Business Decision Management, Inc. | H ome
Government Business Development
Introduction to Government Contracting
There is a very good overview to the government contracting process published by GSA and available from the Government Printing Office (GPO) for about $8.00. It is called the “Overview Guide” and you can order it from the GPO. It is also contained on the GSA CD-ROM.
The above mentioned guides will give you the official way everything is suppose to work according to regulation. In practice, it seldom works that way. I'm going to cover the way it really works but to do so, I have to give some basics and fundamentals and define some terms so you can follow. It will make a little more sense when you read the GSA guides and it will make a lot more sense after you have actually gone through the process a few times.
We must first understand that there are actually two markets here. One to sell to the government and the other to sell to those that sell to the government. If you have a contract directly with the government with no middle man or company, then you are called a PRIME. If you have a contract with a PRIME to supply them with something they need, you are called a SUBCONTRACTOR (“sub”). This distinction is very important.
The government is constrained by a set of laws and regulations that go by a long list of acronyms like FAR, FIRMR/ITMRA, OMB Circulars, GSA Bulletins, GAO, USC, FIPS, MilStd and DFAR. In total, these documents total more than 16 pages of stacked double-sided text. There are legions of special offices and trained experts whose sole purpose in life is to try to maintain some semblance of compliance to these laws and regulations. This is the “official” perspective on government contracting. There is, however, another side to the story.
If you do business in this marketplace, you will eventually discover that it is a subjective and mostly unfair market that relies heavily on an old-boy network, on subterfuge, misleading statements and not too infrequently, out-and-out lies. The lowest bidder or the best company does not always win. The RFP you are responding to may be locked in to be awarded to someone else before the RFP was ever published. In many cases, the eventual winner of the contract is the one that wrote the RFP to which they will bid.
Also possible is that the RFP is completely unfunded and an award was never possible - the government was simply hunting for ideas. It is not uncommon to expend a lot of effort to prepare an extensive and expensive proposal, only to have the RFP withdrawn or significantly altered. You might also find that it has been rejected on a technicality or you might never know why it was rejected. There is even a special judicial board of review for protests against such situations but in most cases, as you will see, there may be little, if any, proof of some “impropriety”.
In fact, it is nearly impossible to know when some if these things happen. More likely is the case that it just smells funny. In fact they have even made a regulation concerning that. It is officially illegal to even have the “appearance of impropriety”. All of these happen on a frequency that would appall the general public if it became widely known. Because so many of the “insiders” profit from this system, it is one of many dirty little secrets “inside the beltway”.
One reason this situation is not more widely known is that Washington is filled with professionals that know exactly how to hide any “appearance of impropriety”. It takes a lot of experience, insight and contacts to root out what is truth and what it fiction. You don't get that from a book - you have to live it and find out what really goes on, first hand. I can only give you a fraction of it.
Contracting Office
The people within the government that actually release the request for proposals (RFP) are called many names because most people don't understand the way the government works. If, for example, the Army Center for Public Works (CPW) wants to release a contract to get some work done, they would be called the program office. The one person within this office that has a vested interest in getting the work done is called the Project or Program Officer or PO. The PO is the person that decides what is needed and what to contract for. He or she will also be the person that obtains the funds to pay for the contract. What is often misunderstood is that this person can select who will do the work. Unfortunately that is rarely the case. There numerous legal layers of bureaucracy that reduce the PO's influence.
The first legal layer is within the program office, the PO, or sometimes a second person, is responsible to see that the contractual aspects of the contract are fulfilled. This person can do almost anything as long as it does not affect the cost. This position assists a third person called the Contracting Officer (CO) with the technical aspects of the contract so he or she is referred to as the contracting officer's technical representative or COTR. In resent years, this has been shortened to just COR. The COR is authorized to sign documents that formally accept contract deliverables from the vendor or contractor. This means that the COR is not someone you want mad at you. In fact, do everything you can to remain on his good side. A COR that is not on your side can make your life miserable.
Even if the PO is the COR, he may not be able to alter the contract after it is awarded without significant paperwork being filed with the CO. Any changes made by the COR must be within “the scope” of the original contract. For instance, a contract to improve the computing power of an agency would be changed by the COR to deliver a laser printer rather than a dot matrix printer but it could not be changed to deliver a pool table rather than a dot matrix printer. A pool table is out of the scope of the contract.
The PO and the COR have to work with and through another office that actually controls the release of the contract. This office is not part of the PO's organization at all. It is usually referred to as the contracting office and the one person assigned to this RFP is called the “contract officer” or CO. The CO is frequently a lawyer and always trained in the detailed legal aspects of government contracting. The CO may be the CO for dozens of contracts and will probably not have any technical skills or understanding of what is being delivered under the contract. Usually, the CO doesn't need to know. He or she will simply ensure that the laws and regulations are followed to the letter even if they result in an action that is contrary to the wishes of the PO - the guy with the money. This is where the system gets to be a problem and frequently forces the need for a “work around” solution. For instance, if the PO wants to buy a certain product or service from a particular contractor, the CO and the contracting office will not allow it. The PO must release the RFP to the general public and all can bid on it. Then the CO will oversee the “source selection evaluation board” (SSEB) and the source selection plan (SSP) which require a fair and impartial review of all bids. The result may be that the contractor that the PO wanted is not selected because they did not turn in the best bid. We'll discuss later how the PO and the contractor can “work around” this rule.
There are only a few contracting offices for all of the federal government. There are perhaps 5 in the Washington DC area that handle all of DoD and the executive agencies. Which one a given PO uses largely depends on the route that the money takes to get to the contractor. There are, however, ways to route money and shift the funding sources enough to exert some degree of control on which contracting office a given PO has to use.
Each contracting office has its own peculiarities that should be learned as soon as possible. Some are to be avoided at all costs because they will take from 2 to 6 months to process your paperwork, including your invoices. Others are efficient but sticklers for meeting the letter of the law and regulations. Some will make up their own rules. For instance, several of these offices will arbitrarily decide they will not accept any new contracts for processing after a certain date towards the end of the fiscal year. In some cases this can be as early as July 1. Try to get to know your CO and the contracting office she or he works for.
Prime Contractors
If you are a small business or especially a single person operations, try not to be the prime. There are so many requirements and limitations that it is hard to know them all and be able to properly understand the cost implications of all of them in the early B&P stages of a contract. This is when you jump into a contract that looks like a perfect fit to your talents, skills or product and then, after you have won the contract, you find out you are in way over your head and will have to default or incur a large cost overrun.
If you are a prime, know what you are getting into. This is also true of State and local governments but for different reasons. BDM has a similar tool box report about State and local governments.
Just remember that sometimes it is true that the “good news is that you won the contract and the bad news is that you won the contract”!!!
Let me say that if you want to get rich off of government contracts, you need to eventually become a prime. It can be done. More than 800 companies did in 1995 but almost 80% of the contracted money went to the top 47 prime companies. If you are careful and know how to write the proposal and negotiate the “best and final”, you'll do alright. See the section in this report that describes what to watch out for in the RFP and in your response. This is not the arena of startups or single person operations but it can be lucrative under the right conditions.
Picking A Winner
The winner of a contract is chosen (a process called “source selection”) on what is called “best value” which means that the lowest bid does not always win. In fact, a fairly large percentage of the time the lowest bidder does not win. As you will see later, there are lots of reasons that this is true but, for the moment, let's eliminate all the “under-the-table” reasons and just look at the “official” reality.
From the contracting office's point of view, too low a bid may mean you either (1) do not understand the complexity of the problem or (2) you are not using quality people or products. This second perspective may be seen as relating to the poor skill level of the your people or to the low reliability of your products.
On the other hand, if you bid too high, you may be seen as unduly complicating what the government thinks is a relatively simple task or you are using “gold-plated” products or prima donnas when they really want technicians. As you will see, the perception of bid cost and price on the part of the government may be very different than yours or reality.
Cost Versus Price
In the world of government contracts “Price” is what you sell something for. “Cost” is your expense that it took to get it ready for sale. You bid a “price” for your goods and services to the government. It “costs” you something to be able to delivery on that contract. On the other hand, your “price” becomes the buyer's cost.
From your perspective, in the real world, the difference between your cost and your price is usually profit. From the government's perspective, the difference between your cost and your price is regulated by law but not necessarily by common sense. In the government market (and controlled by regulations) your costs is made up of salary+G&A+Overhead+ODC+fee (see glossary for the definition of these terms).
Sea Story time:
Let's say your cost to make a widget is $50 each. If you can sell it for a price of $60, you make $10 each. Now suppose there are a lot of large old established companies that also sell widgets but have been jacking up the price on widgets for a long time. They have traditionally been the only suppliers and so their prices, which are remarkably similar to each other, have become sort of the standard of comparison. These other large old established companies make a good widget but you can make it just as good for 50% less. Guess how much credibility you have when you bid 50% less than these large old established companies that have monopolized the market for years. Your “discounted” price will immediately be labeled as the result of poor quality or that you don't understand the market or you use poor materials.
If you keep your prices low, you lose because of the “poor quality” label. If you charge the “going price” then you must compete with the old-boy network of large, old, established companies. Most likely you will lose out for lack of credibility because of lack of experience and contacts within the market. A no-win situation? Wait, it gets worse.
Then there is the situation of an uninformed buyer. This government buyer does not know what it takes to make a widget. He thinks it is relatively simple. What happens if your buyer thinks that widgets ought to cost him $30. Even if you cut your price to $51 and make only $1 in profit, he will reject your bid as being way over what he expected to pay.
On the other hand, suppose there is a high demand for widgets and your buyer thinks it is very hard to make them. Suppose he thinks that widgets generally sell for $80 and that seems fair to him. I f you bid $60 to try to grab the contract, the buyer will think you must be making some really poor quality products to be able to under cut the expected price that much. Again he will reject your price.
The competitive environment and the “best value” method of source selection (awarding the contract) allows these kind of situations to exist and in some cases flourish.
Your response is that you must understand that although it may seem that your Cost and especially the government's Price are “officially” fixed by some formula, in reality, there is much that can be “adjusted”. They are, in fact, relative to whom you are talking.
Most prime contractors know that there are a number of ways to bid people, products and services so that the financial risk is minimized and the chance of these wild financial perspectives are controlled. As a subcontractor or a small company or new prime, you have to learn these techniques. Find out about how to use ODC and your “multiple” (described later) to offset a thin profit margin. You have to understand the differences between “capital investments”, GFE and ODC. This may allow you to bill the government for a major corporate infrastructure improvement to your business while appearing to offer a very competitive bid. There are other ways to balance the financial “risk-reward” scale in almost every kind of contract, however, the mix and match of what and how to do each is beyond the scope of this short report. You can contact Business Decision Management on a case-by-case basis or ask for one-on-one training.
The bottom line is that most of the government is not particularly cost conscious. They want to get the job done. They really have one primary economic consideration: If it can be done for the amount of money they have allocated for it, they are satisfied regardless of the actual value or worth of the work that must be done. At times this means they will overpay for a job and other times they will try to get it for well below the market value. This does not reflect astute bargaining powers or keen negotiating skills on the part of the government. It reflects how much money they have to spend and little else.
It's a Small World, After all
In the description about and elsewhere in this report, I refer to a number of situations that may or may not be viewed as entirely professional and forthright. Although I do not advocate at any time that you break the law, there are actions that you can take within the limits permitted by the law that still will not be viewed in a positive light by your client or your competition. In most cases, these are costing and pricing tactics that give you a competitive edge or a better profit margin. By their nature, they will be buried in the confidential records of your company and not exposed to general review.....or will they. There are lots of ways to have these tactics exposed at just the wrong time. You can bet your competition will jump on a chance to point out a flaw in your costing or pricing - especially if the competition is an incumbent that you are trying to depose. The Defense Contracting Auditing Agency (DCAA) may review your books and you had better be able to justify your multiple and your billing hours. And then there is the disgruntled ex-employee that will “leak” the news of an underhanded play to the right person to do the most damage. The bottom line is that you need to keep everything on the up and up.
There's a Right Way and a Wrong Way
If you over bill for a service, tell your client, in writing, but do it tactfully. If you are going to swap people assigned to the contract or change your billing rates, always be upfront about it and put it in writing. Just learn how to do it right. Examples:
1. Suppose you bid on a service contract and use three top notch resumes of your three best people to justify the experience, credibility and pay scale that you bid. You will and the government agrees to pay your three bid consultants at a fully burdened rate of $85.00 per hour. Unfortunately, you need these guys on other jobs and besides most of the work is technician level and grunt work that is too menial for your top consultants. After you win the contract, you want to substitute some less expensive and less skilled people to support the client. You CAN do this but you MAY NOT. That is, in many contracts, the client may allow you to make the substitution as long as the work gets done right and on time. Unfortunately, doing this is illegal. You can, however, do it by simply stating that you are going to do it in a letter to the contracting officer. Don't say you are going to substitute some less expensive and less skilled people to support the client. Rather use terminology like this:
“Upon closer examination of the tasks within this contract, we have found that a portion of them can be performed by support consultants that will fall into a lower pay scale. This has the potential of reducing the overall cost to the government while maintaining the same schedule and performance as contained in our original proposal. The resumes of the new support consultants are enclosed for your review. Unless notified to the contrary, we will begin using these new support consultants immediately for those tasks suited to their talents, experience and skill levels. We will, of course, maintain the highest degree of performance oversight and quality assurance by our top rated and most experienced consultants.”
This is undoubtedly “spin control” and BBB (beltway bandit bullshit) but it works for a number of reasons. Now you substitute two of the three original consultants for more junior people. You are obligated, by law, to bill the government at the lower pay rate of these new people but the ceiling of the contract has already been set. As a result, if you spend less on labor than the government has allotted for the contract, they will, in all likelihood, expand the scope of the contract to “use up” the excess funds. In other words, you still get all the money in the original contract but you also get paid to have one of your senior people train two junior consultants and you expand the contract into other areas that may lead to further work. You also did it by the book and completely legal.
Similar BBB and spin control can be applied to products, substitution of COTS for customized software and other post-award contract changes that alter the cost and the level of effort to you while keeping the price at or near the same.
How Much?
Finally, as noted in the example above, the government is not particularly tuned into the real costs of goods and services in the real world. You must remember that the managers that have financial decision powers are almost always relatively senior civil service or military people. This means that they have been in the civil service or military for a long time and therefore NOT been in the profit-and-loss environment of the real world. It is a generally accepted characteristics of retiring military officers that they know next to nothing about how to manage money in a company. They may have been in charge of a 200 million dollar program but if they went over the budget or fell short of their schedule, they simply asked for more money - and usually got it.
What little cost awareness they have is derived by word of mouth and tradition more than experience with the real market. Most government managers use very generalized guidelines for costing their contracts. For instance, the cost of a man-year of services is generally regarded as costing between $100,000 and $120,000 per year (fully burdened). If you are in that range, they don't even look at the details of how you derived that price. By the same token, they frequently have unrealistic perceptions of the actual cost of things, particularly of technology.
Sea Story time:
Not too long ago, a 200 page RFP was released to install a new, very advanced phone system in the Washington DC office buildings. It was a massive project calling for multi-year services and lots of equipment. Five teams of Primes put together massive proposals and prepared demonstration sites. The costs to the primes to prepare just the proposals must have been in the hundreds of thousands of dollars each. I was a consultant on one of those bids. The typical bid was around $4.9 million. After all the bids were in, the RFP was withdrawn. The releasing authority had budgeted for and expected to pay around $800,000 or about one-sixth of the actual cost of goods and services.
From a bid and proposal perspective, the bottom line is that you should not assume that your bid is going to be viewed in the same competitive environment or in the same commercial comparative market that you see it in. You can, however, learn a lot about the perspective of the client (buyer) by doing your homework. More on this in the section on Information Resources.
Money Transportation
Once you fall into the realm of being able to do the work for the amount they have to spend on it then you have to figure how to get the money from them to you.
One aspect of being a prime that the subs do not have to worry about is what is called a “funding vehicle”. A “funding vehicle” is something that is used to get the money from the government client to you.
The most common method is covered under the law that requires “full and open competition”. This means that the contracting office must release a public request for proposals (RFP) for all to read - usually in the CBD (Commerce Business Daily) and anyone can bid on it. Then they must fairly evaluate the proposals and award the contract based on “best value”. Sounds great and logical but less than half of all solicitations actually work that way. The rest fall into a host of other categories and methods.
Quick Background for Perspective.......
Each year there is a monstrous technology trade show in Washington DC called the FOSE - Federal Office Systems Exposition. It attracts 100's of exhibitors and most of the federal marketplace buyers and spenders. Every exhibitor is trying to get those buyers and spenders to buy their product. Now let's examine that for a minute.
Sea Story time:
Microsoft sets up a massive booth every year. Let's say Microsoft wanted to sell their groupware product, Microsoft Exchange, to the FDIC and could talk the senior FDIC decision maker into agreeing that Microsoft Exchange is the best product. How does the FDIC go about buying this product from Microsoft? They can't just go back to their offices and write a check or even ask MICROSOFT for a proposal. That would violate the “full and open competition” law. Under this law, they are required to write an RFP and release it to the general public (in the CBD) for all to bid on. Then IBM and Oracle will see it, among others, bid on it and they may win in a fair and impartial selection.
Under this scenario, Microsoft could be left out and get nothing after doing all the preliminary sales work to convince the FDIC manager to buy a groupware product. This also does not satisfy that decision maker at the FDIC that wanted Microsoft Exchange. He saw and didn't like the other groupware products. He wants Microsoft Exchange. How does he make sure he gets the product he wanted?
In fact, why would the FOSE attract so many exhibitors if all the purchases by all the government buyers had to be put in the CBD and go “full and open competition”? Why waste time trying to sell them on the virtues of a specific product? Why not just wait and bid when the RFP comes out in the CBD?
The answer is that all the beltway bandits and many of the government buyers know that there are many different ways of getting around the requirement for “full and open competition”.
What they use is called a “funding vehicle” that they will use to get the money from them to you. Funding vehicles come in various forms and from lots of different sources.
Some are obscure and little used like BAAs, and sole source - others are universal and used by dozens of companies like the omnibus contracts, GSA Schedules, MACs and GWACs, the application contracts. A few can be used only by a designated portion of the potential bidders such as the SBA and 8A setaside awards. There are dozens of others.
It would take a very large treatise to go into all the types and aspects of these funding vehicles. There are just too many variables and conditions on how they apply, when to use them and what their limitations and advantages are. (If you ever get to this point in a bidding situation and don't have a funding vehicle, send BDM an email and we'll explain.)
When you have access to a few dozen of these different kind of vehicles then you can go to a potential client and say, “ I can do the work and I have a method for you to get the funds to me without going thru the delay and expense of a `full and open competition'“. Under those circumstances, the potential government buyer (client) will be very willing to give you a contract. Your only requirement then is to show him you can do the job.
Any major Prime company will have a resident expert that knows all of these mechanisms and techniques to insure they can always have a ready method to get the money to them from the government. That is how MICROSOFT would deliver their product to the FDIC without going to the risk of bidding on a “full and open competition” RFP. It's done all the time by every agency.
Government Paydays
If you are a small startup company of one up to about 15 people and you are a PRIME, you are in big trouble unless you have a sizable cash reserve! The prime will get paid according to the government's idea of when to pay bills. At the absolute fastest, you can invoice them 30 days after you start the contract and they have up to 90 days to respond to that invoice! That means that if you had to buy equipment to get started on the contract, it might be 4 months before you get money from the government so you can pay for the equipment. You also have to carry the expense of your employees for that length of time.
IF you are savvy and negotiate for “rapid payment schedule” AND “partial invoicing” you may be able to get payments in around 30 days after they receive your invoice. That cuts the time to two months. As you can imagine this could be really tough if you need the cash flow.
Sea Story Time:
Once upon a time there was a one-person consultant company that wanted some free advise on where to get some government work. As a favor, a nice company (BDM) provided a few pointers to where he could find some contracts that suited his skills. It was with NASA, a quasi-government agency. He won a contract to provide a very powerful graphics work station within 30 days. He figured that was easy and bid $50,000 including $42,000 for equipment and software and the rest was his labor and profit. He figured he would order the equipment and invoice NASA for its costs and then pay for the equipment when NASA gave him the money. WRONG! The contracting officer at NASA, which had nothing to do with the office that let the contract, told our newbie that he was welcome to submit his first invoice not sooner than 15 days after completion and delivery of the contracted services. He would get paid before the end of the fiscal year.
Unfortunately, he did not have a spare $42,000 laying around and could not wait for more than 7 months to get paid. He could (1) take a short term loan at $7,434 per month (and cut his profit out entirely) or (2) cry a lot. He called the nice company and asked for some advise. I told him to sell the contract to a larger company. It would cost him but he would get something out of it and he would not default on his first major contract. He sold the contract to a large company that put up the funds for his workstation. He also had to give them nearly all of his part of the contract. He got a grand total of $800 for his work and a million dollars in lessons learned.
Bureaucracy by Volumes
One other special treatment that Primes get to have fun with is the jungle of regulations, standards and extended requirements that are included in every government contract. The burden of compliance falls entirely on the Prime, even if most of the actual work is done by subcontractors. The administration of the contract and the responsibility for complete and proper delivery of all of the contract line items (CLINs) falls entirely on the Prime.
Suppose you win a contract to assemble a dozen computers for the Army. As the Prime, you subcontract to several suppliers to give you the parts needed to assemble these computers - cases, motherboards, disk drives, displays units, keyboards, software etc. Let's suppose you have 10 suppliers.
A special set of regulations apply to this kind of contract called the Federal Information Resources Management Regulations (FIRMR) in addition to several OMB, GSA and DFAR regulations. These regulations require that you submit and comply with a long list of requirements for documentation, “Buy American”, license fees, warranties, etc. As the Prime, you are held accountable for the compliance of every one of your subcontracted suppliers. If one of them had their parts made in a black listed country or did not supply the proper documentation, then you, as the Prime are held accountable. You must insure that every subcontractor also complies with all of those regulations. The administration of this kind of compliance can be a massive expense under some circumstances. It is also a large responsibility even though all of your subcontractors will know ahead of time that they are also responsible for compliance. You'll see the other side of this situation in the next section.
Subcontractors
The above text makes it sound like you should always elect to be a “sub” if at all possible. Unfortunately, if you are a “sub”, you have to watch it also. You may not be as isolated as you think from the bureaucracy and regulations of being a Prime.
A significant advantage in being a sub is that you are usually dealing in a business-to-business relationship. This often means that you get paid within a few days of billing the Prime, your client. In a situation similar to the NASA workstation, this can be very important.
If, however, your contribution to the Prime is large or expensive, the contract you have with the Prime may have stipulated that you get paid when they get paid by the government. This effectively eliminates one of the big advantages of being a sub.
In the business-to-business relationship between you and a Prime, it is often easier to work with them in getting the job done. Access to information and people may be easier and more effective than it often is with government representatives. You may also find that the Prime will supply you with a lot of what you need to do the job like office space, computers, materials, transportation, etc. As discussed in the above section, there is a fly in the soup....
There is a federal law that says that whatever regulations that the prime has to abide by in the contract, any subs he uses must also abide by those Regs. Let's take an example:
Prime company A wins a big contract to do program management services for a big DoD office. They need programmers to do some of the smaller jobs. You sub to them to do that work. OOPS - you'd better read the FIRMR/ITMRA because it says you have to provide documentation till the cows come home on any software developed for DoD. Oops, there is also the matter of the FBI records for your clearance. You have to file extensive reports with the FBI and pay some sizable fees to have a “BI” done - background investigation. Ooooops, and then there are the time cards that you must fill out to account for every hour of your work but you can't put in overtime. Ooooops, the deliverable formats that are mandated in the contract are in digital formats that require you to buy new software ....and...and...and...!
Get the idea? Watch your ass because if you take a subcontract to a Prime and do not have a chance to read the Prime's contract, you may find you will expend 2 to 15 times more effort in administrative overhead than in getting the job done.
“Included by Reference”
Read the fine print in your contract to the Prime and ask about any clauses that are “included by reference”. This is a casual statement that is followed by lists of FAR, FIRMR/ITMRA, OMB, GSA, GAO, USC, FIPS, MilStd and DFAR coded references. (You need to understand what all those acronyms are and what is in them - see the glossary).
Stop reading here now and go look at Appendix A for what a list of these “included by reference” requirements might look like (this is an actual list of “included” references for a contract of less than $40,000).
The “clause number” may be misleading. At first glance, it looks like these are all various parts of Section 52.2XX of the FAR. Section 52 is actually just sections of text to be cut-and-pasted into a contract in order to add some requirement without having to print out all of the text of every requirement in every contract. Within this “boilerplate” text, there might be several references to additional regulations, laws and requirements.
Actually, when you look in Section 52 of the FAR, the first statement that is made for every one of these clauses is “As described in XX.YYY-ZZZ, insert the following clause:” Let's take one example:
The clause for Payments at 52.232-1 refers to FAR 32.111 which in turn refers to eleven other clauses in section 52 and to Far 16.601. FAR 16.601 refers to Part 31 having to do with compliance with accounting procedures. Part 31 is a massive section called “Contract Cost Principles and Procedures”. Part 31 refers to cost analysis required in 15.8. negotiating costs as in 42.7, terminated contracts as in 49.113, price determination as in 16.20, cost-reimbursement as in 49.109, and perhaps 250 other clauses that go on for more than 4000 lines of text.
Part 31 also refers to other regulations such as OMB Circular A-122 and the “Construction Equipment Ownership and Operating Expense Schedule” and the “Statement f Financial Accounting Standard No. 13 (FAS-13)” and the Tax Reduction Act of 1975 and the Economic Recovery Act of 1981, and so on and on.
Elsewhere in the FAR, there are also cross-references that affect compliance. For example: In Subpart 1.4, it refers to deviations to Part 31. In Subpart 15.8, it talks about verification of the offeror's cost submission to be in accordance with “48 CFR Chapter 99 (Appendix B, FAR loose-leaf edition), Cost Accounting Standards” as specified in Part 31. In Subpart 30.2, it talks about compliance determination and noncompliance with Part 31. There are many other examples.
Among the volumes of requirements lay some requirements that exist in a default condition unless otherwise stated in the RFP or proposal. One of the most often used is the fast payment schedule (Subpart 13.3). It allows a supplier to get paid faster than normal but it is not offered as a matter of routine because it takes extra work on the part of the contract releasing authority. The default payment schedule could be much longer. Another important one is the ownership rights to items delivered under the contract, especially software. The default is that everything is owned by the government at the end of the contract. There are, however, five other conditions of ownership that can exist if they are known and bid properly.
The bottom line on this example is that these clauses that have been “included by reference” and the default conditions that may exist in the contract constitute and potentially massive increase in the size , scope, requirements and costs in the compliance and delivery of a contract to a government client and may result in the loss of future work with other Primes or government agencies.
In the example in Attachment A, you will have seen that there is a “Clause Date” to every reference. This is another bit of trickery to watch for. If a contract is release specifying a regulation dated SEP 1991, that does not necessarily mean that is the latest version of that regulation. There might be a MAR 1996 version but the RFP was written in JAN 1996, and the latest version of the regulation then was SEP 1991. This can be tricky when you have determined that it was recent changes in the regulation that made it cost-effective for you to bid in the first place. This can also be a problem when the government releasing authority has not kept up to date with the latest changes and mandates compliance with a more rigid and expensive regulation or standard.
WHAT IS A PROPOSAL?
A proposal is a sales presentation, and it is essential that you recognize that as a first premise upon which to base all your ideas about proposal writing. Proposals do not win contracts by luck; they win by determined and intelligent effort, and by successfulwhich means persuasivesales strategies.
THE ESSENCE OF PROPOSAL DEVELOPMENT: THEME
The essence of Proposal Development, the name assigned to those proposalwriting methods and philosophies advocated in these pages, is THEME. The dictionary defines THEME as “an implicit or recurrent idea; a subject of artistic representation”. It is appropriate that the definition of “theme” refers to “artistic” because there is more ART to writing proposals that scientific method. Again referring to the dictionary, ART is defined (among others) as “skill that is attained by study, practice or observation; the conscious production or arrangement of elements in a manner that appeals to an audience”.
Proposals must have a theme that runs throughout the entire document and binds the various elements together. Some have called this a proposal strategy but that term often implies a formal and structured science of planning and conduct that, when followed, always results in a win. Proposals most definitely have form and structure and have very definite ingredients, many of which are defined in government regulations.
Most of your competitors will deliver proposals which demonstrate that they can do the job. And all of your competitors will follow standard format and structure guidelines established in the RFP or other requirements. But the mere ability to do the job is not justification for the award and will not win the contract; you must somehow demonstrate that you can do the job in a superior manner or otherwise give the customer one or more compelling reasons to select you as the winning proposer. Since the people that award the contract will not see anything about you other than your proposal, you must relate those compelling reasons in the text, content, syntax and illustrations of your proposal.
Here are a few of the general theme categories into which those "compelling reasons" might fall:
* Costs
* Quality of work
* Qualifications of staff
* Experience of organization
* Stability and reliability of the organization
* Special inducements/considerations related to cost, schedule or performance
Of course, that is not all there is to Proposal Development, nor to the development of effective theme. In fact, those several categories suggest only the seeds of possible themes, mere dooropeners. For example, it isn't of much use to labor long hours designing the lowestcost program if low costs are not a major concern of the customer. Nor to design an imaginative and innovative program if the statement of work has specified the desired program and mandated strict conformance with overly detailed specifications. That is to say, a theme for a compelling reason is a reason the customer finds compelling, for it is only the customer's perceptions that are of value in formulating strategies. Ergo, an critically important early step is finding out what is important to the customer (rather than to you). And that comes out of analysis, to identify what isor can be made to bemost important in the customer's perception of reality. This is the first objective in the quest for a successful proposal design.
IS THERE MORE THAN ONE KIND OF STRATEGY?
The strategy referred to here has been one that some refer to as "sales strategy," also referred to by others as "proposal strategy." However, because there are other possible strategies commonly employed in writing effective proposals, it is more useful here to distinguish the strategy referred to here as capture strategy, or that main strategy which is expected to be the kingpin of the proposal effortthe main reason given the customer as the inducement to select the proposal as the winner.
That capture strategy may be any or some combination of several possible subordinate strategiestechnical or program strategy (the strategy of the proposed program), cost strategy (appearing to be the right cost and, in some cases, appearing to be the lowest bidder), presentation strategy (organizing the proposal itself for greatest impact), and competitive strategy (coping successfully with competitors' proposals).
These, too, the strategic approaches and ideas, are integral parts of that technique we call "Proposal Development."
THE PURPOSE OF A PROPOSAL, LIKE THE PURPOSE OF ORATORY, IS PERSUASION, NOT TRUTH
Salesmanship is an act of persuasionin fact, the art of persuasionand we write proposals with the intent of winning contracts, with the intent, that is, of persuading others to select us for award. The successful proposal, therefore, is one that persuades successfully.
Persuasion is an art, but it has its own rules and principles, and these are very much a part of Proposal Development. In fact, it is fair to say that Proposal Development is the art of written salesmanship.
None of this is to say that salesmanship is the art of deceit, despite the fact that sales organizations sometimes bend the truth rather badly, nor to suggest for a moment that a proposal should bend the truth even slightly. (Quite the contrary, that may itself destroy the effectiveness of the proposal.) But it is to say that to write an effective proposal you must keep your eye on the ball and remember that your main objective is to convince the customer that your proposal is the best offer of all of them, from all viewpoints, and should therefore win the contract. The art of persuasion has many facets, not the least of which is the art of writing persuasively, and this, too, is an important element in Proposal Development.
IT'S A COMPETITIVE WORLD
The proposals you write are almost always competitive: others are also trying to win the contracts, and they are trying to write better proposals than you write. There are certain factors to remember, in connection with this, not the least of which is to be careful that you neither underestimate nor overestimate competitors.
PROPOSAL DEVELOPMENT
The essence of Proposal Development is strategy. Everything else, and there are many other considerations, is in pursuit of devising and implementing successful strategies.
========================================================================================
II: UNDERSTANDING THE MARKET
The government is "them," not "it"; when you sell to the government, you sell to people.
WHY PROPOSALS ARE REQUESTED
Nominally, proposals are requested when the government wants to procure something on a custom basis, as contrasted with buying an "off the shelf" (proprietary) service or product. Because the procurement is on a custom basis, it is necessary to judge somehow which of the many possible suppliers is best qualified, has the best approach, and is the most dependable vendor. Theoretically, then, the RFP says, "Here is our problem [or need], with everything we know and can tell you about it. Give us the benefit of your knowledge and your ideas about how best to solve this problem [satisfy this need]. Explain your proposed solution, program, ideas, and qualifications to us. And then be sure to explain why we should award the contract to you." (Sell us, that is.)
Note that there are in general two kinds of situations or requirements underlying the issuance of an RFP:
1: The customer has a problem to be solved, which can be described by the customer only in terms of symptoms, requiring "outside" help because the customer lacks the necessary skills, facilities, or staff inhouse.
2: The customer has no problem, in the sense of requiring help to diagnose symptoms and devise a solution, but does have a perceived need for specific outside services which the customer can easily define.
WHAT INFORMATION SHOULD AN RFP AND SOW CONTAIN?
Knowing what ought to be in an RFP and SOW is helpful in understanding the whole proposal process because it helps you understand the government's overall intent in issuing RFPs, despite the fact that so many agencies execute and implement the concept rather badly.
In concept, the statement of work explaining the problem or need is supposed to provide enough information to enable the proposer to understand the problem/need and to conceptualize and plan an effective and responsive program. But it is not to be so detailed as to stifle the proposer's freedom to be flexible and imaginative in response to the request.
Unfortunately, few RFPs and SOWs achieve that happy medium between rigidly structured mandates and uninformative, vague generalities. Instead, we are often confronted with RFPs that go to one extreme or the other, either making it quite difficult to make innovative and imaginative responses or leaving us highly perplexed as to what the customer really needs or wants. Still, knowing as we do that the customer has a problem to solve and/or a need to satisfy, we must therefore fill in the gaps for ourselves.
On the other hand, sometimes it becomes apparent that the customer does not understand the problem, perhaps cannot even distinguish between the problem and the symptoms, in fact. Or, as is also sometimes the case, the customer has a conviction, but a mistaken one of what the problem is.
We may therefore be confronted with any of these problems, in addressing the proposal need, and it is necessary that we have a realistic fix on what our own chief worry item is, as far as an understanding of the requirement is concerned.
THE WORRY ITEM(S)
Frequently, the text of the RFP (request for proposals) and, especially, the statement of work, provide clear indications or at least distinct clues as to the customer's chief "worry item"what is of greatest concern. It may be money: perhaps the customer's budget is rather tight, leading to concern over whether the job can be done for the money available. It may be time: perhaps the customer is deeply concerned over whether the job can be done in accordance with the necessary schedule. It may be stateoftheart or technical problems, leading to concern over whether the job can be done at all or, at least, undertaken with some reasonable assurance of satisfactory results. Or there may be one or more of many other possible items over which the customer is losing sleep.
Discovering that chief worry item or those chief worry itemsthere may easily be severalis the key to successful strategy. That makes it an important function in the proposal process. Unfortunately, however, the RFP and its SOW (statement of work) are not always sufficiently informative, either because the customer deliberately withholds certain information or because the SOW is not particularly well writtena not unusual circumstance, as all experienced proposal writers are well aware. And, still, despite those problems, the key to developing successful strategies and winning contracts lies in the ability to ferret out the customer's true problem or need and the worry items (or make the customer painfully aware of legitimate items about which he/she should be worried). It is that problem, above all else, that makes successful proposal writing a creative process.
YOU ARE SELLING TO PEOPLE
The RFP and SOW were written by fallible humans; that's why the documents are less than perfect. Other humansor perhaps even the same oneswill read your proposal and pass judgment on it. They are persuaded or dissuaded by the same emotions and drives that persuade or dissuade them in making their personal buying decisions. We need to sell to them as buyers for the government or for their organizations just as we sell to them in their personal buying.
========================================================================================
III: THE BID/NOBID ANALYSIS
The first decision is, of course, whether you want to write a proposal at all.
THE FIRST DECISION
Long before work on the proposal can begin a decision must be made to submit a proposal. Within the organization there must be study of the solicitation to determine whether you will or will not risk the expense of submitting a proposalof making the bid/nobid analysis and judgment. That is usually a command decision, made on "mahogany row" by the executives responsible for marketing commitments, although you may very well be called on to assist in the study and enter some opinions of your own about specific areas of concern.
The process varies widely in different organizations, but the basic considerations do not: virtually all organizations, large and small, consider the same factors in deciding whether to bidwrite a proposal, that isor not to bid. It is never cheap or easy to prepare a proposal, and the decision to undertake the expense should never be made casually, but only after solemn deliberation. There are always pros and cons of the job in terms of profit, risk, footinthedoor for future work, pioneering new fields for expansion, best use of company resources, effect on other commitments, and general advantages versus disadvantages. Here are a few of the specific questions to ask and answer, when making these analyses and decisions:
Do we need the contract (new work) at present?
Would winning this place a burden on our overall capacity? On other commitments to other customers?
What are our chances for winning?
What are our strengths and weaknesses, vis-à-vis this requirement?
What are our prospects for overcoming our weaknesses?
Who are our probable competitors? (Can we beat them?)
What other marketing prospects do we have at the moment?
How would bidding this one affect our capabilities for responding to the others?
How do our chances on this one relate to the chances on the others, and what are the relative winprobabilities of each?)
Is this the kind of work we really want to do?
All of this is solely to arrive at that bid or no bid decision, but if the decision is to bid (propose, that is) the information developed should be input to the proposal team to help in the initial needs analysis.
Note that the factors used in making the final decision in any single case have no bearing on future cases. Circumstances and policies change, and you may very well choose to bid in May on the job you would not have considered in Januaryor vice versa. You must consider all the current factors and circumstances, if you are to make intelligent decisions about this. Remember, too, that your judgments made here are going to be reflected in your proposalwriting problems later, should the final decision be to enter the competition.
=====================================================================================
IV: THE ART OF WINNING
Proposal writing is often referred to as an art. The reason is that, although it has defined professional and scientific goals and methods, the variabilities between good and bad proposals, between winning and losing proposals are huge and varied. Fifty bidders can bid on a single RFP and produce 50 different proposals that often sound like response to completely different RFPs. Remember: Proposal writing is only the means; winning is the end. Let us focus on the end.
THE INITIAL PROBLEM
If the point has not been made clearly enough already, let us stipulate here and now: The underpinning of Proposal Development, of winning, is strategy, and winning strategies evolve only from effective, searching, analysis of the RFP and SOW, followed by creative imagination. But who will make the analysis, and how?
Except for small contracts, proposals are written by teams of people, usually ad hoc teams assembled for the purpose and made up of technical, professional, and executive staff members. The proposal and all that goes into it is supposedly the combined and carefully blended distillate of their best collective thinking.
Unfortunately, the typical proposalwriting conditions too often result in a proposal that is not that precious distillate, but is a lashup package, a compromise among a field of views and opinions.
This is chiefly because many proposals are written by groups of people, who are not really teams because they have not worked as teams before and because the typical proposal schedule does not afford the luxury of enough time to do the job. Invariably, a proposal must be written without enough time, and often without enough of every other resource, and all too often with people borrowed from other tasks who have not had time to read the RFP thoroughly and are not prepared for even the first meeting. And yet, somehow, we must manage to write winning proposals despite all these problems.
A PRACTICAL SOLUTION
A method which has proved effective in overcoming this problemin assisting such groups to develop rapidly a concurrence of view and commonness of purpose, such as is necessary to function smoothly as a team while still serving as a vehicle for strategy developmentis one based on using graphic methods for analysis, primarily functional flowcharting and brainstorming.
The necessity for the method arises from the fact that a great many work statements are poorly written, either as a result of having been written by someone who does not have a firm understanding of the problem or need or as a result of having been assembled (rather than written) by an assortment of individuals without central control. As a consequence of this, it is close to impossible in many cases to visualize the customer's need from the words alone. A graphic representation is necessary to visualize what needs to be done to satisfy the requirement.
Presumably, the way to do this is to translate the words of the SOW directly into the functional blocks, arranging them in logical sequence. In fact, this is a good way to begin, when possible. But it is not always possible. Many work statements are simply too vague, often almost incoherent, to lend themselves to this. When that is the case, more stringent measures are required to generate something that begins to approach the functional flowchart idea.
In this latter case, the method is to begin with whatever the "knowns" arethe endresult and/or product, for exampleand work with those. And in that latter case, it is often far better to develop even the initial, firstdraft flowchart as a group exercise in the initial meeting. Either way, the group has a roughdraft functional flowchart to address as the basis for analyzing and planning the proposal effort, and to refine and polish until it represents the program in graphic form and is the basis for the proposal.
THE FIRST STEP
Before beginning the flowchart, and especially when the SOW is so vague as to make it difficult to translate it into a chart, an extremely useful first step is to make up a checklistthree checklists, in factfrom the RFP. These are the three kinds of items to be listed:
* What must be included in the program
* What must be included in the proposal
* What will be the criteria upon which the proposal will be evaluated and a winner selected
It usually requires repeated readings of the entire solicitation package to complete these lists (it is most difficult to get everything in the first reading). But the objective is to list everything in each categorynot only what is written on the lines in the RFP, but also what can be gleaned as having been written between the lines.
These lists should guide the drafting of the functional flowchart, the uncovering of problems, the discussions and development of approaches and strategies, and the design of the program.
BRAINSTORMING
The objective of brainstorming is to generate a synergy of ideasa result greater than the sum of the parts. Brainstorming should, according to its inventor, advertising executive Alex Osborne, address only one question or objective at a time. In this case, these are the objectives that should be pursued in successive sessions:
* Development/refinement of the functional flowchart until all are satisfied that it presents the approach to be adopted and the program to be proposed.
* Worry items: what specific items are critical in importance to the customer and should be the linchpins of the main or capture strategy.
* Proposal outline reflecting approaches and strategies.
* Proposal assignments: who is best suited and/or in best position to do each part of proposal.
STRATEGY FORMULATION
The keys to finding worry items and formulating strategies will be found quite often in redundancies and anomalies in the RFP. Sometimes these show up plainly in the text, but often they are much more apparent or suddenly become apparent in the graphic representationsthe flowchart. That is one of the several benefits of creating that flowchart. (The singular case is used here, but for large projects it may be necessary to prepare more than one flowchart.) It's important to discover these for two reasons:
1: It's necessary to know all the "downside" aspects, if you are to design an effective program that will not become a serious problem laterif, in fact, you are to be truly responsive with your proposal.
2: It is important to utilize these flawstactfullyin explaining your program, and showing your superiority to competitors. Any inadequacies in the RFP, and especially any potential problems, are grist for your strategic mills.
Another important benefit of a good flowchart is that it is an enormous aid to communication generallyto explaining your program to the customer. The more detailed and more explicit your flowchart is, the fewer the words you need to explain your program. In short, the writing task is greatly aided and simplified by a good flowchart.
This is a general truth about proposal writing (and, for that matter, all writing): good graphic presentations are at least as important as good writing, if not even more important. However, it is essential that the graphic illustration be absolutely clear and easy to grasp, and the surest route to that clarity is to keep it simple. The figure used as a functional flowchart of the proposal development process (in the front matter of this manual) is an examplenothing "arty" at all; just simplicity in concept and in execution.
WHYITCAN'TBEDONE ANALYSIS
One excellent way to turn up some of these problems, during the brainstorming sessions, is to perform a whyitcan'tbedone study. In this analysis you start with the premise that the job can't be done, and all participants offer their reasons to justify the premise. Any reason offered that cannot be easily discounted by some fairly obvious fallacy in the reasoning becomes a potential element in the strategy.
|