RGCI - Writing a Convincing Labor Basis of Estimate

Oftentimes when supporting the production of cost volumes and pricing exercises for clients, we’re given a basis of estimate (BOE) that has been written by someone on the technical team. Even being a group of accounting and compliance professionals who know little in areas such as cyber, engineering, or other technical areas of the scope of work, we’re left scratching our heads. This usually leads to several back-and-forth discussions centered around gleaning enough information from the technical team to pass the proverbial government “sniff test”.

The reality of source selection boards is that those who sit on said selection board may be a mixture of technical and non-technical backgrounds. Furthermore, the DCMA Cost Analyst or DCAA auditor who is auditing, performing cost/price analysis, or cost realism on the proposal likely does not have a deep technical understanding either. This means that it is in your best interest to take the necessary time to prepare and articulate a clear, convincing basis of estimate for labor in the proposal that can be understood by anyone evaluating the proposal.

Below is a list of helpful tips and recommendations that could provide useful when discussing BOEs with your engineering and technical teams who are supporting the estimate of hours for a program:

  • The use of the phrases “engineering judgement” or “management estimates” should be minimized as these tend to be other ways to say, “I don’t know”.
  • Focus on objective data that you have on hand from similar projects or programs and correlate the events/activities of the referential program to clearly link to the scope of work.
  • Don’t start writing the BOE until you have clearly broken down the project into the individual Work Breakdown Structure (WBS) elements.
  • Define your BOEs at the lowest level of detail and then summarize in narrative form based on page limitations. Typically, cost volumes are not limited in terms of page count, so the first draft should focus on providing as much detail as possible. This way, the narrative writers can appropriately summarize, build tables, etc. to get the message across that you know the scope of work and what it will take to complete.
  • Be sure to consider contingencies and any assumptions utilized in developing an individual BOE.
  • Designate someone other than the person(s) who develop the BOEs to play devil’s advocate. This is a critical part of the technical review process to ensure the soundness of your BOEs. Furthermore, we recommend including a non-technical representative in the review process to provide a holistic view from the perspective of all potential proposal evaluators.
  • Don’t forget to include “extras” associated with a new program. Often times a new hire cannot simply assume the position and immediately begin working. There may be time for training, obtaining clearances and other validations necessary to begin work, so it’s critical to consider this time as well. Over a 5-year program and hundreds of labor categories, even just a half day of training and safety briefing can add up.
  • The BOE process does not stop once the proposal is submitted. Ongoing monitoring on the validity of BOEs and maintaining a library of BOEs from both successful and non-successful proposals can continually improve your BOE development process.
  • Finally, your labor pricing is as critical as your estimate of hours. Utilizing salary surveys is truly a science; choosing the right mapping is rarely as simple as matching the labor category title. It is critical to have someone on your team who is truly knowledgeable about your chosen salary survey software, and it is critical that they can explain why a specific reference position was selected.

If your team needs support writing or evaluating BoEs, the team at Redstone GCI can help. We routinely support all facets of proposal pricing, including the BoE development process. Our team can augment your proposal team to provide subject matter expertise during the proposal writing/pricing or as part of your color team reviews. Our HR & Employment Law group includes compensation expert’s adept at developing narrative to support total compensation plan, the use of salary surveys and many other qualitative aspects of labor pricing. Our firm supports winning bids in excess of $1B annually and is routinely sought out for critical pricing support.

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Written by Adam Cole

Adam Cole Adam is a Senior Consultant with Redstone Government Consulting, Inc. based in our firm’s Huntsville office. Adam supports our government compliance group and his role includes production of pricing models for cost volume proposals, the preparation of complex incurred cost submissions, data modeling and analysis related to indirect rates, and unallowable cost testing. Adam works closely with our directors and managers in performing testing and assessments of DFARS Business Systems, specializing in the accounting system. He also works with other team members to assist clients with compliance requirements of the U.S. Government. Education Adam holds a B.S. degree in Economics from The University of Alabama with minors in Computing Technology & Applications and Management Communication.

About Redstone GCI

Redstone GCI is a consulting firm focused on fulfilling the needs of government contractors in all areas of compliance. With a singular mission to help contractors through the multiple layers of “red tape,” we allow contractors to focus on what they do best – support their mission with the U.S. Government. We are home to a group of consultants made up of GovCon industry professionals, CPAs, attorneys, and retired government audit and acquisition professionals.

Our focus and knowledge of audit and compliance functions administered by DCAA and DCMA will always be at the heart of what we do. However, for the past decade, we’ve strategically grown to support other areas of the government contractor back-office with that same level of focus and expertise. We’ve added expertise in contracts management, subcontract administration, proposal pricing, various software systems, HR and employment law, property administration, manufacturing, data analytics/reporting, Grant specialists, M&A, and many other areas. When we see a trend in the needs of contractors, we act to ensure we can provide the best expertise in the market to fulfill those needs.

One thing our clients can be certain of is that with the Redstone GCI Team in your corner, there is no problem too big and no issue too technical for our team to tackle.

Topics: Compliant Accounting Infrastructure, Proposal Cost Volume Development & Pricing, Small Business Compliance, Human Resources, Government Regulations, Federal Acquisition Regulation (FAR)