Keith R. Scott Associates
Introduction to the
Federal Contract Market
Presentation
To
Federation of Israeli Chambers of Commerce
August 20, 2014
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What is the Scope of the Federal Market?
The Executive Branch of the Federal market consists of 15
departments, 70 independent agencies and
government corporations, as well as numerous
agencies of the Executive Office of the President
The Executive Branch supports both civilian and defense
functions
The Executive Branch out-sources much of its work to the
commercial and nonprofit sectors through contracts
and grants
In Fiscal Year (FY) ’13, the Federal government spent over
$461 billion on contracts: $308 billion for DoD, $153
billion for civilian agencies.
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Why Compete in the Federal Market?
Overall market size: Federal marketplace is a multibillion dollar industry
Contract size: Federal contracts range from small purchase
orders up to billion-dollar contracts:
•
•
•
Micro Purchases are defined as any purchase of $2,500 (in
some cases $3,000) and below and can be made without
obtaining competitive quotations. Purchases in this category
are open to small and large businesses and are usually
purchased via a credit card or Government Procurement Card
(GPC)
Simplified Acquisition Procedures (SAP) apply to acquisitions
between $2,500 and $150,000. The majority of these purchases
are set aside for small businesses
Purchases over $150,000 are considered large purchases that
require a sealed bid process
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Why Compete in the Federal Market?
(continued)
Contract length: Federal contracts are usually long-term,
often 5 years in length
Preferences: Federal contracting rules require that
agencies set aside a percentage of contracts for small
and disadvantaged businesses. Set-aside goals
include:
• 23% for small businesses
• 5% for small disadvantaged businesses
• 5% for woman-owned businesses
• 3% for HUBZone small businesses
• 3% for service disabled veteran-owned small
businesses
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What Does the Federal Government Buy?
A wide variety of products and services classified in two
main systems (http://www.naics.com/search/):
SIC Codes: The Standard Industrial Classification
(SIC) codes are used by the Federal Government
to identify and classify specific categories of
business activity that represent a company’s
primary line of business.
NAICS Codes: The North American Industry
Classification System (NAICS) industry codes
define establishments based on the activities in
which they are primarily engaged. The Small
Business Administration (SBA) uses NAICS as a
basis for its size standards.
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NAICS Codes That May Be of Interest
NAICS
Type of Business
31-33
51
54
56
Manufacturing
Information (IT)
Professional, Scientific & Technical Services
Administrative, Support, and Waste
Management and Remediation Services
Educational Services
Health Care and Social Assistance
61
62
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How To Assess Federal Market
Opportunities
Is the work in your area of expertise? Are you offering services under
the listed NAICS code?
Have you marketed the agency or department in which the opportunity
resides?
Have you been tracking the opportunity or is there still sufficient time to
track the opportunity and establish a capture management plan?
Is there a small business (SB) preference or an small disadvantaged
business (SDB) preference for which you qualify?
Do you have the financial capacity to manage the opportunity?
Do you have the financial and staff capacity to bid the opportunity?
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How To Assess Federal Market
Opportunities – More Questions to Ask
Does the work require personnel and/or facility clearances?
Is the work requirement in a locality where you have or can reasonably
secure resources?
Can your firm ‘go-it-alone’ in supporting all work requirements, or do you
need a partner to fill in gaps in your capability?
Should you be seeking to prime or to subcontract the opportunity?
Is there time to seek an appropriate partner(s)?
Have you bid anything similar? If so, what was the outcome of your prior
similar bids?
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Marketing and Capture Management
Approaches
Building relationships with project, contract and Small Business Program staff in
target agencies
Building relationships with incumbents, large contractors and other potential
teaming partners
Submitting capabilities statements well in advance of sources sought,
pre-solicitation or other notices of forthcoming bids
Gathering intelligence about incumbents, agency forecasts, contract
histories and client future needs
Defining pricing strategies that are effective and competitive in each
individual agency market
Using Federal Supply Schedules as a marketing tool and contract vehicle
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Types of Federal Solicitations
Request for Information (RFI)
Sources Sought
Invitation for Bid (IFB)
Request for Quote (RFQ)
Request for Proposal (RFP)
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Analyzing Solicitation Requirements:
What Does Your Firm Bring to the Table?
Technical expertise with scope of work (SOW) requirements
Recent past performance and current experience in your areas of
expertise within: commercial, other government, academic
and Federal marketplace
Size, NAICS and area(s) of set aside requirements
Focus on what matters to the program and to the contracting office
(examples: in-place quality management plan, proven past
performance, methodology for minimizing risk)
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Understand Federal RFP Sections
Section A – Information to Offerors or Quoters
Section B – Supplies or Services and Price/Costs
Section C – Statement of Work (SOW)
Section D – Packages and Marking
Section E – Inspection and Acceptance
Section F – Deliveries or Performance
Section G – Contract Administrative Data
Section H – Special Contract Requirements
Section I – Contract Clauses/General Provisions
Section J – Attachments, Exhibits
Section K – Representations/Certifications and Statement of Offerors
Section L – Proposal Preparation Instructions and Other
Section M – Evaluation Criteria
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Keys to Successful
Technical Proposal Preparation
Make bid/no-bid decision as early as possible – even before
release of the solicitation
Download and review solicitation and revise bid/no bid decision
based on final assessment of ability to support requirements
Prepare outline and schedule for proposal within 48 hours of
reviewing solicitation
Assign proposal responsibilities within 72 hours of solicitation
review
Update corporate “boiler plate” materials
Write to the solicitation evaluation criteria and instructions
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Financial Background to Bidding
Federal Contracts
Pricing bids for the Federal Market must consider:
• The type of contract
• The competitiveness of your pricing elements
Main Types of Federal Contracts:
• Fixed Price
• Time and Materials/Labor Hour
• Cost Plus Fixed Fee
Elements in Pricing Contracts (What Comprises Your multiplier):
• Labor Rates
• Frings
• Overhead
• General and Administrative (G&A
• Fee (Profit)
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Fringe Benefits
Holiday labor cost
Other paid leave labor costs (such as jury duty,
family leave)
Employer payroll taxes (FICA taxes, state
unemployment taxes)
401(k) employer match or contribution
Health insurance and similar benefits
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Examples of Overhead Costs
Non-billable staff: such as Human Resources (HR),
accounting, sales
Proportionate share of total facilities costs:
• Business development efforts and to manage or
•
•
•
perform administrative functions
Office supplies
IT services
Telephone
Overhead costs support the efforts of the direct
labor workforce, not necessarily related to a
specific contract
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Examples of G&A Costs
Non-billable staff: such as HR, accounting, sales
Business development efforts and to manage or
perform administrative functions
Professional fees, such as legal, accounting, payroll
processing fees
Travel – perhaps in support of business
development efforts
Business insurance (general liability)
State & local taxes (not federal taxes!)
Conferences, business meetings
Dues and subscriptions
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Multiplier Rates
The 2012 Grant Thornton Survey of the government
contracting industry showed multipliers of 1.9 for
offsite labor and 2.2 for onsite labor
Gross profit rates shown in that survey are between
1%–5% of revenue
Typical profit ranges bid:
• Fixed price = 10%–15%
• Time and Materials = 5%–8%
• Cost Plus Fixed Fee = 3%–5%
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Next Steps
Prepare 12-month strategic plan for the Federal Sector and
incorporate into overall corporate strategic plan
Identify corporate lead and Federal BD management team to
manage implementation of Federal Sector plan
Begin implementation of capture management approaches based
on plan
Review progress at least monthly if not biweekly
Maintain strong lines of communication between :
• Corporate lead and Federal BD management team
• BD team and potential clients
• BD team and teaming partners
• Corporate lead and current clients
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SBIR Program: History and Goals
The Small Business Innovation Research (SBIR) program
is a U.S. Federal government program aimed at
encouraging domestic small businesses to engage
in research and development (R&D) activities and
projects that have the potential for
commercialization.
Currently, 11 Federal Agencies participate in the SBIR
program.
The program’s main goals are to: (1) stimulate
technological innovation; (2) meet Federal R&D
needs; and (3) increase private-sector
commercialization of innovations derived from
Federal R&D funding.
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SBIR Program: Phases
Phase I: Establish the technical merit, feasibility, and
commercial potential of the proposed research or
R&D efforts. Phase I awards normally do not
exceed $150,000 total costs for 6 months.
Phase II: Funding is based on the results achieved in
Phase I and the scientific/technical merit and
commercial potential of the project proposed in
Phase II. SBIR Phase II awards normally do not
exceed $1,000,000 total costs for 2 years.
Phase III: Pursue commercialization objectives
resulting from the Phase One and Two. The SBIR
program does not fund Phase III.
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SBIR Program: How Do Israeli
Companies Participate?
While a wholly-owned and operated Israeli company
cannot participate in the SBIR program: it could
(1) set up a U.S. entity or (2) form a joint venture
with an existing American company that will make
it eligible to apply for an SBIR grant.
For example, an Israeli company could establish an
American subsidiary, and the American subsidiary
could apply for an SBIR award as long as it is more
than 50% directly owned and controlled by a U.S.
citizen or permanent resident.
The SBIR program could also be a good option for an
Israeli company whose owner is a U.S. citizen
residing in Israel.
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Keith R. Scott Associates
Contact Information:
Barbara J. Zakheim, President
Office: 240-638-2757
Mobile: 301-675-4652
Email: bzakheim@keithrscott.com
Corporate Headquarters:
8403 Colesville Road, Suite 1100
Silver Spring, MD 20910
Website: www.keithrscott.com
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