Building a government
st
contractor for the 21
century
By Carlos Garcia
Owner and CEO
KIRA
Army Directorate of Public Works Support Contractor of the Year
The world has changed for government
contractors
• Far greater number of regulations
• Price becoming increasingly important
• Larger contractors are consolidation
• Proliferation of multiple award contracts
• Change from cost plus to firm fixed price contracts
Army Directorate of Public Works Support Contractor of the Year
Far greater number of regulations
• Department of Labor regulations are onerous
• Contractors must certify far more items on a
contract
• More inspections by OSHA and other regulators
• Fines can be very large
• Paperwork requirements have increased
• Retention of records increasingly important
Army Directorate of Public Works Support Contractor of the Year
Price becoming increasingly important
• Congress is mandating that agencies save money
• The requirements grow but the compensation does
not
• Most contracting officers gravitating to low cost
offeror
Army Directorate of Public Works Support Contractor of the Year
Large contractors are merging and
consolidating
• Many large businesses have merged
• This makes it difficult to gain traction for teaming and
subcontracting
• Frequent reorganizations make it hard to know who the
buyer is
• When two companies merge they may select legacy
subcontractors from one of the companies
• Individuals with whom relationships have been forged may
leave company
Army Directorate of Public Works Support Contractor of the Year
Increasing number of Multiple Award
Task Order Contracts (MATOC)
• These contract vehicles do not guarantee work
• Bid and Proposal costs do not end with award of
MATOC
• Risk that MATOCs may not be funded
• Risk of protest at MATOC level and Task level
• Customer may decide not to use MATOC
Army Directorate of Public Works Support Contractor of the Year
Change from cost plus to firm fixed
price contracts
• Price is more important than ever
• More risk to contractors
• Fewer equitable adjustments
• Importance of understanding work load data
• Need to deliver service efficiently
• Time is money
• Low G & A essential
Army Directorate of Public Works Support Contractor of the Year
Part 2
Winners and losers
Army Directorate of Public Works Support Contractor of the Year
Winners
• Companies that focus on industries where they
possess advantages
• Companies that can manage service efficiently
• Companies with low G & A rates
Army Directorate of Public Works Support Contractor of the Year
Losers
• Companies that lack focus
• Companies in denial about the amount of sole
source work they can generate
• Companies with high G & A rates
Army Directorate of Public Works Support Contractor of the Year
Part 3
Role of key executives in developing
and implementing strategy
Army Directorate of Public Works Support Contractor of the Year
Role of key executives in developing and
implementing strategy
• Board of Directors
• Selection of the Chief Executive Officer
• Setting hurdle rates of return
• Allocating capital to the Chief Executive Officer
• Establishing other objectives for the Chief
Executive Officer
Army Directorate of Public Works Support Contractor of the Year
Role of key executives in developing and
implementing strategy
• Chief Executive Officer
• Develop strategy for the organization
• Establish business plan to achieve objectives
• Select key management team
• Establish objectives for each member of the
management team
• Report to Board of Directors
Army Directorate of Public Works Support Contractor of the Year
Role of key executives in developing and
implementing strategy
• Chief Operating Officer
• Manage operations
• Ensure compliance with laws and regulations
• Deliver operational results that meet budget
• Provide inputs in business development process
Army Directorate of Public Works Support Contractor of the Year
Role of key executives in developing and
implementing strategy
• Chief Financial Officer
• Leadership of finance and accounting
• Oversight of tax and audit
• Oversight of rate structure
• Oversight of budget
• Cash flow and capital expense management
• Provide inputs in business development process
Army Directorate of Public Works Support Contractor of the Year
Role of key executives in developing and
implementing strategy
• Vice President of Business Development
• Manage all business development initiatives
• Manage bid and proposal processes
• Manage inputs from other key executives in the
business development process
• Ensure that business development process
aligns with strategic goals
Army Directorate of Public Works Support Contractor of the Year
Classic mistakes made by contractors
• Marketing 8(a) status as their only competitive advantage
• Thinking that contracts are simply job shop rebadging
operations
• Failing to understand the customer’s objective on each
solicitation
• Failing to budget sufficient time and money for key
solicitations
• Spreading Business development budgets over a large
number of opportunities
Army Directorate of Public Works Support Contractor of the Year
Part 4
Budgeting
Army Directorate of Public Works Support Contractor of the Year
Challenges of budgeting in government
contracting
• Contract awards get delayed
• Protests delay contract starts
• Government shut downs
• Changing customer priorities
Army Directorate of Public Works Support Contractor of the Year
Budgeting must be done
• Most budgets are too optimistic on contract awards
• Most budgets are too optimistic on revenue
generation
• Most budgets underestimate business
development expense
• Most budgets underestimate start up costs on
contracts
• Most budgets underestimate legal expense
Army Directorate of Public Works Support Contractor of the Year
Zero based budgeting is safely approach
•
•
•
•
•
Start each year’s budget with a blank sheet of paper
Start by listing only the most critical expenses
Then add the fixed expense
Finally add variable expense
Budget revenue expectation and associated costs
separately and then combine them
• Avoid backing into numbers
Army Directorate of Public Works Support Contractor of the Year
Teaming and partnering
•
•
•
•
•
•
Approach teaming carefully
Invest the time to get to know your partner
Understand your partner’s mission and objectives
Investigate their prior experience teaming
Look for opportunities to creating long term agreements
Check SBA and other regulations in entering into
agreements
• State in your agreements how companies can exit
partnership
Army Directorate of Public Works Support Contractor of the Year
Conclusions
Army Directorate of Public Works Support Contractor of the Year
The landscape has changed for
government contractors
• The government will continue to spend money on
contractors
• Contractors will be under pressure to perform – on
budget and on schedule
• Firm Fixed Price contracts will continue to be the norm
• Low Cost Technically Acceptable evaluation criteria will
become the norm
• More risk will shift to contractors so price accordingly
Army Directorate of Public Works Support Contractor of the Year
Questions?
• Contact: Carlos Garcia
• email cgarcia@kira.com
Army Directorate of Public Works Support Contractor of the Year