Every pricing effort is different so there is no way I can provide a “How To Guide” and it apply to every situation. So this is a very generic description. Whether you’re pricing a product or a service there are cost involved that must be covered within your total price. Some of the common cost include:
- Material Cost
- Labor Rates
- Mil-Std Testing/Inspection Requirements and Certifications
- Mil-Std Packing, Shipping and Insurance Requirements
- Travel Cost (this is usually a separate estimate as travel is cost reimbursable)
- Other Direct Costs (ODC)
- General & Administrative (G&A)
- Overhead (OH)
- Warranty Costs
- Escalation Rates for Multi-Year Contracts
- Security Requirements (Cyber and Physical)
- Risk
- Margin (Profit)
If you leave something out of your pricing or underestimate the cost of something is can be very difficult to get the Government to provide additional funding. The days of “low bidding” and asking for additional funding later are gone. That’s not to say it never happens, but not often. You should identify all your requirements and price them separately. The “roll-up” will be your total price.
Author: Phil Davidson
I have worked in the Defense Industry as a contractor for over 20 years. I do Business Development for a small aviation company right now, but I have worked as a full-time and part-time consultant over the years. I decided to redesign my website as a place where I can share information about my experience and help companies come together for working together and teaming.