As you bid on a subcontract, pricing is a major factor that will come into play, but experience, quality of work and additional differentiators can also increase the strength of your proposal to the prime. Nevertheless, be sure not to sell yourself short and have all the essential subcontract pricing considerations accounted for. Here are some requirements, costs and other subcontract pricing factors you should take into account before you sign a contract.
Subcontract Pricing History – Find out what your competitors are charging for similar services. You can contact a Procurement Technical Assistance Center to ask them if they have any history of what subcontractors were paid for projects that required your services. It would also help to obtain a few past contracts to verify the statements of work to see what was required of the subcontractor. If competitive pricing is your #1 concern, government purchase orders and government bid result documents can provide exceptional transparency into competitive pricing. Understanding the price the agency is willing to pay the prime or 3rd party vendors will help you price your product competitively without leaving money on the table.
All Special Requirements – Extra requirements, such as special deliveries, can add up. If you’re simply adding on a percentage of your overall subcontract price, beware that you’ll need to factor in gas, mileage and the delivery person’s fee to accurately estimate delivery costs. The statement of work and detailed requirements published in the RFP or bid documents can help you identify any special requirements, even if the prime contractor hasn't shared them with you.
Quality Requirements – If certifications or acknowledgements are required, will there be an added cost to your subcontracting company? See what additional fees may be involved with getting the needed certifications or acknowledgements and how that will affect the ending subcontract price.
Overhead and Profit – Although the bidding process can be very competitive, just remember that you must make a profit. Bidding on a contract just to win it doesn’t make good business sense if you won’t profit in some way. Making a "no-bid" decision can often be the most profitable choice for your business - know when to walk away from bids where price is the only concern and your business model requires healthy markups to sustain company profitability.
Until you know your true subcontracting costs, you can’t be sure if you’re actually making money in certain areas or not. Remember that even if you see an increase in sales, it doesn’t mean that you have an increase in profit. If your cost information isn’t on the dot, your subcontract pricing can’t be correct or competitive. Onvia's Purchase Order Analytics offering can be a great source of intelligence for pricing details on products and services in the government market, even if you sell those services indirectly to the agency through a prime contractor.