Types Of Fixed Price Contracts
The beauty of the fixed price contract is that there are no special subtypes or nuances to hassle with. However, if a contractor is working for the U.S. government on a federal project, the rules are different.
Under the Federal Acquisition Regulation , the government may choose from a few special types of fixed price contracts, all of which are designed to let the government control costs, maximize taxpayer dollars, and put more of the risk on the vendors side. These special types of fixed price contracts include:
- Fixed-ceiling-price contracts with price redetermination
- Fixed-price contracts with economic price adjustment
- Fixed-price incentive contracts
Bid On Military Contracts
Look for federal government contracting opportunities at SAM.gov. Federal agencies publish RFQ and RFI there, as well as on other federal acquisition platforms, and that is where contractors can place manufacturing contract bids. The procurement officer will then review bids and select the one that matches the contract best, and offers the lowest prices. Winning a military bid depends on many factors, and one of the most important of them is making a reasonable offer with well-explained costs. Experience and good financial reports are vital, as well.
You should also take into account the various categories of federal contracts. There are micropurchase contracts where an agency directly purchases the product from a vendor. Then, there is the Simplified Acquisition Procedure that allows agencies to speed up procurement. The SAP has a limit of $250,000. The third option is a formal contract that exceeds the limit of the Simplified Acquisition Threshold.
Government Contracts: 10 Questions You Need To Know
Government contracting is an industry where businesses and contractors are left wondering where to start due to its broad procedures and need to know information. That said, we came up with the idea of enlisting down the frequently asked questions and the basic knowledge you need to know about the government contracting industry.
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Government Contract Pricing And Bid Evaluations
Note that in fixed-price government contracts, the general rule is that when bidders submit a low bid, they should bare the risk of loss. So long as there is no obvious risk to the government, your chances of winning are high.
However, government contract pricing involves both price reasonableness and price realism. These are two areas that government contractors should be aware of. See the difference between the two pricing concepts. They both set the tone for whether your pricing proposal gets the final pile for consideration.
Lowest price technically acceptable bidding: Government contract pricing for these types of bids pay very little attention to low price proposals. However, the key is to make sure that your technical proposal is acceptable. If it is not, then the source selection board will not get to the second step- your low price.
Negotiated government contracts: When the government RFP evaluation is based on stated weighted factors in the solicitation, government contract pricing is taken more seriously by the agency. However, even in negotiated procurements, and despite lower-scored technical proposals, agencies still can go to a lower-priced bidder. The key is to read the RFP evaluation criteria.
Government contract pricing when bidding on federal contracts is all about stating your bottom line price. If you are unsuccessful in winning the award, then this can be a lot better than finding your company experiencing performance problems.
Finding Government Contracts For Bid
There are a few different avenues for seeking out government contracts, including:
SAM.gov, which stands for System for Award Management, is a government-wide database for vendors seeking out government contracts. This will be your go-to avenue for finding prime contracts to bid on, in which your business works directly with government agencies. Learn more about SAM registration here.
One way you can get your foot in the door with government agencies is through subcontracting. As mentioned above, vendors who get contracts directly with agencies are known as prime contractors. Subcontractors, on the other hand, are brought on by the prime contractors to help complete a portion of the work designated by the prime contractor.
You can find available subcontracting opportunities via the SBAs searchable database, SUB-Net. If this is your first time working for a government agency and youre not familiar with the proposal process, this is a great place to get started.
If youre unsure about which government agencies your small business is best suited for, working with a bid-matching service can help you navigate contracting opportunities. Check out your local Procurement Technical Assistance Center to see if they offer free bid-matching services . This is especially useful for first-time contractors, as PTAC can connect you with experienced government contracting mentors who can support you through the proposal process.
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How Does The Contract System Work
GeneralServices Administration is responsible for supplying federal agencieswith goods and services they need. The range of such goods and service is notall-encompassing, but still is wide enough to cover the majority of spheres andindustries. Basically, the government needs almost everything.
The vehicleto purchase goods and services for the federal agencies needs is calledSchedules. A schedule award opens up contracting opportunities for a business.Bidding for such opportunities and winning the bid effectively signs thecontract between that business and the government.
And learning how to bid is a significant part of your success in doing business with the largest customer in the world.
Solicitation Provisions And Contract Clauses
Changes or Additions to Make-or-Buy Program. The contracting officershall insert the clause at 52.215-9, Changes or Additions to Make-or-Buy Program, in solicitations and contracts when it is contemplated that a make-or-buy program will be incorporated in the contract. If a less economical “make” or “buy” categorization is selected for one or more items of significant value, the contracting officershall use the clause with-
Its Alternate I, if a fixed-price incentive contract is contemplated or
Its Alternate II, if a cost-plus-incentive-fee contract is contemplated.
Price Reduction for Defective Certified Cost or Pricing Data. The contracting officershall, when contracting by negotiation, insert the clause at 52.215-10, Price Reduction for Defective Certified Cost or Pricing Data, in solicitations and contracts when it is contemplated that certified cost or pricing data will be required from the contractor or any subcontractor .
Price Reduction for Defective Certified Cost or Pricing Data-Modifications. The contracting officershall, when contracting by negotiation, insert the clause at 52.215-11, Price Reduction for Defective Certified Cost or Pricing DataModifications, in solicitations and contracts when it is contemplated that certified cost or pricing data will be required from the contractor or any subcontractor for the pricing of contract modifications, and the clause prescribed in paragraph of this section has not been included.
Integrity of Unit Prices.
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% Of Contract Dollars Set Aside For Small Businesses
Yes, this was mentioned earlier, but we cant understate how significant this is. Thats 23% of $500 billion that the U.S. government spends annually on federal contracts. And recognizing that agencies have to meet this 23% target can give you a major leg up. Through the Federal Procurement Data System, you can see which government agencies arent yet meeting that target, giving you a much stronger chance of procuring a contract when you bid.
There really isnt a good reason not to go after government contracts.
Read The Solicitation Thoroughly
Asolicitation package may contain a number of documents, specifications,attachments and requirements: technical conditions, delivery volume and terms,required certifications, what documents you need to submit, and so on. Withhundreds of government contracts out for bid, you should still remember thatevery opportunity is different, and carefully read all the attached documents.Missing a bid opportunity is bad, but much worse is to bid on the contract youhave no way to complete.
If you have questions ask! Typically, a contracting officer is willing to clarify details about the solicitation, so dont rely on wild guesses when bidding. Make sure you understand every single point of the solicitation you bid on. Also, you may need to read the corresponding FARs that govern the solicitation you are to respond to make sure you know the regulations and requirements.
When thefederal government has contracts for bid, it awaits fair and reasonable pricingbased on the MFC principle. Apparently, you cannot winif you bid too high, but bidding below the ground level is also wrong.Remember: you will need to prove your prices later on by providing actual PriceProposal and Price Narrative documents.
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Holly Hagan Reveals She’s Pregnant With First Child With Footballer Husband
Our pictures show Sarah a world away from her days as a nurse as she soaked up the sun.
A jet ski had just returned her to shore from a yacht, where she had spent time with family and friends.
But we cannot show you their £30million mega-villa and £1million superyacht on the paradise isle.
The couple have said they are not Covid profiteers, insisting it was just good business.
She said she received a tip off that a deadly virus was spreading from China at the end of 2019 and was seeking PPE before it was known about in the UK.
Sarah said: We knew the items that would be required and commissioned them for immediate production, ensuring we were first in line for delivery.
This ensured access to the significant supplies that would be needed in the UK and around the world with the shortest possible delivery times.
“We were thus able to deliver in as timely a way as possible and this undoubtedly saved lives.
By doing what our company is there to do, we were able to supply the NHS and other key services with high-quality and reliable PPE at the time of greatest need.
Strictly Follow The Instructions Stated In The Rfp
Being a detail-oriented leader is an asset if you want to make it in the federal contracting industry because federal agencies are heavily scrutinizing each contract proposal whether it followed the specified instructions at Section L or not. If your contract bid fails to follow the direction of the government agency, the government agency might eliminate your proposal due to technicalities.
So before you start writing down your contract bid, take note of all the instructions indicated in the Section L of the RFP to guide you through the process.
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Glossary Of Government Contracting Terms
Here are some common acronyms and terms used at USDA. While not complete or comprehensive, we will be adding more items periodically.
BLS: Bureau of Labor StatisticsBOP: Basic Contract Option PeriodBPA: Blanket Purchase Agreement
CFR: Code of Federal RegulationsCLIN: Contract Line Item NumberCONUS: Contiguous United States
DFARS: Defense Federal Acquisition Regulation SupplementDHNDAA: Duncan Hunter National Defense Authorization ActDICAP: Department of Defense Information Assurance Certification and Accreditation ProcessDoD: Department of DefenseDPA: Delegation of Procurement AuthorityDSSR: Department of State Standardized Regulation
FIPS: PUB Federal Information Processing Standards PublicationFISMA: Federal Information Security Management ActFP: Fixed Price
IDIQ: Indefinite Delivery, Indefinite QuantityIEEE: Institute of Electrical and Electronics EngineersIG: Inspector General
NAICS: North American Industrial Classification SystemNDAA: National Defense Authorization ActNICAP: National Information Assurance Certifications and Accreditation Process
SAM: System for Award ManagementSAP: Special Access Programs
How Do I Find Awarded Government Contracts
Again, the United States Government gives importance to transparency. Aside from the websites mentioned above, you can review the governments spending history details prepared by the government accountability office posted at USASpending.gov. On the other hand, you can use the GSAs Forecast of Contracting Opportunities to see the trend in the federal marketplace.
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Determine Your True Costs To Best Price Out A Project
Why do small businesses tend to get their cost information wrong? Simply because many, if not most, small businesses don’t really know what their overhead costs are.
Often, when pricing out a project, businesses will simply take their prime costs and mark that figure up by some arbitrary percentage that they believe is sufficient to cover all indirect costs and give them some profit. Or they will use a single, company-wide rate applied on only one type of base, such as direct labor hours or engineering hours, for assigning indirect costs to the product or service provided. In either case, if this estimated percentage is higher than what their overhead really is, it affects their ability to be competitive. If their estimate is lower than what their costs really are, it affects their ability to be profitable.
If your business falls into one of these categories, we strongly recommend that, before you bid on a contract , you take the time and the steps necessary to determine your actual costs.
You might consider using some form of activity-based costing to accomplish this. ABC, in its simplest terms, is a cost management method that allows a business to determine the actual cost associated with each product and service. With this method, you look at every item and activity in your business associated with putting out your product or service and then attach a cost to it. In other words, you break your costs down to their least common denominator so you know what they really are.
Is Government Contracting Easy
It is most definitely not. The government contracting industry is riddled with complicated processes that deter many from venturing into it. However, given the circumstances, there are certain exceptions and considerations given to federal contracting firms, especially to disadvantaged small businesses. So although government contracting is certainly not easy, there are policies and programs to ensure that everyone has a fighting chance of winning a government contract.
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Does my small business have a chance to sell to the Govt?
U.S.Government is the largest buyer in the world. Although it has specifics,landing a contract with the government is desirable by thousands of small businesses.Yet, most of them will never be able to work for federal agencies. Why?
Not becauseof government, mind you. In fact, the government encourages small businesses toapply for contracts. Moreover, federal agencies are obliged to award a certainamount of contracts to small businesses. This is done for multiple reasons:
- Small businesses are the driving force of economy
- Small businesses provide a large fraction of jobs nationwide
- The government wants to make sure small businesses are not trampled by corporations
- Small businesses often bring up innovations
- Small businesses, being small, react to market fluctuations faster providing up-to-date and contemporary solutions to the government
That beingsaid, still 90% of small businesses wont have a chance to successfully bid ongovernment contracts. Some of them because they cannot offer competitiveprices. Others because they are not qualified enough for such contracts. Alarge portion of firms will talk about finding government opportunities to bid,but will never go further than that. And dont forget the majority of companyowners who dont know how to sell to the government, but are not willing tolearn either.
What Is The Difference Between Contract Types
Firm Fixed Price contracts: This contract type should be used when requirements are known and can be precisely described. We also know exactly when we want it and where we want it. Cost of performance can be reasonably predicted. We know what it ought to cost and the risk is relatively low, making a fixed-price appropriate.
Time and Materials contracts: This contracting type is used when requirements are poorly described and we dont know exactly what we want or exactly when or where we want it. It is typically services the cost of performance can be predicted with a reasonable degree of certainty with respect to the cost per hour. However, when its going to be performed, where its going to be performed, and which categories of labor might be used are less understood. With the unknowns, the use of individual delivery orders is appropriate. Often T& Ms are Indefinite Delivery Indefinite Quantity contracts . The basic contracts an empty template and the delivery orders carry the money specifications and other details.
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Do Your Market Research
For all acquisitions, COs should conduct market research to get a sense of what prices they should expect to pay, including what, if any, discounts may be appropriate. Understanding the marketplace by examining prices paid data, current commercial pricing practices, and other industry trends can help COs identify when more discounts may be warranted. The Acquisition Gateway is one potential source for this information.
How Do I Get Local Government Contracts
USA.gov provides information on the vital steps of being part of the federal marketplace. As stated on the website, here is what you need to know to offer your products or services to the local administration successfully:
- Contact your local state procurement department office to access the valuable development resources and strategies needed for your growth in the industry.
- Figure out the policies and processes of your local state.
- Look for contracting opportunities available in your city and country.
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How Does The Government Ensure Fair And Reasonable Prices When Acquiring A Process Such As Agile Software Development
The Government may determine whether prices are fair and reasonable in a contract utilizing an Agile software development methodology by requesting and evaluating pricing of the effort as a unit of measure that is equivalent to the proposed sprint/release cycle and demonstrating the correlation between the proposed technical solution in the PWS and the pricing.
COs must obtain the type and quantity of data necessary to establish a fair and reasonable price. Generally speaking, competition drives reasonable prices. The Government ensures fair and reasonable prices by looking at the prices per sprint cycle, the team size, and if applicable, the labor category rates used to build the team â whether they are in line with other rates in this industry. Expected âthrough-putâ and determination of specific services all factor into the offerorâs price for an IT contract utilizing Agile processes. The Government can compare the proposed prices received in response to the solicitation to the historical prices paid by the Government or private sector for the same or similar Agile process, or compare proposed prices with prices obtained through market research. See Appendix C: Sample Language for Government Contracts for Agile Software Development Services.