Government contracting bids can feel like a high-stakes game, where your cost proposal either sets you apart or leaves you on the sidelines. Small businesses chasing federal work know the drill, tight margins, compliance hurdles, and no room for slip-ups.
Today, Shoaib Bazaz from iQuasar sits down with Sharee Richardson, a Contracting Officer with more than 14 years of experience planning, awarding, and managing federal contracts.
From dissecting ambiguous RFPs to navigating BAFOs, she shares practical insights on the “5 Steps to a Winning Cost Proposal,” revealing real-world tactics that deliver compliance, competitiveness, and results.
Shoaib: Hi Sharee. Thanks for doing this interview with us. My first question would be: how do you spot and handle unclear pricing rules in an RFP early on?
Sharee:
One way to spot unclear pricing rules early on is to look at the disparities between Section B, Section C. Contractors should evaluate whether the contract type and pricing approach defined in Section B align with the level-of-effort, labor categories, and job description described in Section C.
Contractors should also assess any cost-related ambiguities. For example, Section C may require Other Direct Costs (ODCs), materials, or travel that are not clearly addressed in Section B, or it may be unclear whether such costs are to be reimbursed separately or included in fixed or fully burdened rates.
It is also important that the pricing structure in Section B can reasonably support the requirements and deliverables found in Section C. Any misalignment may be a sign of unclear and incomplete pricing guidance.
Shoaib: Thanks. What’s the simplest way to set a competitive price that still covers your costs?
Sharee:
Great question. The best way to set a competitive price while ensuring all business expenses are covered is to first, fully understand ALL requirements of the contract and to streamline where possible.
Next, you will want to identify what the market rate or cost is for the service or product. One way to do this is by looking at historical data (past or similar contracts). You can also look up various services and supplies on the Bureau of Labor and Statistics website
Once rates have been determined, you will want to compare your market rates to your costs. If you have a product or service that has a proven track record (i.e., strong past performance ratings and customer feedback), and your costs are less than market, you are already in a competitive position. However, you should still consider streamlining to help prevent others from undercutting you.
If your costs are greater than market, you must examine multiple solution sets.
For example, if you have a Follow-on opportunity, can you swap a few higher-paid employees for qualified but lower-paid employees? Can you offset full salary increases with a portion as bonuses so that the ongoing salary escalates at a lower value over time? Can you reduce fringe costs in a way that keeps employees whole, such as “sharing” the cost savings of medical premiums with employees who can use their spouse/partner’s insurance? (The employee gets a little extra pay with no loss of insurance coverage, and the company gets to reduce the number of covered employees and the associated cost of premiums.) Can you reduce overhead without sacrificing the quality of service for your customers? Can you reduce your proposed fee percentage if a potential growth in business reduces the company’s indirect rates? Lower indirect rates can increase the effective profit on existing contracts, particularly FFP or fixed-rate contracts – those increases can help offset lower profits (based on a lower proposed fee) on the new opportunity.
Shoaib: Makes sense. How do you quickly build accurate labor and material estimates from past data?
Sharee:
Building accurate labor and material estimates from past data can be done by analyzing past data per Agency (organization) and develop metrics such as fully burdened costs per labor category for Research and Development (R&D) vs Operations and Maintenance (O&M), vs staff Augmentation. For example, R&D tends to require Subject Matter Experts (SME’s) who command higher wages and have higher labor costs. The company typically requires lab space, which increases overhead costs, including additional review, oversight, and testing costs due to the unknown nature of R&D. O&M typically has fewer, if any, SME’s and requires very little, if any, lab space and fewer testing costs, if any, so the fully burdened costs are typically less per hour. In pure staffing opportunities, costs per hour are the least because the customer assumes the burden of development or operational costs.
Regarding materials, I would suggest performing an analysis as well and obtaining multiple quotes ahead of time for the same line items as well as equal substitutes that meet the customer’s requirements. This will help you to pre-negotiate your contract terms and conditions.
Shoaib: Thanks. What easy checks prove your costs match the proposed work?
Sharee:
One easy way to prove your costs match the proposed work is to complete a Compliance crosswalk of all cost elements vs the proposed work. For example: In the Management section, you may show 20 Full Time Employees (FTE’s) across 10 different Labor Categories (LCATs). Some LCATs may require only one FTE while others may require three. Confirm in the cost section the exact same number of LCATs and the exact number of proposed FTE’s for a total of 20 FTE’s? You can also look at historical data and see if similar requirements exist. Identify the costs and apply 2-3% increase in cost.
Shoaib: That’s insightful. Thanks. Another frequently asked question is How do you fix team disagreements on price before the deadline?
Sharee:
The best way to fix team disagreements on price before the deadline is to:
- Determine the importance of winning to the company. Is it a “must-win” to keep the company going at least at a steady state? If so, submitting an aggressive (lower cost) bid may be needed to help win. If the opportunity is not needed to keep the company in a steady state, perhaps you don’t need to be as aggressive.
- Define the competitive landscape. What is the probability of winning? If you have very high confidence (80 – 90% probability) because you are in a unique situation (location, specific items, rare skills, etc.) you can be less aggressive on a lower cost bid.
- Is the proposal more of a business vs financial opportunity (new business area with a bright future, or financial opportunity to keep things steady state etc.). If the future seems to be in a new area, then perhaps an aggressive (lower cost) bid is worth it to gain work with better prospects. I.E., “Get well later” once you establish yourself in the new area.
Shoaib: Last question. When does the government ask for a BAFO? What are some best practices to keep in mind while responding?
Sharee:
The best thing to keep in mind is to know your competition. Review FOIA and business intelligence, determine their strengths & weaknesses, and how you compare. “Score” their areas vs yours. Utilize free services such as USAspending to conduct Market Research and learn more about your competitor.
Lastly, you will need to ask yourself if winning is important to you and your team what you plan to accomplish by submitting the proposal? Is it for financial opportunity or to get your company’s name out there as a form of marketing?
Sharee’s insights boil it down: winning cost proposals come from smart early moves, tight team sync, and checks that tie every dollar to your work. Small businesses and agencies can use these five steps, plus BAFO savvy, to cut through the noise and land federal contracts.
At iQuasar, we specialize in helping government contractors succeed with the solutions they need. Contact us today to learn more about how we can help you on your journey to success.
About Sharee
Sharee is a Contracting Officer with more than 14 years of experience planning, awarding, and managing federal contracts. Her contracting expertise spans professional services, government leasing, IT, medical supply contracts, and R&D in support of clinical trials. She is dedicated to helping small businesses confidently navigate the federal contracting process by providing proposal review, business development support, market research, and pricing strategy guidance.
