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GSA IT 70 Price Proposal

FACTS: Small Business withdrew its IT70 offer because the GSA KO refused to accept anything less than its lowest, historical cost plus fixed fee (CPFF) rate in the BOA negotiation. The Small Business does not have any past or current business with commercial customers, so all historical business is with the federal government under broad agency announcement (BAA) or Small Business Innovation Research (SBIR) CPFF contracts.  The company does not have a history of time and material (T&M) or labor hour (LH) type contracts.  The company develops its cost rates based on the actual salary of an employee combined with the DCAA-approved provisional billing rates (e.g. Overhead, G&A, etc.).  Together the company combines the cost rate and the provisional billing rate to create a fully burdened rate.  Taking the SW Engineer I category and using hypothetical rates, there could be a span of say $60 - $80 depending on the individual employee's salary and his/her fully burdened rate. For purposes of the GSA IT 70 submission, the company created a blended T&M rate based on its labor categories and historical fully burdened cost rates.  However, the GSA KO said the only rate that would be accepted as the BOA negotiation would be its lowest, historical cost rate of say $60/hour.  

Issue/Concerns: If the company is only allowed to negotiate from its lowest cost rate, it will lose money on every task order. By the time of its first task order award, the lowest paid employee in the labor category has likely received a raise and/or the employee may have already left the company.   Moreover, if the company is forced to start negotiations from its lowest cost rate, it will never have room to offer further discounts without taking recurring losses.   

Question: Why can't the company offer a fair and reasonable, blended T&M rate for SW Engineer I that represents the fully burdened cost rates that the company has charged?  The company is not trying to hide its history and clearly shows its math on all its calculations.  Moreover, to determine fair and reasonable pricing, the GSA contracting officer may consider many factors, including pricing on competitor contracts, historical pricing, and currently available pricing in other venues.  When taken in its totality, the rates that the company proposes are in line and even well below its competitors in similar NAICS categories.  

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I have, on multiple occasions, negotiated GSA Schedule contracts using indirects and blended salary data, presenting a cost buildup to justify pricing. The company may have rung a bell now difficult to unring when it presented fully loaded most-favored-customer rates from a CPFF contract.

Woulda, coulda, shoulda, but it would have been better to state on the CSP that there were no customers, including federal, from which fully loaded commercial rates could be devised, ie, T&M or FP-LOE. Instead, provide the cost buildup, and in the pricing narrative propose "all commercial customers" as the basis of award, promising to renegotiate this when the company first makes a commercial sale on a labor-hour basis.

Now, I would first try to escalate the issue in whatever office was handling the negotiation, and keep working the chain of command.

Another simpler option would be for the company to make an in-scope commercial sale to justify its rates.

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