My first time on a podcast

I was honored to be guest on RSM Federal’s Gamechangers for Government Contractors last month.

Talking about Price to Win strategies in this episode and some best practices for basic pricing tactics in order to submit compliant and competitive proposals.

Impact Pricing Podcast

I was proud to be on a recent podcast and wanted to share. One aspect that I should have mentioned during my conversation Mark Stiving of Impact Pricing is how much the contract type impacts the pricing approach and evulation criteria.

Guest on Impact Pricing Podcast

Every opportunity will have a unique competitive range and you need to ensure that your company is position for the succuss in your given industry. Plan to target the agencies and large companies had are currently doing the work. When you find optimal opportunities, price smartly to ensure that you are maximizing your margins and probability of win!

What is a wrap rate?

Have you ever heard the term “wrap rate” or FBLR and thought, what is that?

I bet you’ve heard this term many times in your CovGon career, but do you really understand what a wrap rate is?

Very simply, it’s the multiplier between what an employer pays for an employee’s service and the price that the employer charges the client.

For example, John gets paid $50 / hr and John’s employer charges the customer $100 / hr.  John’s employer’s wrap rate is 2.0 (100 / 50.)  Make sense so far?  Great!  Now let’s do some more digging into what a wrap rate entails.

So while John gets paid $50 (less applicable taxes) directly from his employer, there are some additional costs associated with his employment.  Some of these costs are mandated by law (payroll taxes/FICA/SUTA) and some of these costs are employer choices (insurance, 401K plans, other benefits) in order to attract and retain a top-notch workforce.  These indirect costs are called fringe costs.  Let’s say this is 40%.

There are other costs that are necessary for the employer to pay to equip John with the tools and an office he needs to perform the work for the client. For example, John will need a computer and a smartphone in order to effectively serve the client and the employer pays for this. Perhaps the employer will also need an office (and associated utilities) for John to work out of along with his teammates and maybe to host clients from time-to-time. These indirect costs are called overhead (OH) costs. Let’s say this is 20%.

There are other costs of doing business such as marketing and travel expenses, back office functions and outsourced consulting services (legal & accounting) that are necessary to run the business.  These costs are call general and administrative (G&A) costs.  Let’s say this 10%.

Lastly, companies need to make a profit and all these factors (direct labor, fringe, OH, G&A, and profit) are all considered in a wrap rate.

Direct labor + fringe costs + OH costs + G&A costs + profit

$50 * 1.4 *1.2 *1.1 * 1.08

$50 + $20 + $14 + $8.4 + $7.4 = $100 (rounded)

I believe that wrap rate is indicative of a company’s culture and impacts their ability to compete.  Careful indirect rate management is key to be able to afford to execute to a given wrap rate. 

Getting Going

Keep on adding content.  

So I took a hiatus in firing up this website and trying to get focus back on this. Let’s see if we can improve this site with initial goal to create user customized downloads based of their form inputs for location(s) and labor category(ies) for direct labor price documentation the Department of Labor(DOL)’s Bureau of Labor Statistics (BLS).