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PREPARING PREPARING COST COST
PROPOSALSPROPOSALS
Tangela Williams, CPATangela Williams, CPASr. Cost/Price AnalystSr. Cost/Price Analyst
Cost and Price Analysis BranchCost and Price Analysis Branch
Vital Elements of A Proposal;Vital Elements of A Proposal; Proposal Examples, includingProposal Examples, including
Overhead Rate CalculationsOverhead Rate Calculations General & Admin (G&A) Rate General & Admin (G&A) Rate
CalculationCalculation Unallowable Costs;Unallowable Costs;
Preparing For an Audit;Preparing For an Audit; Common Deficiencies Found in Common Deficiencies Found in
Proposals.Proposals.
TOPICSTOPICS
VITAL ELEMENTS OF A PROPOSAL
Summary of Total Cost by Element Cross-referenced to each line item
Breakdown of Labor (FAR 15.408, Table 15-2 II.B.) Hours Rates and Costs by Appropriate Category
Consolidated Priced Bill of Materials Types, Quantities, Cost FAR 15.408, Table 15-2 II.A.
VITAL ELEMENTS OF A PROPOSAL
BASIS OF ESTIMATE
How Indirect Rates are Computed
How Indirect Rates are Applied;
Cost Breakdowns, Trends and Budgetary Data (FAR 15.408, Table 15-2 II.C.);
Identification of All Other Costs by Category and Basis for Pricing (FAR 15.408, Table 15-2 II.D.);
Rationale for Proposed Profit (FAR 14.404-4).
PROPOSAL EXAMPLES
SAMPLE PROPOSALXYZ Technologies, Inc.
Washington, DCProposal Submitted in Response to RFP #IRS-Show-Me-The -Money
ELEMENT OF COST AMOUNT REFERENCE
Engineering Labor $400,000 Schedule 1
Production Labor 30,000 Schedule 1
Direct Labor [email protected]% 25,800 Schedule 2
Material 110,000 Schedule 3
Material Handling [email protected]% 55,000 Schedule 4
Subtotal 620,800
G&A @8.0% 49,664 Schedule 5
Estimated Cost 670,464
Profit @10.0% 67,046
Total Price $737,510
Engineering Labor Cost SCHEDULE 1
Labor Category Rate Hours TotalProgram Manager $40.00 1,000 $ 40,000Sr. Engineer 28.00 9,000 252,000Jr. Engineer 24.00 4,500 108,000
Total Eng Labor $400,000 =======
Production Labor Cost
Labor Category Rate Hours TotalFabrication $10.00 2,000 $ 20,000Assembly 8.00 1,250 10,000
Total Production Labor $ 30,000 ======
SAMPLE PROPOSALXYZ Technologies, Inc.
Washington, DCProposal Submitted in Response to RFP #IRS-Show-Me-The -Money
SAMPLE RFP COST PROPOSAL
MAINTENANCE
SUPPORT
CONTRACT
SEE HANDOUT
PROPOSAL - EXERCISEYou are the owner of Small Company USA and you have just submitted a proposal to the federal Government. The Government has set aside the task of surveying a plot of land for the construction of a complex Government Building. The site is environmentally sensitive. Your company does not have the expertise to deal with the suspected pollutants believed to be under the site. Therefore, you have decided to subcontract certain aspects of the environmental site work to the only firm in the county that has the current technology to perform the necessary testing. This is your first proposal that you have prepared for the IRS. Even though the proposal is small, the C.O. has requested that DCAA perform a pre-award accounting survey and a review of your proposal.
What do you need to check out before the auditor arrives?
What can you anticipate that DCAA will be requesting?
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Proposed Reference
Technical Labor $ 75,000 Schedule 1
Labor Overhead 39,937 Schedule 2
Subtotal $114,937
Subcontract Service 72,000 Schedule 3
Travel 3,000 Schedule 4
Total Cost Input $189,937
G&A 54,004 Schedule 2
Total Cost $243,941
Profit 24,394
Total Price $ 268,335
=======
PROPOSAL EXERCISESmall Company, Inc.
Direct Labor Need Support for the $75,000 bid in this
proposal. Small Co. Inc. is bidding 2,500 hours at $30/hr.
Need to provide the basis for the 2,500 hours and the $30 per hours.
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Schedule 1
Hours Rate Amount
Technical Labor (Note 1) 2,500 $30.00 $75,000
NOTE 1: Hours are based on Contract XYZ which was performed in FY 200X and was similar to this effort. The hourly rate is based on the current average rate paid to Technical support staff. Payroll records are available upon request.
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Schedule 2
FY 2009 Budget DirectTotal Cost Overhead G&A Unallowable
Admin Labor $20,000 5,000 15,000Depreciation 2,000 2,000Fringe Benefits 5,000 4,000 1,000Interest 8,000 8,000Office Supplies 5,000 5,000Tech Labor 150,000 150,000Rent 10,000 10,000Travel 5,000 3,000 2,000Telephone 1,000 1,000Payroll Taxes 6,000 6,000Subcontracts 72,000 72,000 Miscellaneous 60,000 45,000 14,000 1,000 Total $344,000 225,000 80,000 30,000 9,000
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Overhead Rate Calculation: Schedule 2
Overhead Pool = $80,000 == 53.33%
Direct Labor $150,000
G&A Rate Calculation:G&A Pool = $30,000
== 9.84%
Total Cost Input $305,000
UNALLOWABLE COSTS Determining Allowability (FAR 31.201-2); Reasonableness; Allocability; CAS (not applicable to small businesses),
GAAP and practices appropriate to the particular circumstances;
Terms of the Contract.
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Subcontracted Services:
What is the basis for the $72,000 estimate? If it is “sole source” (which we put into the
scenario), then Small Co. is responsible for analyzing for reasonableness.
If competitive, then supply the quotes from the various bidders and explain why this one was selected.
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
Travel Cost What is the basis and purpose of the $3,000
estimated travel? Proposal indicates this will be a direct cost
(How do you know it is direct and not indirect?) Does the solicitation require a trip? What is the basis of the pricing?
PROPOSAL EXERCISESmall Company, Inc.
Proposal for Technical Support Services
TRAVEL Schedule 4
Cost Element #of Trips #of days Cost Total NOTESAirfare 3 n/a $429 $1,287 1Car Rental 1 2 55 105 2Lodging 3 3 120 360 3Incidentals 3 3 40 120 4Mileage 3 n/a 35 35 5Per Diem 3 3 40 120 5
$3,000 =====
NOTES: 1. Airfare estimated based on coach airfare from Denver to Baltimore April, 2009. Telephone quotes available upon request.
Notes 2, 3, 4, 5 – Provide a basis consistent with your company’s policies and procedures (policy should be in accordance with Federal Travel Regulations).
PREPARING FOR AN AUDIT Personnel Familiar Readily Available An Adequate Accounting System Detailed Schedules Used Available Data Related to the Proposed Costs (Supporting
Documentation) Readily Available Provide the Proposal and Supporting Data in
Electronic Format Financial Statements of the Company
Lack of Supporting Data; No Basis of Estimate; Does Not Comply With RFP Instructions; Schedules Don’t Tie Into Summary Amounts; No Grand Total Summary; and Math Errors.
COMMON DEFICIENCIES
FAR PART 15 – Contracting By Negotiation FAR PART 31 – Contract Cost Principles OMB Circular A-122 – Cost Principles for
Non-Profit Organizations Contract Pricing Guides
DCAA – www.dcaa.mil FAI – http://www.acq.osd.mil/dpap/contractpricing/index.htm
REFERENCES
QUESTIONS AND ANSWERS