A Contracting Officer s Guide To Getting Stronger Contractors

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2 A Contracting Officer s Guide To Getting Stronger Contractors Breakout Session # B12 Jeff Shen, VP & GM, Red Team Consulting Date: Monday, July 28, 2014 Time: 2:30pm-3:45pm

3 Introductions Red Team Federal and Red Team Consulting About Red Team Federal... Red Team Federal ( RTF ), a division of Red Team Consulting, LLC, is an economically disadvantaged woman-owned small business that provides acquisition strategy and planning, federal procurement training, and contract management support. Our Federal Government experience spans a broad array of industries and marketplaces. We are a Prime on the GSA MOBIS contract, in Acquisition Support and Training. RTF s major areas of support include: Pre-Award/Post-Award Contract Support Acquisition Strategy and Planning RFP Development Cost Estimation Performance Based Contracting Source Selection Support Federal Procurement Training About Red Team Consulting... Red Team Consulting is a woman-owned small business providing a wide range of consulting services in support of federal contracting activities. Our mission is to help our clients grow. Red Team and Red Team personnel have supported over a thousand federal procurements across nearly every agency in the federal government. We have maintained an extremely high win rate since the company was founded in March of Red Team s major areas of support include: Fully outsourced proposal development and management Strategic capture management and planning Proposal writing Price strategy and Price to Win Training and seminars Outsourced contract and program management 2

4 Introductions Speaker Jeffrey Shen EVP of Red Team. Over 18 years of federal contracting and program management experience. Involved in the award of over $20B of contracts. Delivered business strategy, technology solutions to the Federal Government and Fortune 500 companies worldwide. Former V.P of Sales and Marketing for a $300 million integrator. Mentored/trained many successful sales executives, project managers, and technical staff. Active leadership role in industry organizations. Frequent speaker on federal contracting, business development, and government ethics. 3

5 Agenda Part 1: Facts About the Industry and Contractors Quiz and Poll Proposal Functions Industry Realities Proposal Solution Realities Part 2: Characteristics of Good and Poor Contractors Characteristics of Both Types of Contractors Factors To Consider When Evaluating Contractors Part 3: Finding More Honest Contractors Incumbents vs. Non-Incumbents Solicitation Development - SOW/PWS, Other Technical, Management, Past Performance, Cost/Price Price Modeling and Gaming 4

6 Facts About the Industry and Contractors Quiz How much do well-prepared companies spend (internally and externally) on average when pursuing a $100 million, single award IT contract with a 100 page count for the Technical, Management, Past Performance, and Price Volumes? A. $25,000 - $50,000 B. $50,000 - $125,000 C. $125,000 - $250,000 D. $250,000+ How long before the due date do contractors typically complete the proposal? A. The day it is due B. One day before C. Three days before D. One week before 5

7 Facts About the Industry and Contractors Poll Poll 1 to Industry: A. Option A: One on one discussion with Government prior to Final RFP release B. Option B: Industry day with Q&A prior to Final RFP release Poll 2 to Industry: A. Option A: January 3 rd RFP release with 30 day turn B. Option B: December 23 rd RFP release 40 day turn Poll 1 to Government: A. Option A: Company who meets milestones 90% of time with no cost overruns B. Option B: Company who meets milestones 100% of time with cost overruns Poll 2 to Government: A. Option A: Proposal is not organized to Section L instructions B. Option B: Proposal does not clearly address Statement of Work 6

8 The Joy of Proposals 7

9 Facts About the Industry and Contractors Proposal Functions Capture Management Win Strategy and themes Teaming development Competitive analysis Price to win Marketing and communications Proposal Management Proposal schedules Compliance matrix Annotated outline Color reviews Proposal strategy Overall proposal compliance Other Proposal Functions Capture analysis Pricing strategy Pricing management Costing build-up development Technical writing Volume leadership Proposal coordination Subject matter expertise Editing Desktop publishing Graphics designing Production Business development support 8

10 Facts About the Industry and Contractors Industry Realities Organization: Many companies are driven by profit and growth and not always on mission success of agency Companies prioritize opportunities based on win probability and potential profit How companies intend to win and how they perform are two entirely different ways of thinking Resources: People who work on proposals typically have other roles within the company The people who write your proposals (or those in business development) are rarely involved in the performance or delivery of the contract post-award Process: Teaming partners are not always strategically selected. Proposal efforts are often started very late well after Final RFP release 9

11 Facts About the Industry and Contractors Cost Realities Cost of Capture Realities Companies spend hundreds of thousands of dollars on small to medium-sized procurements and millions of dollars on large procurements. Delays or missed deadlines in the procurement process greatly impact industry Financial impact New business pursuit impact Companies record bid and proposal costs as allowable expenses in their G&A. This affects their wrap rates, causing labor rates to be higher. The ultimate result is that the government pays more. An RFP that hits release timeframes and is easy to understand and respond to will cost a company much less to pursue. 10

12 Facts About the Industry and Contractors Proposal Solution Realities Prime offerors combine their experience with their partner s experience to address requirements and they present this as Team experience, but sometimes the prime has limited experience with the actual work required. Many companies do not use their corporate certifications such as CMMI or ISO in day to day operations. There are some companies who possess limited technical experience and will hire outside help to develop their technical approach. 11

13 Facts About the Industry and Contractors Pricing Realities Many small businesses do not understand how to price contracts. Many also utilize incorrect cost data to calculate rates. On pricing evaluations, companies will find ways to manipulate the pricing model. 12

14 Characteristics of Good Contractors Acquisition and Proposal Timeline Submits a response to the RFI or sources sought announcement that provides specific information the government requested, and not standard marketing information. Submits detailed, well thought-out questions to any draft solicitation materials During any face to face discussion, they bring ideas, suggestions, and potential solutions for you to consider. Their proposals are well organized to Section L instructions and address every portion of your Section M evaluation criteria with substantiation and proof points to demonstrate they 1) understand the requirement, 2) have a viable solution, and 3) are a low risk contractor During contract award and negotiation, they are easy to work with and do not try to alter terms, pricing, or requirements of contract during discussions and negotiations 13

15 Characteristics of Poor Contractors Acquisition and Proposal Timeline Ignores all prior draft solicitation information Does not approach the opportunity with an understanding of at least some of the existing challenges or initiatives Their communication during this timeframe is more focused on selling them than understanding the customer Proposals are not aligned to the instructions, hard to read, hard to follow, and hard to evaluate Proposals do not actually commit to anything, but instead simply describe what they are currently doing During discussions and negotiations, they attempt to change aspects of their proposal including key personnel, pricing, or milestones 14

16 Other Good Characteristics Honesty and Integrity Honesty When a company knows what they do well, is willing to admit what they don t do well, and figures out how to overcome their weaknesses. Companies that understand how to execute a plan to turn those weaknesses into strengths or fill in gaps Companies that don t try to manipulate areas that they don t know how to perform well. Integrity - Company that recognizes their mistakes and goes out of their way to fix them. Recognize and willing to proactively remedy issues. Companies should emphasize how they anticipate challenges and what they do when they encounter issues Brings their solution architects or PM s to be involved in business development or planning meetings 15

17 Finding More Honest Contractors Government Industry Communication Release RFIs that ask for additional guidance outside of input to the requirements Require vendors to specifically discuss what they ve done that is similar to the requirements you are developing. Ask them to be specific. Ask them to cite risk areas that you should be aware of especially if they claim similar experience. Ask them what they did to overcome those risks. Ask them for the names/roles/responsibilities of the actual people they propose to work on the project post-award 16

18 Finding More Honest Contractors Strategies to Consider During Market Research Look at company s key personnel on LinkedIn. Does the company s current (or prior) personnel have the skills or skillsets that you are competing for the contract? Do the titles of the key personnel resemble what you will be looking for? Does the company s website list a company s program management approach, quality assurance program, or risk mitigation approach? How much past performance, awards, and certifications are listed on the website? Do they cite how they have used CMMI or ISO certification in the past? Compare their prior experience to what is listed in FPDS or USAspending.gov 17

19 Finding More Honest Contractors Incumbents vs Non-Incumbents Incumbents work years in advance of their contract closure to try and influence the contract to them. Tip: Work closely with PMO to ensure that they do not perform anything within a closed architecture that does not allow new competition. If the re-compete RFP comes out looking very similar to the original RFP, industry perceives that this is set for the incumbent. Tip: Communicate openly that the government is looking for new ideas, innovations, and processes for the re-competed requirement. If the RFP requirements change significantly, companies think the incumbent is not well liked and want change. Tip: Communicate that the RFP change is not indicative of incumbent performance and indicative of updated requirements and processes. 18

20 Finding More Honest Contractors Solicitation Development - SOW/PWS Instructions requiring a response to the PWS/SOW can be confusing. Ensure that the PWS is logically organized. Delineate what portions of the PWS require a response. Avoid duplication of response requirements. Correlate the page limit restrictions to the detail in the PWS. SOWs/PWSs sometimes don t change in re-compete contracts. Tip: Technologies, processes, and best practices change in 3 to 5 year cycles. Industry won t provide an innovative solution if the requirements haven t changed. Take the time to update the SOW on a re-compete contract. 19

21 Finding More Honest Contractors Solicitation Development Other Technical Companies are hesitant to offer any technical innovation in their proposal for fear of increasing their overall price. Tip: Allow bidders to show some technical innovation and creativity that will ultimately benefit the government. Some solicitations require bidders to have a portal or web system to manage the project. To evaluate all bidders fairly, require that everyone put in a link to their live portal so you can evaluate it. Incorporate some measure of risk/reward and metrics into evaluation. Require companies to propose measures and metrics for financial incentives and disincentives for their work performance. Evaluate based on those metrics. 20

22 Finding More Honest Contractors Solicitation Development - Management Corporate certifications such as CMMI or ISO are not often used in day to day operations. Tip: Require that companies explain how they have used their certifications internally or on prior projects. If a solicitation requires a management methodology, companies will make one up if they don t have one. If they do have one, they don t always follow this methodology post-award. Tip: In the instructions for the management portion, ask for examples where they ve used their management methodology successfully on prior projects. 21

23 Finding More Honest Contractors Solicitation Development - Management Companies will propose key personnel that they don t have or personnel that they know are not going to be available. Tip: Request signed offer letters or signed contingent hire letters to show their commitment to the position. Tip: Request detailed resumes that are specific to the positions required. If recruiting and retention are required in the proposal response, require innovative recruiting methods and prior statistics for filling open positions. Statistics can also include staff turnover, staff retention, and average tenure of existing staff. 22

24 Finding More Honest Contractors Solicitation Development Past Performance Primes will take credit for the work the entire team performed as opposed to their own individual contribution. Tip: Ask for clear delineation of work performed by the prime vs. subcontractor on contracts cited as past performance or experience. Tip: Ask for information regarding staff that worked on a previous contract, and their role on the proposed contract. Require offerors to provide the specific annual revenue number (not total contract value) for each reference to determine relevancy. Be specific with the questions on the past performance questionnaire. Make sure the they highlight the relevancy towards the Statement of Work. 23

25 Finding More Honest Contractors Other Technical Management Past Performance Ask for examples for each requirement. Don t assume companies will insert proof points. Ask for them. RFPs should ask for more individual responsibilities between the team. Distinguish offering and approach between prime versus the rest of the team. Make the requirement performance based and incorporate financial based metrics into the RFP for performance Oral presentations most recant the proposal and have a Q&A. As part of your due diligence, suggest ad-hoc scenarios to determine how a contractor would approach a specific task or challenge. 24

26 Finding More Honest Contractors Solicitation Development Cost/Price Many small businesses do not often understand the fundamentals of pricing Government contracts. Specifically, they struggle with cost type contracts Tip: Many small companies have never been audited and don t understand DCAA. In addition of requiring an agency letter, require companies to provide data to justify data and methodology. Be cognizant of highly inflated or inconsistent indirect rates or undocumented direct rates. Tip: For smaller efforts, require offer letters to see the salary of those staffed people. Fixed price procurements versus cost type contracts New entrant versus Incumbent contractors. 25

27 Finding More Honest Contractors Solicitation Development Cost/Price Base the pricing evaluation on a sample task order that may or may not be awardable. This forces companies to think about the real level of effort and rates assigned to proposed labor categories. Avoid providing evaluation quantities for labor categories that have no basis. This prevents the offeror from bidding unrealistic rates on various categories (Unbalanced Pricing) Look at rates based on reasonableness of individual rates versus looking at total price of hours and rates calculated together. Composite average versus Nominal average 26

28 Finding More Honest Contractors Solicitation Development Cost/Price Request companies to provide innovative ways/methods as to how they intend to reduce their overall pricing or cost throughout the contract lifecycle. Examples include: Open up a Materials and Handling pool for material heavy contract. Volume discounting based on labor. Open PMO s within corporate structure internally billed. When utilizing Lowest Price Technical Acceptability, define your technical acceptability evaluation based on the complexity of the requirements. Tip: Consider utilizing minimum acceptability metrics for certain requirements. 27

29 Finding More Honest Contractors Solicitation Development Cost/Price Reasonableness: (FAR (a)) - Should answer the question: Is the Government paying too much? Justification for how Offerors developed their indirect and direct costs should be clearly outlined. Direct Costs Salary Survey Payroll Verification Letter of Intent BOE Indirect Costs YTD information (as opposed to historical) Escalation Fee 28

30 Finding More Honest Contractors Solicitation Development Cost/Price Realism: (FAR (d)(3)) - Shows the Government that you clearly understand the solicitation requirements and have mapped the labor categories appropriately to the hours. Work Breakdown Structures Control Level Reporting Time Phased Rate Tables Fixed LOE or solution-based evaluations 29

31 Finding More Honest Contractors Solicitation Development Cost/Price Reality Modeling The intent of Reality Modeling is to best predict what changes will likely occur over the life of a contract and bid with those changes in mind. In other words, compare what is being evaluated with what will actually be purchased, and then determine the timing and margin on the purchase. Gaming The intent of Gaming is to exploit the inefficiencies and imbalances in a given solicitation. The Modeling/Gaming process: Typically a bid model begins with a uniform application of margin to all items. Items determined to be over-evaluated (i.e bidder believes it is less likely to be sold) bid with prices below cost. Items that are under-evaluated (i.e. bidder believes it is more likely to be sold) bid with healthy or even high margins. 30

32 Finding More Honest Contractors Solicitation Development Cost/Price 31

33 Questions? Jeffrey Shen Sunrise Valley Dr., Suite 100 Reston, VA Office: Fax: