Pricing Strategy and Cost Volume Development Flashcards

What is the purpose of a 'make-or-buy' analysis in proposal development?

Answer: To determine which work will be performed in-house and which will be subcontracted, and to justify those decisions

Make-or-buy decisions drive subcontracting strategy and must be disclosed in many government proposals to demonstrate efficient use of contractor capacity.

What does 'total cost of ownership' (TCO) emphasize in proposal pricing strategy?

Answer: The full lifecycle cost of a solution, including acquisition, operation, maintenance, and disposal

Presenting TCO shifts the customer's focus from lowest acquisition price to the best long-term value, benefiting solutions with lower ongoing costs.

What is a 'not-to-exceed' (NTE) price in a government contract proposal?

Answer: A ceiling price above which the contractor agrees not to bill the government

NTE pricing protects the government from open-ended cost growth while allowing the contractor flexibility to manage costs below the ceiling.

Why should the cost volume be reviewed for consistency by the Proposal Manager before submission?

Answer: To catch discrepancies between cost assumptions and the technical approach that could raise evaluation red flags

Inconsistencies between the cost volume and technical sections signal to evaluators that the team does not fully understand the scope of work.

What is a key reason to include a detailed labor category matrix in a cost proposal?

Answer: It demonstrates that proposed staff have the qualifications that justify their labor rates

A labor category matrix links education, experience, and skills to hourly rates, making proposed costs reasonable and defensible.

What is 'cost avoidance' as a value proposition in a proposal?

Answer: Demonstrating how the proposed solution will prevent the customer from incurring future costs they would otherwise face

Quantifying cost avoidance for the customer is a powerful discriminator that shows the value of your solution beyond the contract price itself.