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Jennifer Schaus & Associates GOV CON WEBINAR SERIES - 2017


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

www.JenniferSchaus.com

Join Us for A Series of Complimentary Webinars on various US Federal Government Contracting Topics. Presenters are industry experts sharing knowledge about the competitive government contracting sector. Find all of our Govt Contracting webinars (free download) at www.JenniferSchaus.com

Contact Us @ 2 0 2 – 3 6 5 – 0 5 9 8


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

www.JenniferSchaus.com

ABOUT JENNIFER SCHAUS & ASSOCIATES: -

Based in downtown Washington, DC; A la carte services for Federal Contractors;

- Proposal Writing to GSA Schedules and Contract Administration, etc.; Deep bench of industry experts; -

Educational webinars;

Networking events and seminars;

WEBSITE: http://www.JenniferSchaus.com


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

www.JenniferSchaus.com

ABOUT JENNIFER SCHAUS: -

Over 20 years in federal contracting; -

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Began career with D&B; Industry speaker and author;

Board Member: GovLish; NCMA; and NMIA.

Volunteer Mentor &/or Instructor: VA PTAP; CBP / VBOC; Capitol Post; 1776; Eastern Foundry, WIT; WDCEP and the Towson University Incubator.


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

ABOUT OUR SPEAKER Meg McKeon

www.JenniferSchaus.com


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

www.JenniferSchaus.com

ABOUT Meg McKeon: Education: Master’s in Accountancy 10 Years in Govt Contracting: Position/Title: DCAA Auditor, Analyst, Consultant Phone: 505-980-4636 Email: meg@proacctllc.com

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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ABOUT ProAcct LLC: - Government Cost Accounting Experts - DCAA Compliance - Cost Proposals and DCAA Submissions - WEBSITE: http://www.proacctllc.com


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

Compliant Cost Proposals Tuesday, August 29th, 2017

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Purpose of the Presentation

 The purpose of this presentation is to provide a template for a cost proposal reflecting a common format used to present cost data  The format is also considered compliant for the following situations    

Truth in Negotiations Act (TINA) Compliant Proposals >$750,000 Certified Cost and/or Pricing Data that follows FAR 15-408 Table 15-2 instructions Cost Plus Fixed Fee (CPFF) Proposals Subcontract Proposals which follow a familiar structure that Primes are used to seeing  Overall a template that says…’Yeah I know what I’m doing’  Most importantly…if you use this template or one similar to them, then most likely you will be capturing most of the cost that are needed and you wont cheat yourself out of what you need or underestimate your costs.

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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The Cost Proposal - Adequacy Checklist  The Adequacy Checklist is included in the Cost Proposal Template, and Cost Proposal Template #1  The adequacy checklist is used by DCAA to review all cost proposals  DCAA is now asking the Buying Commands to confirm cost proposals are adequate for an audit …so the Buying Commands may be doing reviews too  Therefore many buying commands and Prime contractors are requesting that contractors confirm the proposal is adequate before submission to the Prime or Government  And yes…..this is a bunch of work  Lets go over the adequacy checklist briefly  Remember it reflects all the instructions in FAR 15-408 Table 15-2  It reflects what is necessary to have a TINA compliant proposal

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

Cost Proposal Templates  Elements of the cost proposal template:     

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Microsoft Excel Worksheet

Cover Letter Cover Page (Logistical information about the contract, company, RFP, etc.) Table of Contents (otherwise known as an index Summary Page (Shows over all costs of the proposal) Direct Costs:     

Labor Material (Bill of Materials) Subcontract Costs Other Direct Costs (ODC’s) Travel (often considered an ODC)

 Indirect Pools and Rates

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

Cost Data Cost by Cost Element Summary

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Elements of a Cost by Cost Element Summary  Cost Element Summaries show a total for each cost element  The summary includes the total amount for each direct cost and the rate for each indirect pool.  The direct costs is multiplied by the associated indirect rate for the indirect costs  Labor is often the first cost element shown on a summary sometimes starting with labor hours  Then material costs, which can include subcontract costs, other direct costs (ODC’s), such as travel  After total costs are shown, the fee is applied. Total costs plus fee is the total proposed costs.

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Cost Element By Year  The yearly summary still shows all the cost elements  The totals are summarized by year  There are several ways to show costs  The first examples shows costs by year with labor hours and costs multiplied by labor overhead  The material costs are shown by year then multiplied by material overhead  ODC costs are shown later, then all costs are multiplied by G&A for the G&A rate  Total costs are shown and multiplied by fee to get total proposal amount

 The second example showed the same costs as the total summary but by year

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

Cost by Cost Element by Year

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Costs By Part Number  Costs are sometimes shown by Part number especially for manufacturing proposals  Subcontracts are done by part number since material costs are where most subcontracts are found  Subcontracts are often the largest material costs.  Since anything over $750,000 is considered a subcontracts, the costliest parts are subcontracts  Subcontracts then have so show all costs in a compliant cost proposal under TINA guidance. We’ll get to that later.  Sometimes primes will request costs per part number in order to track costs by part in the Material Resource Planning (MRP) system  Whether costs are shown by part in one schedule, it still should be shown by total cost elements and by each individual cost Your Logo Here


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Costs by Part Number - Example

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Proposing Direct Labor Costs  The two most common and largest types of Direct Labor are Engineering Labor and Manufacturing Labor.  Engineering Labor involves a variety of activities associated with product research, product design, and the development of manufacturing methods and procedures.  Engineering activity is often charged as a direct labor cost. However, the efforts of supervisors and many engineering support personnel may be charged as indirect costs.  Assure that the supplier is consistent in charging these costs as direct or indirect to ensure no duplication of costs. You may need to review various pools.  There may be several engineering types of labor such as mechanical, electrical, design, industrial, etc.  Manufacturing Labor is the effort required to actually produce an item. Most manufacturing labor cost is a "hands-on" direct cost.  Manufacturing labor includes all production labor associated with producing the part and usually includes the employees that actually touch the product. This labor is also known as ‘ad value’ or ‘touch labor’.  Some types of manufacturing direct cost (e.g., inspection), may be allocated to each job as an indirect cost.  Depending on the circumstances and supplier accounting procedures, supervision may be a direct or an indirect cost.  As with engineering labor, assure that the supplier is consistent in charging these costs as direct or indirect under similar circumstances.

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Examples of Labor Costs Proposed

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Labor Costs: Labor Rates  Labor costs are shown by labor category. Each category shows labor hours, and labor rate. Hours times rate equals labor costs.  Labor hourly rates are found in the payroll records. Labor is recorded in payroll records by either salary or wages.  Salary is an annual amount and treated very differently than hourly wages by the Department of Labor.  To find the hourly rate of a salaried employee, the salary is divided by 2080 hours, the maximum hours that can be worked in a year.  Wages are recorded as hourly labor rates.  If the hourly rate is the same for certain labor categories they can be grouped together.  Rates are often averaged for a labor category of labor group, such as manufacturing  Labor categories are often grouped into Engineering labor and Manufacturing labor for production proposals. For service organizations labor is shown by each category or by categories with different rates Your Logo Here


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Example of Labor Rate Calculations

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Labor Costs: Labor Hours  Proposing, budgeting and estimating labor hours is the real art of a Government proposal.  Direct labor hour estimates can usually be grouped according to one of two methods:  Estimates developed primarily from historical direct labor costs, and  Estimates developed from the application of technical data  Proposing labor hours based on history, Government prefers this method because it can be verified  Determining basis of estimate (BOE) for proposed labor hours. How was the BOE developed?  Round Table Discussion at Supplier?  Comparison with Similar Part Number(s)?  Based on prior history of This Part Number?  Or even Time Studies?  What does the BOE provide, by part number (historical hours are often used in manufacturing)?  Detailed Hours by Operation? or  Total Hours by Machine/Work Center? or  Total Hours by Job? or  Set-Up Hours? Run Hours? Other Direct Labor Hours (e.g., Engineering)? or  Just Total Labor Hours or Cost?  No Hours, just prior Job Labor Costs

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Labor Costs: Labor Hours Continued  Provide an explanation of the suppliers labor cost collection system. Does the system capture labor hours:       

by Operation (e.g., Set-up, Run time, Assembly, Inspection) by Work Group (e.g., Machining, Assembly, Inspection) Is there any job costing system used for manufacturing? Are any direct labor hours captured in timesheets? Are Engineering hours shown as direct or indirect time Does the company issue unique charge codes for each job or contract they have Request historical records to verify labor hours performed

 Detail when the last ‘jobs’ were done as well as     

How many times the supplier has produced that part Provide records that can easily be identified as the output from a job cost system. Make sure the data is current Describe how the supplier calculated the proposed hours based on the historical hours Provide worksheets which show how labor costs are calculated and shows the difference between the proposed and historical labor hours?  Provide a description of why labor hours differed from the historical hours  State whether company is producing a larger quantity of parts

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Labor Costs: Labor Hours Continued  If proposal is not based on historical data, reasonable technical data should be used as a basis of estimate. The data can be gathered by:  Round Table Discussion at Supplier?  Industrial Engineer analysis?  Top Engineers at Supplier based on expertise of production or service?  Determine what type of technical data should used to determine the labor hours  Provide a written description of the technical data for the proposal  Technical data used to support labor hours often ties the cost proposal to the technical proposal  The description should address particular aspect of the scope of work  The description needs to include the qualifications of the Engineer or subject matter specialist writing the report including previous experience with this product or service  The describe what the Engineer did to determine the hours needed, such as reviewed drawings, read inspection and/ or qualifications specifications to confirm technical requirements, experience in ‘similar to’ efforts. The better the technical expert identifies the efforts done to determine the hours needed, the more credibility the report will have  The conclusion of the report should clarify the hours needed for each activity to be performed, either based on the statement of work or work breakdown system, or a clearly written narrative of how the work will be approached  Only another technical specialists can determine the validity of technical data provided by a subject matter expert  Coordinate communications between the Government or Primes technical specialists and the suppliers technical specialists.  Sometimes the review will be done by the Government or Prime only by reading the technical data in the proposal.

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Material Costs (Bill of Materials)  Material Cost (FAR 31.205-26) is the cost of materials used to complete a Part Number (or contract), including more than just the cost of the materials that actually become part of the product. Material Costs typically include:  (1) Raw materials, parts, subassemblies, components, and manufacturing supplies, whether purchased or manufactured by the contractor, that actually become part of the product;  (2) Collateral costs, such as freight and insurance; and  (3) ‘Related’ Material that cannot be used for its intended purpose (e.g., overruns, scrap, and defective parts). In computing material costs, the contractor shall consider reasonable overruns, spoilage, or defective work (unless otherwise provided in any contract provision relating to inspecting and correcting defective work).  (4) Also included is Outside Processing, and Finishing, tooling etc. Your Logo Here


Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

Example: Simple Bill of Material

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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More Material Cost Considerations  Your ability to create an adequate Bill of Materials is dependent upon the ability to provide supporting data that supports the current proposal, such as:          

Current vendor quotations Current Invoices Current Purchase Orders Current Sub-tier Supplier Quotes Current order placement prices Current and Historical Inventory Prices Historical Quotes and Purchase Orders Previous purchase order prices adjusted for quantity differences, standard costs All source documentation should be within the last year to be considered current.

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Jennifer Schaus & Associates – GOV CON WEBINAR SERIES - 2017 - WASHINGTON DC

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Other Direct Costs (ODC’s)  There are several types of costs that can be charged directly to a contract  This can include any costs requested in the request for proposal (RFP) or any costs determined as necessary to complete the statement of work stated in the RFP.  Common costs considered as ODC’s are as follows:  Subcontractors-Most often subcontractor are material vendors and proposed as part of material costs. However there may be subcontractors that will provide professional services that can be considered subcontractors. This may include labor costs proposed by companies offering unique services.  Travel- Agreements may be made for contractors to attend meetings or events at the Government or Prime contractors locations. This may also include testing of products developed or quality reviews. Travel costs are direct when necessary to complete the contract.  Conferences-Any attendance at conferences identified in a contract would be considered direct  Outside services-Any services that can not be completed by the prime or subcontractors can be proposed as direct services  Freight or other costs decided upon by the company Your Logo Here


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Indirect Cost Support for Indirect Rates  Indirect costs are all the administrative costs incurred for and by the business.  The best thing about the government is they pay a portion of those indirect costs.  That is done by creating a relationship with the direct costs incurred by the company in the form of a ratio or rate  The relationship is referred to as the causal/beneficial relationship between the pool and the base  For example: Overhead costs such as maintenance and repairs, vacation, sick leave, health benefits, depreciation on equipment are all either caused by the need for expense by the people working on direct contracts, or the benefits they are receiving for working at the company  Therefore Overhead expenses/Direct labor equals the overhead rate  The next slide shows examples of the compositions of overhead ‘pools’ and how the costs are divided by the base to come up with an overhead rate

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Examples of Overhead Pools Included in Cost Proposals

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Examples of G&A Pool Exhibits

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Jennifer Schaus & Associates

GOV CON WEBINAR SERIES - 2017

QUESTIONS? CONTACT OUR SPEAKER MEG MCKEON AT 505-980-4636 AND AT MEG@PROACCTLLC.COM

THANK YOU FOR ATTENDING!!

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FED GOV CON - Compliant cost proposals  

Please join Jennifer Schaus & Associates every Wednesday in 2018 for a complimentary Wednesday series. For full audio of this presentation p...

FED GOV CON - Compliant cost proposals  

Please join Jennifer Schaus & Associates every Wednesday in 2018 for a complimentary Wednesday series. For full audio of this presentation p...

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