Price More, Stress Less: 3 Ways to Streamline Pricing During Government Proposals

“Is there a better way?” If you’re a contractor or agency Contract Officer (CO), you have no doubt asked yourself this about the current contract pre-award process.  

There is, but it takes effort on both the vendor and government sides. A consistent drive to streamline contract pricing usually involves minimal research, a modicum of compromise, a dedication to good intentions and often a little patience. 

We have several ideas to consider when optimizing the pricing equation. Here are three key pieces of advice for each perspective—contractor and CO.

Streamline Pricing on the Contractor Side 

1. See if your agency client awards on value or price. Do you really need to be the low-price leader? Sometimes you do. In various government divisions, agencies make awards based strictly on price alone—the lowest price wins, without exception. 

   Yet other agencies are more likely to award contracts to the offeror who creates the best value for the dollars required. In this context, your proposal includes the work of very talented subcontracting professionals who are expensive but willing to operate at a slight discount to collaborate with the government—and hopefully lock in future work on other contracts. 

   Still other agencies award contracts based on a combination of value and pricing. If you can determine in advance where your client agency falls, you'll streamline your contract process exponentially. 

   How to do this? Research public-domain contracts the agency has completed or are in play. You’ll be able to spot a preferred trend sooner than later.

2. Get a good idea of expected prices before you start a proposal. One thing is certain: The agency you’re dealing with has already gone through the financial gymnastics required to know what a contract will cost before calling for proposals.

   This number doesn’t necessarily align with the resultant award number. Why? The agency has to get early funding for the project from its government higher-ups, as part of its budget process for the year; this is primarily for risk management. By knowing the amount, you can get somewhat close to what you should charge.   

   That said, here’s some guidance on how to anticipate pricing expectations: 

   Study the contract RFP to determine the scope of work and its breakdown structure. This helps you envision the tactical process involved, and its sequence of events. If you don’t have the data to define certain tasks, make your best assumption and put your estimate together—and explain your assumptions in the proposal. Also, clarify why you felt you had to guesstimate. Use tact.  

   Put together an employee and subcontractor forecast, so you have a rough idea of the talent you’ll need to fulfill the agency’s needs. What skill sets? Which vendors? Can you use tried and true talent, or do you need to go outside your comfort zone for special services? Assign a timeline and set an ideal number of hours for each person involved. 

3. Back pricing out of similar, recent contracts. With even minimal sleuthing, you can usually find contracts that have been previously awarded by your client agency or similar—along with the related public-domain financial data that maps to each. 

   Gather average hourly rates and analyze the comprehensive pricing 

   of these similar contracts, then anticipate direct and burdened labor rates for your current Request for Proposal (RFP) based on your research.

   You can also conduct research on the U.S. General Services Administration (GSA) site, and then map your findings to public-domain commercial salary surveys for applicable labor categories. 

   Finally, it’s always smart to devise a bidding strategy that incorporates a perspective on your competition’s wrap rates—what they’re likely to end up paying as final labor rates, indirect rates and the like. 

   Regardless of which public sector market you are seeking to do business in, finding government contracts is just the start of the government sales process. This guide outlines five best practices to deploy a winning sales strategy.

Streamline Pricing on the Agency Side 

1. Know your contractor’s approach to pricing. As an agency CO, you’ll be leaps ahead in the contracting game if you can understand your contractor’s goals. 

   Study their previous proposals for insight into a specific pricing strategy. Extensive details on pricing typically indicate less wiggle room than in proposals that are more general in treatment. Past Price Negotiation Memorandums (PNMs), as well as insight from your associates who’ve had previous dealings with the contractor, are other valuable sources of information. 

   As you research, reflect on the contractor’s priorities and anticipate how they affect pricing. For example, a contractor’s primary goal in answering an RFP may not be to make a huge profit. It may be to enter a new government category, build greater market share in an existing category or simply re-establish a foothold in continuing government business. By understanding any of these scenarios, you’ll be in a better position to create an agency win by awarding a current contract more quickly and economically.   

2. Aim low but allow for some back-and-forth. Obviously, the greater the value you expect to win from a contract, the better your agency team will perform, creating a best-case reputational scenario in the process. 

   Always counter an initial contractor bid with one that creates a greater advantage for your agency. But be prepared to make concessions. 

   Placing your opening position too close to your desired price will leave you less room for flexibility—and that can mean losing out on a highly qualified contractor, while also having to go back to your shortlist to start final negotiations again. 

   Net/net: According to Defense Acquisition University, you want your initial price offer to be close to your end goal but still far enough away for you to make compromises if necessary. 

3. Remember that patience is a pricing virtue. Though a quick contract award process is the most desirable, impulsive decisions on your agency’s part can cost you. On the flip side, patience in pricing can help smooth out a talented contractor’s rough edges, present expectations in a more favorable light and give your contractor space to say “yes” to an outcome that might not be their ideal. 

   That said, playing a shorter waiting game may ultimately streamline pricing. If conversation pauses become too long, you can set decision deadlines that work in your favor. 

Short-Game Tactics but Long-Game Government Contracting Vision

Successful contract streamlining is more than just getting your best deal fast. It’s about obtaining a high-value solution for both parties as painlessly as possible.

This can lead to quality performance, on-time delivery and a mutually beneficial long-term winning relationship for both the contractor and agency. While you should aim to gain a fair price as efficiently as possible, you should also focus on building a strong rapport with your other party.

Deltek + ProPricer Helps Automate Your Pricing Process

For an easier way to streamline proposals, change orders and revisions, consider ProPricer Contractor Edition. It’s an automated pricing platform that simplifies proposal pricing development accuracy, submission, evaluation, negotiation and audits. 

Want to learn more about bidding on data-driven contract services? Discover how data analytics offerings can boost your contracting game in this eBook.