Florida Procurement Technical Assistance Center Helping Businesses Grow & Succeed at Florida Gulf Coast University Presents: Pricing Your Product or Service Why you and not them? Why them and not you? This session focuses on a modernized marketing tactics for developing a compelling offering with a competitive advantage. Amanda Stirn, FSBDC Consultant and Marketing Director will present exploring the creation of instant clarity headlines and tips on breaking down competitive and unfair advantages, to strengthen your marketing approach. Government Contracting Services are offered by the Florida Procurement Technical Assistance Center at Florida Gulf Coast University

Learn more online at www.FPTAC.org Government Contracting Services are offered by the Florida Procurement Technical Assistance Center at Florida Gulf Coast University (FGCU) This Procurement Technical Assistance Center (PTAC) is funded in part through a cooperative agreement with the Defense Logistics Agency.

Objectives Cost Cost Realism Price Price Analysis Profit

References FAR 14 Sealed Bidding FAR 15 Contracting By Negotiations FAR 16 Type of Contracts FAR 30 Cost Accounting Standards Administration FAR 31 Cost Principles and Procedures FAR Appendix B Cost Accounting Rules www.acquisition.gov/far

Methods of Procurement Sealed Bids (Price only) Invitation For Bid (IFB) Negotiated (Price or Cost) Request For Quote (RFQ) (Price only) Request For Proposal (RFP) (Price or Cost Data)

What is Cost? Cost is the expense the contractor will incur in performing the work

Cost Criteria: Reasonable, Allowable and Allocable Variable, Fixed, and Semi-Variable Direct and Indirect

COST CONTRACTS Cost-Plus-Fixed Fee Cost-Plus-Award Fee Cost-Plus-Incentive Fee Cost-Sharing

Three Basic Cs For Cost Type Contracts Know your Costs Know your Customer Know your Competition

What will the Government Pay? The Government will reimburse the contractor to do the work as long as the costs are allowable, reasonable, and properly allocable to the contract

What are the Cost Elements? (Your Company) Direct Labor Overhead Material Subcontractors General and Administrative Travel Profit

1) Overhead may include: Cost of Doing Business!!!!! Taxes Federal Taxes Social Security (FICA) Employer Portion Medicare Taxes Property Taxes Licenses State Licenses County Business Licenses

2) Overhead Continued: Fringe Benefits: Employee Health Insurance Annual Leave Sick Leave Family Leave Retirement

3) Overhead Continued: Office Space Furniture Electricity Air Conditioning Heat Equipment Copier Computers Phone

4) Overhead Continued: Utilities: Sewage Waste Water Treatment Trash Removal Recycle Program

5) Overhead Continued: Insurance Building, Car, Truck Worker’s Compensation Contract Requirements Credit Cards Bldg. Maintenance Lawn Service Depreciation Interest on Loans

What are the Cost Elements? (State) Salaries Fringe Benefits Travel Other Direct Costs In-House Charges Indirect Cost Profit

Build a Cheeseburger?

Base Line for the Cheeseburger One make every 30 seconds, start to finish Includes: Direct Labor Overhead Material Profit

Direct Labor ½ minute labor $00.20 1 minute labor $00.40 Counter Clerk $8.05 Cashier $8.05 Cook $8.05 Total $24.15

Overhead 100%

Materials Build a cheeseburger starting at the bottom Bun Bottom Mayonnaise Mustard Patty Cheese Pickle Lettuce Tomato Ketchup Sesame Seed Bun Top

Material Costs Bun Bottom $00.1251 Mayonnaise $00.0005 Mustard $00.0007 Patty $00.2900 Cheese $00.0300 Pickle $00.0200 Lettuce $00.0080 Tomato $00.0500 Ketchup $00.0004 Sesame Seed Bun Top $00.1253 Total $00.6500

Material Costs Wrapping Paper $00.015 Bag $00.015 Napkins $00.015 Salt/Pepper $00.015 Total $00.006

Cost Elements for the Cheeseburger? Direct Labor $00.20 Overhead 100% $00.20 Material $00.71 Subtotal $01.11 Profit 10% $00.11 Total Cost $01.22

What is Total Cost? Cost Elements + Profit = Total Cost

Cost Realism Cost and Technical proposals must be realistic for the work to be performed Reflect a clear understanding of the requirement Cost must be consistent with the various elements of the technical proposal

Profit Represents the payment the contractor may receive for performance over and above the cost incurred for doing the work Contractor/Government Risk

Profit Statutory Limits Cost Plus Fixed Fee 10% Research and Development Cost Plus Fixed Fee 15% Architect and Engineering Services 6%

What is Price? Cost Elements + Profit = Price

What is the Price for your Service?

Price Direct Labor $10.00 (Unloaded Rate) Overhead $15.00 Est. 150% Material $03.20 Subtotal $28.00 Profit $02.80 Total Price $31.00 (Loaded Rate)

Profit Factors for FFP Contracts Market Competition Contractor Risk 100%

Are you Making a Profit? Sales-Direct Cost-Indirect Cost= Net Profit

Price Analysis Process of examining and evaluating a proposed price without regard to evaluating the separate cost elements and proposed profit.

Firm Fixed Price Contracts Firm-Fixed Price with Economic Adjustments Indefinite Delivery Contracts Time and Material Labor Hour Letter Contract

Price must be Fair and Reasonable Based on: Adequate Price Competition Previous Prices Yardstick Published Prices or Independent Government Estimate

TIPS 2080 Hours = Government Year Loaded-Unloaded Rates Separate Technical and Cost Proposals DCMA- Direct Labor Rates Overhead G&A (For a Specific Company) Best Value Awards Technical Past Performance Price

Summary Cost Cost Realism Price Price Analysis Profit

Q & A www.fsbdcswfl.org www.fptac.org Point of Contact Daniel Telep Jr. dtelep@fgcu.edu 239.745.3708 www.fsbdcswfl.org www.fptac.org