PRICING 101 FOR GOVERNMENT CONTRACTING

Transcription

1 PRICING 101 FOR GOVERNMENT CONTRACTING Presented by: The Colorado Procurement Technical Assistance Center (PTAC) NCMA Training Day 15 May 2014 Bob Brown Procurement Counselor

2 Overview Introduction Federal Acquisition Regulation Cost Information Accounting System Pricing Model Contract Types

3 Procurement Technical Assistance Program (PTAP) established by Executive Order 12372, July 1982 Recognized need to assist businesses in gov t contracting Support for increased competition, innovation Each Program awarded to either a government entity, higher education or a non-profit entity Award Mechanism Grant funding through DoD under the Defense Logistics Agency Nationwide Program - 49 States, 94 total programs 3

4 Colorado PTAC Established November 2009 Non-Profit, 501c(3) Corporation Public/Private Partnership (P3) with the state of Colorado, Office of Economic Development & International Trade (OEDIT) Funded by federal, state, public, and private contributions (cash and in-kind) Approx ~ $800K annual budget Ribbon cutting on 9 Nov 09 Program can increase through additional federal match 4

5 PTAC clients have passed Contracting 101 Educated in procurement process from registrations to clauses Understand your requirements better fewer dumb questions Responsive, complete, compliant proposal response Have the continuous support of PTAC throughout contract life cycle Source of capable and prepared Colorado based subcontractors in all industries Support in meeting socioeconomic goals - PTAC clients are in all small business preference categories 5

6 97% of PTAC clients are Small Businesses 1.2% HUBZone Certified 3% - Large 1.20% 9.10% HUBZone Certified HUBZone Located 19.6% Veteran Owned 19.6% 31% Woman Owned 31%

7 $350,000,000 $300,000,000 $250,000,000 $200,000,000 Reported Contract Award Dollars Awards Sub Awards Prime Total 4 year Awards 2.7B Total Awards Year 4: $949,136,606 $150,000,000 $100,000,000 Total Awards Year 3: $693,907,998 $50,000,000 $0 Yr1 Qtr1 Yr1 Qtr2 Yr1 Qtr3 Yr1 Qtr4 Yr2 Qtr1 Yr2 Qtr2 Yr2 Qtr3 Yr2 Qtr4 Yr3 Qtr1 Yr3 Qtr2 Yr3 Qtr3 Yr3 Qtr4 Yr4 Qtr1 Yr4 Qtr2 Yr4 Qtr3 Yr4 Qtr4 Total Awards Year 1: $463,077,539 7

8 1. Register: Get the Right Registrations 2. Research: Find the Right Opportunities 3. Respond: Write Persuasive Proposals 4. Retain: Support in Performance & contract administration actions

9 Veterans and SD Veterans are only recognized by VA after review by Center for Veteran Enterprise Mandatory step in registration is seeking counseling from a VA CVE certified counselor PTACs receive the same training as the CVE reviewers to become qualified counselors CVE will not certify any counselor who charges a fee Certified counselors have preferred access to CVE Colorado PTAC currently has 3 certified counselors

10 Dynamic Small Business Search yields 974 profiles of Veteran Owned and Service Disabled Veteran Owned companies in Colorado. VA s CVE shows 202 certified Colorado House Bill HB sets a state procurement goal of 3% for SDVOSB SDVOSB s must be certified by VA CVE same rules as federal/va procurements

11 References & Sources Part 30 Cost Accounting Standards Policies & Procedures for applying Cost Accounting Standards Part 31 Contract Cost Principles Defines cost principles and procedures for the determination, negotiation and allowance of costs FAR Cost Principles Guide a compilation of revisions to Part 31 since 1984 Part 32 Contract Financing Policies & Procedures for contract financing & other payment issues DCAA Contract Audit Manual (DCAA Manual ) Policies, Procedures & Guidance for auditing contractors and federally managed programs Cost Accounting Standards (CAS) Electronic Code of Federal Regulations, Title 48 Part 2930

12 Cost Basics Price = Cost + Fee Per FAR Part ; depends on contract type Cost is the value (in $$) of the resources required to complete the work or product Fee = Profit Allowable Costs Reasonable costs incurred by a prudent person Allocable assignable to specific cost objective CAS & GAAP Within Specific Terms of the Contract Meet Cost Limitations of FAR 31.2 Unallowable Costs Anything NOT Allowable (See the Big Ten) Direct Costs Assignable to a specific, individual contract Indirect Costs NOT Assignable to an individual contract but associated with two or more contracts

13 Cost / Price Sometimes the terms cost & price are used interchangeably, but there are some differences: Cost includes everything needed to produce the goods & services required. Direct & indirect cost includes G&A & overhead. Price adds profit to the costs

14 Accounting System Structure Indirect Costs Off Site Overhead Fee G & A On Site Overhead % of all other costs (direct costs, payroll o/h, on/off site o/h) % of Direct Labor; may be on other costs Direct Costs Payroll Overhead % of Direct Labor Direct Labor Direct Material Other Direct Cost Job 1 Job 2 Job 3 Job 4 Job 5 Job 6

15 Specific Cost FAR and FAR breaks down cost into two categories for government accounting: Direct Indirect

16 Allowable Costs All types of costs are Allowable, just not all Specific costs - Tests for: Reasonableness - the cost should not exceed that which a prudent person would incur in the conduct of competitive business Allocable a cost is chargeable to a contract if: It is incurred specifically for the contract; The benefits can be allocated in reasonable proportion to the benefits received by the contract; The cost is necessary for the operation of the business. Meets the standards of the Cost Accounting Standards and Generally Accepted Accounting Practices (CAS & GAAP) Within the terms of the contract Within the cost limitations of FAR 31.2 Two types of Allowable Costs Direct Costs Indirect Costs

17 Allocable Cost FAR states that a cost is allocable if it satisfies any one of three conditions: I. The cost is incurred specifically for the contact II. The cost benefits both the contract & other work, and can be distributed to them in reasonable proportion to the benefit received III. The cost is necessary for the overall operation of the business

18 Unallowable Costs Costs that can not be presented for payment: The Big Ten (FAR ) Bad debts (FAR ) Contributions or donations (FAR ) Entertainment (FAR ) Fines, penalties, and mischarging costs (FAR ) Interest and other financial costs (FAR ) Lobbying and political activity costs (FAR ) Losses on other contracts (FAR ) Organization costs (FAR ) Patent costs (but with exceptions) (FAR ) Costs of alcoholic beverages (FAR )

19 Cost Pools Payroll overhead pool: Social Security, Medicare, health insurance, etc are grouped together on productive payroll G&A pool: Group expenses that are necessary for the operation of the business, but that cannot necessarily be connected to a particular contract or job Executive staff salary & payroll taxes, home office supplies/expenses, marketing, shop & engineering overhead etc.

20 Compliant Accounting System Pre-award Survey of Prospective Contractor Accounting System (GSA Form 1408) 1) Segregate direct & indirect costs 2) Identify & accumulate direct costs by contract 3) Accumulate costs under general ledger 4) Timekeeping 5) Labor distribution 6) Interim determination of contract costs

21 CAS continued Pre-award Survey of Prospective Contractor Accounting System (GSA Form 1408) 7) Exclude unallowable costs (FAR) 8) Identify costs by contract line item 9) Segregate preproduction and production costs 10) Billings (progress payments, public vouchers) 11) Adequate, reliable data for pricing follow-ons 12) Accounting system in full operation

22 Policies & Procedures Type of System Charts of Accounts Timekeeping Capitalization Depreciation Bank Statements

23 FAR profit guidelines for government prenegotiation preparations Profit is motivator towards efficient performance Profit must be analyzed using a structured approach similar to all costs Statutory limits imposed by 10 USC 2306(d) and 41 USC 254(b) For experimental, developmental, or research work performed under a costplus-fixed-fee contract, the fee shall not exceed 15 percent of the contract s estimated cost, excluding fee For architect-engineer services for public works or utilities, the contract price or the estimated cost and fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6 percent of the estimated cost of construction of the public work or utility, excluding fees For other cost-plus-fixed-fee contracts, the fee shall not exceed 10 percent of the contract s estimated cost, excluding fee.

24 Pricing Model Putting it all together

25 ABC Inc. Summary of Price Proposal COST/PRICE ELEMENT AMOUNT REFERENCE DIRECT MATERIAL $ 50 SCH. B-1 DIRECT LABOR 500 SCH. B-2 PAYROLL OVERHEAD 20 % APPLIED TO DIRECT LABOR 100 SCH. B-3 OTHER DIRECT COSTS 200 SCH. B-4 TOTAL COST BEFORE G & A $ 850 GENERAL & ADMINISTRATIVE 10 % APPLIED TO TOTAL COST BEFORE G & A 85 SCH. B-3 TOTAL PROPOSED COST $ % OF TOTAL COST 75 TOTAL ESTIMATED COST AND FEE $1,010

26 ABC Inc. Pricing - Schedules SCH. B-1 DIRECT MATERIAL SCH. B-4 OTHER DIRECT COSTS QUANTITY COST TOTAL ITEM 1 16 $1.25 $20 ITEM ITEM TOTAL 51 $50 CONSULTANTS $50 SPECIAL EQUIPMENT 70 TRAVEL 80 TOTAL $200 SCH. B-2 DIRECT LABOR HOURS RATE TOTAL CATEGORY A 12 $15 $180 CATEGORY B 14 $10 $140 CATEGORY C 15 $12 $180 TOTAL 41 $500

27 ABC Inc. Price Proposal OVERHEAD G & A ACCOUNT POOL BASE POOL BASE COST OF SALES (DIRECT ONLY): DIRECT MATERIAL $ 100 DIRECT LABOR $1,000 1,000 OTHER DIRECT COSTS 300 TOTAL COST OF SALES $1,400 PAYROLL OVERHEAD SOCIAL SECURITY $ 70 MEDICARE 20 HEALTH INSURANCE 30 VACATION, HOLIDAY &SICK 80 TOTAL PAYROLL OVERHEAD $200 $ 200 GENERAL AND ADMINISTRATIVE ACCOUNTING $ 20 DEPRECIATION 30 OFFICE SUPPLIES 20 RENT 70 TELEPHONE 20 TOTAL G & A $160 TOTAL POOL / BASE $200 $1,000 $160 $1,600 RATE (%) 20 % 10 %

28 Overview of Contract Types Selection of Contract Types (FAR ) Type & complexity of the requirement Period of performance Contractor s technical capability Cost analysis

29 Types of Contracts Firm Fixed Price Cost - Reimbursement Indefinite Delivery/Quantity

30 Fixed Price Contracts (Far ) Firm Fixed Price The price is not subject to adjustment Contractor has greatest risk Costs Profit / Loss Government risk is only of non-performance

31 Cost-Reimbursement Contracts (Far ) Provide for payment of allowable incurred costs Estimate total costs Establish a ceiling Uncertainties involved in definition of work Government has greater risk Inexperienced contractors often confused by unclear work requirements

32 Indefinite Quantity Contracts (Far ) Indefinite quantity of supplies or services Within stated limits A fixed period Recurring need Multiple awards Risk varies depending on ordering quantities and type of work

33 Useful Websites DCAA: Contract Audit Manual Standard Audit Programs: Department of Labor Wage Determinations: Fringe Benefit (Payroll Load): Per Diem: Social Security & Medicare Tax Rates:

34 Contact Information Colorado Springs PTAC 6 South Tejon St., Suite 850 Colorado Springs, CO Colorado Springs Location Phone: (719) S. Tejon St., Suite 850 Colorado Springs, CO Grand Phone: Junction PTAC Western Colorado Business Incubator Toll Free: B 3/4 Road Grand Junction, CO By Appointment: Grand Junction (970) Location 2591 Legacy Way Golden Grand PTAC Junction, CO Jefferson Phone: Economic Council Bldg 1667 Cole Blvd., Bldg 19, Ste 400 Golden, Aurora CO Location Phone: Aurora (719) Chamber of Commerce E. Alameda Ave., Suite 300 Aurora Aurora, PTAC CO The Chamber Phone: Aurora Colorado E. Alameda Ave., #300 Aurora, By CO Appointment Only Colorado Phone: Phone: (719) Aurora Ft. Collins Pueblo PTAC Boulder Alamosa Pueblo Business & Technology Center Durango Trinidad 301 N. Main Street Glenwood Pueblo, CO Golden By Appointment Please call Loveland Pueblo Alamosa, Trinidad, Greeley, Loveland, Ft. Collins, Boulder, Craig, Durango By Appointment Please call Craig/ Meeker Steamboat Springs Golden Glenwood Springs Montrose Cortez Durango Alamosa Acknowledgment We would like to give special recognition to: Ronald S. Marta, Consultant, Procurement Technical Assistance Center with the University of Houston C.T. Bauer College of Business, for these materials. Trinidad

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