 Different Stakeholder Lenses? What is the Root Cause? End-User poorly defines requirement resulting in various interpretations of the requirement as it is processed through the endto-end Acquisition lifecycle Requirement process may create a difficult procurement process, deliver wrong product to customer and create more costly acquisitions Customer Project Leader Analyst Programmer Consultant Contract Operations Final Bill Support True Need 9

11 Stakeholders: Lost in Translation? Customer Requiring Activity Contracting Officer Procurement Industry Sequestration Military Drawdown Social Media Culture Public Pressure for Transparency Technology Advances Global Economy Security Sensitivity 10

12 Creating more B&P costs What is driving the increases? Policy to reduce costs can actually increase costs: Limited Performance Periods Inappropriate LPTA awards which result in performance issues Unclear requirements create churn and poor industry bids Limited performance based contracts to incent industry innovation GWAC/IDIQ contracts not leveraged Leads to more contracting actions and increased B&P costs from Industry 11

13 Shorter Contract Periods Imply False Cost Savings Base+2 Base+4 Increased B&P costs are more than the incremental cost savings accrued because of the increased procurement/b&p iterations. Multiple contractor transitions result in reduced performance while contractor costs increase year over year. Government Contracting workforce and cost is significantly higher Government and Industry should work together to efficiently manage cost, performance, and value 12

14 Low Price Technically Acceptable (LPTA) The LPTA source selection is appropriate when highest value is expected to result from selection of the technically acceptable proposal with lowest evaluated price When using LPTA, the following apply: Award will be made on the basis of the lowest evaluated price of proposals meeting or exceeding the acceptability standards for non-cost factors Past performance need not be a factor in LPTA selections Tradeoffs are not permitted Proposals are evaluated for acceptability but not ranked via non-cost/price factors Exchanges may occur FAR: LPTA is a Best Value approach; technically acceptable definition and criteria are critical; LPTA is not appropriate for services which require past performance. Source: TechAmerica 13

15 DoD s Better Buying Power Initiative Policy vs. Reality Policy: The Under Secretary of Defense Directive Implementation of Directive for Better Buying Power Achieving Greater Efficiency and Productivity in Defense Spending, DTD 24 April Initiative implements leading practices to strengthen DoD s buying power, improve industry productivity, and provide an affordable, valuable-added military capability to the Warfighter. Reality: Overworked and understaffed contracting employees Increased Industry Overhead and creates churn Industry and Government pressures and incentives do not align Results in lack of trust between Government and Industry Unintended Consequences of BBP 14

16 DoD Better Buying Power 2.0: Industry Interpretation for Success See the Acquisition Big Picture Prepare and Empower the Acquisition Workforce Acquisition and Sourcing Discipline Enable Sourcing Governance by providing the right information, to the right people, at the right time 15

17 Considerations Maximize bi-lateral communication Afford Industry maximum potential to interact with you so informed proposals are developed Structure RFIs focused on desired program outcomes with minimal prescriptive structure to promote Industry innovation Leverage draft RFPs to verify desired intent is likely to be achieved Focus on end price (outcomes) versus components (e.g., labor rates) 16

18 DISCUSSION 17