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Proposal Prep: Competitive Cost & Price Analysis

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Contracting officers and primes must determine a price fair and reasonable before contract award which requires performing either cost or price analysis. Luckily, not all proposals must endure rigorous cost analysis, but you still must provide enough information to aid in the determination of a fair and reasonable price. We’ll explain the differences between cost and price analysis, the reasons for each, and best practices to help you maximize profit and minimize findings.
 
Learning Objectives
1. Identify and collect all costs associated with a product or service
2. Calculate and allocate indirect rates
3. Present cohesive and logical cost and pricing support

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Proposal Prep: Competitive Cost & Price Analysis

  1. 1. Competitive Cost & Price Analysis
  2. 2. Robert E. Jones Government Contracts & Accounting Expert CPA, CPCM, NCMA Fellow Meet your presenter: • Robert has over 15 years of Department of Defense contract and accounting experience. • He has successfully managed over $30 million in federal contracts and has a 100% success rate for all audits he has helped support. rjones330
  3. 3. Melissa Metzger Government Accounting & Finance Advisor MAFM Meet your presenter: • Melissa has successfully developed and instituted compliant and efficient processes that have saved businesses over $1.5 million during the last 5 years. • She has successfully managed over $100 million in annual federal funds. Melissa-Metzger-mafm
  4. 4. Today we’ll learn: How to help the contracting officer make a determination of fair and reasonable prices.
  5. 5. “We can complain because rose bushes have thorns, or rejoice because thorns have roses.” ~ Alphonse Karr French critic, journalist, and novelist
  6. 6. Learning Objectives 1. Identify and collect all costs associated with a product or service 2. Calculate and allocate indirect rates 3. Present cohesive and logical cost and pricing support
  7. 7. Room Poll Are you currently working on government contracts? • Yes • Not yet - we need help! • Not interested
  8. 8. Identify & Collect All Costs Direct Indirect Fringe Overhead G&A
  9. 9. Direct Labor Materials Travel ODC Subcontractors
  10. 10. Indirect Fringe Overhead G&A Unallowable
  11. 11. Fringe Costs of maintaining employees • Employer Taxes • Health Insurance • Retirement • Paid Absences
  12. 12. Overhead Costs of supporting customers or products • Customer/Product Support • Facilities • Labor & Personnel  Training  Overtime Premium • Supplies & Equipment  Operating Supplies  Depreciation  Repairs & Maintenance • Travel
  13. 13. General & Administrative (G&A) Costs of operating the business • Labor & Personnel  Training • Office Supplies • Business Development • Licenses • Taxes • Travel
  14. 14. General & Administrative (G&A) Costs of operating the business • Professional Services/Fees  Accounting  Human Resources  Information Technology  Legal
  15. 15. Room Poll Is your general ledger (G/L) currently organized into cost pools? • Yes • No - not needed • Not yet - we need help! • Unsure
  16. 16. Calculate & Allocate Indirect Rates Fringe Overhead G&A
  17. 17. Fringe Base All W-2 labor Allocation Methods • Labor Dollars (most common) • Labor Hours
  18. 18. Overhead Allocation Methods • Units of Production • Direct Labor Hours • Direct Labor Dollars • Direct Material Dollars • Prime Costs • Machine Hours
  19. 19. General & Administrative (G&A) Allocation Methods • Total Cost Input (TCI) – most common • Value Added  = TCI – Materials & Subcontracts  Default when using Material & Sub Handling
  20. 20. Room Poll How do your rates compare with others in your industry? • We're higher • About the same • We're lower • I don't know
  21. 21. Present Cohesive & Logical Support
  22. 22. Follow RFP Instructions File format Excel vs PDF FAR Table II Hours & Dollars by Labor Category by CLIN by Year (time phased)
  23. 23. Provide Complete Details Provide all information requested Fixed price • Should only be top-level price • May ask for price by CLIN or item, but should not be cost elements Cost-type • Base labor and material costs • Details of Fringe, Overhead, and G&A
  24. 24. Verify the Math Have an outsider verify the math Ensure columns foot and cross-foot Ensure supporting documents match Ensure supporting tables tie to summary
  25. 25. Room Poll Do you need help with cost and pricing? • Yes – please hurry! • No – we’re experts • Unsure
  26. 26. Discussion and Q & A
  27. 27. www.LeftBrainPro.com/rccd-cost-19 Connect with us Download the presentation Left Brain Professionals Inc. @LeftBrainPro @LeftBrainPro
  28. 28. Melissa R. Metzger MAFM melissa@leftbrainpro.com Robert E. Jones CPA, CPCM, NCMA Fellow robert@leftbrainpro.com

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