Rose Report: Issue 14

Cost Proposals: The Details Count

issue14-pic-story2When submitting a proposal to win government work, it is extremely important to understand the cost section requirements. This is where the contractor explains—sometimes in great detail—how much it will cost them to perform the work. Each cost proposal is unique, and preparing one takes an in-depth knowledge of your operations and estimating practices.

One key to creating a successful cost proposal is to thoroughly study the requirements laid out in the RFP—read the solicitation carefully. There is usually an opportunity for the contractor to submit questions if some point requires clarification—take advantage of this window with targeted and thoughtful questions. At the end of this phase, your goal is to have a very clear understanding of how you will approach the pricing.

The next step is to begin assembling the cost section of your proposal. The first component may include general information written out in narrative form. Areas such as your company accounting practices, pricing methodology and subcontractor evaluation techniques may be covered here.

With cost type contracts, the more labor-intensive portion usually takes the format of an Excel workbook. This is where you meticulously outline and support your costs, including listing any relevant assumptions. If you need to show how you built labor rates, make it easy for the evaluator to see how you got there. For example, if you plan to assign a senior analyst to this project, show how many labor hours this project will take and how much you’re paying the analyst. Then include a provision for benefits, such as health insurance, and other corporate costs, in accordance with your company practice.

It’s also key that numbers in your worksheet link to other worksheets where appropriate—this is important for the evaluator, but also ensures that any changes you make during the process flow through the proposal properly. Your cost section needs to be consistent with the other sections of your proposal, such as the technical or business management section. You’ll likely have different people with different areas of expertise working on each element—make sure they communicate often to avoid inconsistencies.

Of course, you need to look at what it will take to win the contract. You can’t charge higher than your costs, and you can’t charge lower than your costs—that’s why you have to substantiate your rates. You don’t want your estimate to be too high or too low, when the government is looking for “reasonableness” when choosing a contractor.

Finally, thoroughly review your final numbers and don’t overlook details. The contract may include seemingly minor formatting requirements such as margin widths. By accurately following all of the instructions, you’ll demonstrate your competence and credibility.