Insight by ProPricer

How small businesses can price themselves right for DoD contracts

The Defense Department is awarding more and more contracts to small businesses and companies that usually don’t do business with the Pentagon.

In fact, the military is going out of its way to reach out to nontraditional businesses in order to amp up the amount of innovative technologies and ideas it can bring in.

Whether a company has been working with DoD for years, or is on its first contract, sending the right proposal with the right price to the Pentagon is crucial for an award.

Finding the right price to pitch to DoD can be a challenge though.

“What helps is having really good coordination between the estimating and pricing teams, a lot of times that they’re at odds with each other,” said Michael Weaver, director of operations at ProPricer, during the discussion “Bringing Small Business into the Defense World,” sponsored by ProPricer.

“A step above that, or beyond that, I think is it’s really important to understand how your rates work,” Weaver said. “A lot of times, especially in the small business world, we’ve had customers that have come in and said, ‘What should I use for an overhead rate?’ That’s not really something that anybody can tell you other than the people that you have working in your finance group. As you start hitting that threshold, where you have to start disclosing those numbers, and you get audited, you want to make sure that you’re not being kicked back, or that you’re not getting any challenges put against you because you can’t justify your overhead rate.”

The main thing a company needs in navigating the complex process of government contracting is an awareness of itself.

Weaver said businesses want to make sure there aren’t any hidden costs and to be upfront with government agencies. He said the best way to build a relationship and collaborative environment is to be honest and open with DoD.

Luckily, for small business, DoD has lowered some of the thresholds. Award vehicles like other transaction authorities (OTAs) and mid-tier acquisition make it easier for nontraditional companies to work with DoD without having to jump through the hoops of the Federal Acquisition Regulations (FAR) and the Defense Federal Acquisition Regulations.

“With OTAs proposals can be awarded in under a month, you’re lessening a lot of the bureaucracy that takes place during the proposal, award process, and even the audit,” Weaver said. “From the small business perspective, even if you’re going through those OTAs, where you don’t have to be FAR compliant, one of the ways we can really help is to create a standardized process.”

Weaver said companies should standardize processes to decrease formula errors, more making “fat finger” typos that will lead to future audits.

“Even with new acquisition methodologies like OTAs, the benefit of using a pricing software still makes a lot of sense, because you can hot swap pricers,” he said. “Then you don’t have to worry about what type of program they worked on before. All of the resources for your labor categories are predefined. Your rates are set up and reusable. You’ve got that one-to-many relationship that allows you to update your rates as they come in. We use them as many times as possible. It just makes it easier for companies to go in and knock proposals out faster.”

Innovation for Acquisition

A lot of times, especially in the small business world, we've had customers that have come in and said, ‘What should I use for an overhead rate?’ That's not really something that anybody can tell you other than the people that you have working in your finance group. As you start hitting that threshold, where you have to start disclosing those numbers, and you get audited, you want to make sure that you're not being kicked back, or that you're not getting any challenges put against you because you can't justify your overhead rate.

Pricing Strategies

Even with new acquisition methodologies like OTAs, the benefit of using a pricing software still makes a lot of sense, because you can hot swap pricers,” he said. “Then you don't have to worry about what type of program they worked on before. All of the resources for your labor categories are predefined. Your rates are set up and reusable. You've got that one-to-many relationship that allows you to update your rates as they come in. We use them as many times as possible. It just makes it easier for companies to go in and knock proposals out faster.

Listen to the full show:

Featured speakers

  • Michael Weaver

    Director of Operations, ProPricer

  • Scott Maucione

    Defense Reporter, Federal News Network

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