Government contracting is, without a doubt, a competitive landscape where companies need to look for every edge they can gain during the proposal process.
The federal government sources contracts to companies in a variety of ways, including small business awards, direct awards, and Government Services Administration (GSA) schedules. As Congress and agencies look to maximize dollars in the federal budget, you can be assured that government contracts will become even more competitive. That means govcons must be more thoughtful in the bid process to ensure wins.
If you want to beat your competition, you must strike a careful balance:
How can you improve your position for a contract bid and not hamper your ability to execute on the contract with a reasonable profit margin?
Know Your Customer
The first step in the proposal process is understanding what the customer is looking for and to build relationships and emphasize your company’s strengths. A meeting with the agency before it issues a request for proposals (RFP) can result in a fruitful discussion of the customer’s needs. Having the ability to present and validate your solution, confirm decision-makers, and recommend acquisition approaches will help to more fully know your customer and have your customer know you. A strong understanding of what the agency seeks and how your firm can best deliver will allow your proposal to speak directly to these customer needs.
Know Your Partner
Past performance and price are critical parts of the win strategy for contracts. Govcons often strike teaming agreements with other contractors to partner on potential work and deliver on technical requirements by leveraging each other’s capabilities and past performance.
You must also be a good match, however, from a cost perspective. Make sure your teaming rates can meet your target price by fitting within your indirect rate structure and presumed fully burdened rates. This nuance is critical to pricing strategy.
In addition, make it as easy as possible for an agency to target awards to your team via small business designations, GSA schedules, etc.
Know Your Data—And Keep It Current!
It’s essential that you have a pulse on your target indirect rates and wrap rates. The wrap rate is a critical piece of information for bidding on contracts. If you’re using outdated or inaccurate indirect rate data, it can significantly impact not only your competitive advantage but also how well you’ll perform financially if you win the contract.
Many companies stop at their actual year-to-date rates. Keep an updated forecast and know how your rates will trend based on current business changes. You can significantly improve your pricing position during the bid process if you have up-to-date budget and forecast data that can help you identify whether methods such as forward pricing [using a potentially lower wrap rate based on assumptions that the additional work is won] will give you a better price point.
Be Realistic About Your Price
Remember that most of your competitors also employ these tactics to get their rates as low as reasonably possible to execute and also provide the most savings to the government.
Be careful, though, not to cut your pricing so low that you cannot reasonably execute. As we cautioned in our blog on pricing pitfalls, there is risk to inadvertently bidding as low as possible with no regard for execution at such a low target price.
Seek out advisors that can help you assess your rates in comparison to others for a true competitive landscape. Navigating the competitive landscape is a crucial part of success in government contracting. CAVU Advisors has expertise in all aspects of the process related to pricing proposals, budgeting, price-to-win strategy, and competitive benchmarking. Reach out to our team for help with maximizing your proposal opportunities.