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huwen119

Sub requests Prime's final price proposal info

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I am working on a TA with a sub (we are exclusive). We have an NDA executed and this is a FFP task order contract. Due to propriety info contained in the price proposal and competitiveness of the program, I rejected their request to obtain Prime's (us) price proposal info (the final number we submit to the Govt) in the TA. During the negotiation, I provided a link to the sub so that they can check contract value after the award. However, it seems this is a deal breaker and they insisted having access to this info, with that said, any alternative approach or language that I can use in the TA to bring them on the team (they are crucial for this win)? 

Thank you! 

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Please provide some clarification, thanks.

You are negotiating with a key prospective subcontractor and want some ideas on how to successfully close the deal to get through or around a sticking point.

What is a TA?

NDA = non-disclosure agreement? Between which parties?

Who are you "exclusive" with?  Is "we" you and this specific sub?

What "final number" or other specific price proposal "info" is the sub insisting upon having access to?  Details or overall bottom line?  Why are they insisting upon having access to this information?  Hard to propose alternative approaches or "language" (??) without understanding the sub's purpose or reasons for wanting to know the (?) information.

Respondents here often go off numerous different rabbit trails when the initial post is unclear.  That is a waste of everyone's time.  If a proposed sub is insisting upon something that is not acceptable and you are seeking alternate approaches or "language" to include them, it is necessary or helpful to understand exactly what they say they need and their motivation or underlying needs. Also may be helpful to know what, if anything,  the "NDA" has to do with the situation. Thanks.

 

 

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I presume that TA is an abbreviation for teaming agreement. The sub probably wants to see what the prime included for the subcontract in its proposal to the Government. Probably wants to see if the prime's proposal is consistent with the b.s. the prime's been feeding them. :lol: I'd want to see that, too, if I were the sub's negotiator. I have no ideas for alternatives.

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Ok, that makes it clearer. I would agree with Vern.  Simply looking at the bottom line price proposed to the government wouldn't satisfy the sub's needs.  

If you aren't willing to truthfully reveal to the sub how much will be included in the proposal, due to subcontractor negotiation reasons or leverage for further negotiations with the firm after award, then you probably won't be successful in negotiating a teaming agreement with that firm.  

If you are willing to divulge how much is included for the subcontract, then there may be ways to do that without having to show the sub the entire proposal. 

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Joel and Vern - thanks for reviewing this post. Below is the additional information, hope it clarifies my question.

"What is a TA? (Teaming Agreement between Prime and Sub)

NDA = non-disclosure agreement? Between which parties? (yes, NDA is between Prime and Sub)

Who are you "exclusive" with?  Is "we" you and this specific sub? (yes, Sub is willing to enter into an exclusive TA with Prime (my firm) and not team with other companies for this effort.)

What "final number" or other specific price proposal "info" is the sub insisting upon having access to?  Details or overall bottom line? (the overall total price that we propose to the Govt and with each year broken out); Why are they insisting upon having access to this information? (workshare is based on % of revenue for each party. I think this is why they insist on getting this info and teaming with my firm)"

I think if this becomes a showstopper for entering into a TA, we (Prime) have to make a business decision on whether we need this sub or not.  Your suggestions are much appreciated! 

Thank you. 

 

 

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Basing workshare on revenue instead of hours was a big mistake. Just my point of view.

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3 hours ago, here_2_help said:

Basing workshare on revenue instead of hours was a big mistake. Just my point of view.

Agreed, not sure what capture team negotiated with sub but this was not a well positioned effort to go after.

A general comment, we want to be a good prime who honor workshare to subs who help us win, but I always find hard to finanlize in writing especially when capture team has made some promises to subs...

thanks here 2 help.

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I don't know it may too early in the morning (ps - I do not drink coffee) but in reading in this thread I came to the quick conclusion that you do not want a "team" you want a "sub" agreement.   No intent to get into a big discussion about the differences, definitions, etc. but for me in the practical view "team" is some how absent from the intent of what you want in this particular arrangement.

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On ‎7‎/‎23‎/‎2017 at 7:48 PM, huwen119 said:

Agreed, not sure what capture team negotiated with sub but this was not a well positioned effort to go after.

A general comment, we want to be a good prime who honor workshare to subs who help us win, but I always find hard to finanlize in writing especially when capture team has made some promises to subs...

thanks here 2 help.

If their workshare is based on a percentage of revenue (agreed with above that this was a bad idea), then they’ll figure out what the contract value is once they get their subcontract. And if you still won’t tell them your contract value, then they’ll assume you’re lying to them. I realize proposal values are not necessarily the same as final contract value, but if you’re going to need to ultimately disclose the contract value then hiding the proposal value won’t accomplish much.

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On 7/22/2017 at 3:52 PM, huwen119 said:

they are crucial for this win

Then why withhold basic information such as the sub's share of the pie?   They can look it up on FPDS after award anyway.  I agree with C. Culham: your company is not really looking for a 'teaming' agreement.

 

On 7/23/2017 at 5:23 PM, here_2_help said:

Basing workshare on revenue instead of hours was a big mistake.

Theoretical Physicist hours? Mail Room Clerk hours?  How would that work with multiple LCATs? ....and even then, relevant clauses such as Limitations on Subcontracting are measured in dollars, i.e., 'revenue'.

Basing share ratios on a revenue split encourages efficient subcontract management; basing share ratios on hours encourages...burning up all the hours.  Why would I not want my sub to have an incentive to complete their work ahead of schedule ?

I think you might be confusing the hours-based estimating techniques used to derive the revenue split with the actual subcontract terms.

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Contractors call a preaward agreement laying out how they intend to bid an opportunity a "teaming agreement." This agreement becomes input to a subcontract, usually at contract award.

What a sub isn't going to see in FPDS is the prime's load on their portion of the deal. Every company I've worked for has attempted to hide markups from subs on FFP deals.

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On ‎7‎/‎26‎/‎2017 at 1:09 PM, REA'n Maker said:

Basing share ratios on a revenue split encourages efficient subcontract management; basing share ratios on hours encourages...burning up all the hours.  Why would I not want my sub to have an incentive to complete their work ahead of schedule ?

I think you might be confusing the hours-based estimating techniques used to derive the revenue split with the actual subcontract terms.

I think you are so off-base on your response, that it hurts me to type this.

1. Revenue = sales. At the end of the day, Revenue = billings. Billings are comprised of both direct and indirect expenses (rates). Indirect expenses are an unknown until finalized. When you base a share ratio between prime and subK on revenue, you have introduced variables that simply cannot be effectively managed. To be clear: the final share ratio cannot be calculated until the final billing rates have been calculated. As we all know, that can take years (unless the prime is savvy enough to negotiate final rates with the subK in advance of official government rate finalization, and even then it will be a matter of months).

2. Basing the share ratio between prime and subK on revenue does NOT impact schedule whatsoever. There is simply no relationship. Zero. None.

3. You seem to think that the TA share ratio agreement is some magic formula. Wrong. Instead, it is a number that the parties work toward, hopefully in good faith. Some months the subK might get more work than planned; other months it may get less. The parties watch the actual ratio like a hawk, but at the end of the day, so long as the prime is making a good faith effort o meet the terms of the TA (and subsequent subcontract) then the final number will be what the number will be, and the subK has little if any recourse.

4. Basing a share ratio on billings absolutely, incontrovertibly, does NOT "encourage efficient subcontract management". Instead, it encourages billing more per subcontractor labor hour incurred. The subK has the incentive to be more expensive in order to maximize its share of the pie.

5. Basing a share agreement on labor hours is (1) easier to manage, (2) easier to track, and (3) encourages the lowest cost per labor hour so as to maximize the number of labor hours for both parties. since if parties are burning the available funding more slowly there is more funding available for both.

Going to go soak my fingers now in warm water.

 

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On 7/28/2017 at 0:55 PM, here_2_help said:

I think you are so off-base on your response, that it hurts me to type this.

My diagnosis is that any pain you are feeling most likely results from all that torturing of basic contracting principles you have been engaging in.

For example, you talk about a "TA ratio share agreement", and then say "The subK has the incentive to be more expensive".  Which is it? Is there an agreement, or is the  sub free to bill whatever their evil hearts desire?  Then, you round the corner again by saying "the subK has little if any recourse"  regarding their share, while simultaneously saying they can stick it to the prime in order to "maximize their share of the pie".

Maybe I wasn't clear enough.  I'll try and simplify my "revenue split" comment as much as humanly possible:

  1. At the proposal stage, prime signs a TA with a subcontractor to perform X% of work estimated at $Y FFP (as OP stated);
  2. After prime contract award for $Y', prime makes an FFP subcontract award for X% * $Y' , minus a 1% pass thru;
  3. The sub performs to the SLA in their contract (which involves monitoring service level performance, not "watching them like a hawk");
  4. Prime disburses X% * ($Y'/12) of the monthly prime contract payment to the sub (minus the aforementioned pass thru).

 You'll note that the original poster stated on 7/23 exactly what I am saying above, so I 'm not sure how you got off on to that "manage by hours" tangent.  Why you think   "final rates" and "indirect expenses"  have any relevance here is also quite incomprehensible, but I'm not going to even go there out of sheer  lack of patience.  

On 7/28/2017 at 0:55 PM, here_2_help said:

Basing a share agreement on labor hours....encourages the lowest cost per labor hour so as to maximize the number of labor hours for both parties. since if parties are burning the available funding more slowly there is more funding available for both.

So the gist of your argument is that LH vehicles encourage  lower labor rates, thereby 'maximizing the number of labor hours' and reducing the burn rate, with the result being 'more funding available' ?  :huh:

Suffice to say, "on that note,  I take leave of this conversation."

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