What is a Wrap Rate?
I bet you’ve heard this term many times in your Govcon career, but do you really understand what a wrap rate is?
Very simply, it’s the spread (multiplier) between what an employer pays for an employee’s service and the price that the employer charges the client.
DIRECT LABOR (DL) COSTS:
For example, Jack gets paid $50 / hr and Jack’s employer charges the customer $100 / hr for Jack’s services. Jack’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 Jack gets paid $50 (less applicable taxes) per hour 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) to attract and retain a top-notch workforce. These indirect costs are called fringe costs. Let’s say this is 40%.
OVERHEAD (OH) COSTS:
Other costs are necessary for the employer to pay so Jack can perform the work for the client. For example, Jack will need a computer and a smartphone to effectively serve the client and his employer pays for this. The employer also needs an office for Jack to work out of along with his teammates and a conference room and kitchenette to host clients from time to time. These indirect costs are called overhead (OH) costs. Let’s say this is 20%.
GENERAL & ADMINISTRATIVE (G&A):
There are other costs of doing business such as marketing and travel expenses, back office functions, and consulting services that are necessary to run the business. These costs are called general and administrative (G&A) costs. Let’s say this is 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.
DL costs + fringe costs + OH costs + G&A costs + profit = fully burdened labor rate (FBLR)
$50 * 1.4 *1.2 *1.1 * 1.08
$50 + $20 + $14 + $8.4 + $7.3 = $100 (rounded)
Price to Win Solutions believes that the wrap rate is indicative of a company’s culture and impacts its ability to compete and win contracts! Careful indirect rate management is key to being able to afford to execute a contract under a proposed wrap rate and make adequate profits!
The federal government outsources much of its work, awarding contracts to businesses for execution. The awards go to both for-profit and non-profit entities. The government wants to promote competition to the maximum extent. Sometimes there are limits on the profit a business may make on their work depending on the type of contract that is awarded.
The Federal Government spends over $800 billion on contracts each year, and current law requires 23 percent of these dollars must be awarded to small businesses. Each year, the government awards a percentage of its contracting activities to small, veteran-owned, and disadvantaged businesses. Some examples of eligible businesses include businesses owned by serviced disabled veterans, women, people of color, Native Americans, historically black college or minority institutions, and entities that have employees that live in historically underutilized business (HUB) zones (as designated by the Federal Government).
The breadth of federal government contracts available to small businesses is vast and diverse. There are contracts available for services ranging from construction to emergency services. There are contracts available for products ranging from office supplies to quantum computers.
How do I get started in Government Contracting?
PTW helps businesses navigate the cumbersome federal government contracting lifecycle. PTW can help locate opportunities, identify possible partners, interpret historical data, price and submit your proposal.
PTW’s purpose is to help your company win, monetize, and grow federal government contracts.
To start, your company must be registered in the system for award management (SAM). This is the initial government entry point for ALL contractors who are interested in obtaining federal government obligations (funding).
When you register on SAM.gov, you must select a North American Industry Classification System (NAICS). You still need to have other pertinent business information and certify to some federal acquisition regulations (FAR) that are applicable to your business type.
Once you have a SAM.gov login, then you can do your own queries and set up your own searches based on the business you want to pursue.
Before you start pursuing work as a prime contractor, you need to have a better understanding of the market you will be entering by leveraging data from usaspending.gov. If you don’t you will waste precious time and resources pursuing work as there are better opportunities elsewhere.
Types of Government Contracts
Cost-plus-fixed-fee (CPFF) contracts are those in which a contractor is paid a certain amount of money in compensation for materials. Cost Plus Fixed Fee contracts are a subcategory of Cost Reimbursement contracts, in which a contractor is paid a set fee when a project begins.
The only difference from previous types of state contracts is that a contractor bound to a time and cost contract is not one who would provide materials needed for a project. Labor-hour contracts do not include any necessary materials, only paying labor costs and profits.
In some cases, public agencies may use a version of this contract known as an hours-for-hire contract. For these types of contracts, the government sets the per-hour rate of labor, calculates material costs, and sets the pricing cap. Cost-reimbursement contracts are types of contracts in which the government compensates a contractor with the cost incurred by the government, so long as the cost falls under a specified ceiling price.
While fixed-price contracts generally have a greater balance of risks for contractors, risk on a cost-reimbursement contract typically falls on the government agency. Time-and-materials contracts are the intersection of fixed-priced and cost-reimbursement contracts, and they typically require that the government bears more of the risk than the contractor (making them less of an attractive option for government agencies). Time-and-Materials contracts are less popular than Fixed-Price and Cost-Reimbursement contracts because they present the U.S. with more risk for uncertainty in costs.
This type of fixed-price contract is used in early-stage government research and development projects, when actual costs might be too uncertain to determine early on. This type of contract is also common with R&D contracts, in which the federal agency and government contractors would receive a payoff after completing the contract. These types of contracts permit a contractor to claim restitution for expenses incurred, up to a specified amount. Cost-reimbursement state contracts let contractors bid on tasks that will pose risks for them, but provide just a small incentive payment to keep prices in check.
In a government contract, these types of Federal Government contracts set out an obligated funds cost estimate and price caps the contractor cannot go over, particularly not without agreement from the awarding official. Here, the U.S. may define the contract values prior to selecting the contractor. Under this arrangement, the government and the contractor negotiate the labor rates per hour as well as material costs. Agencies can also sometimes negotiate a not to exceed clause that specifies a contracts maximum value. The contract contains a proportionate allocation, which states that both the contractor and U.S. government will cover any part of the cost of the contract above an agreed-upon budget.
Before negotiating any type of contract that is not firm-fixed-price, the awarding official should verify that the contractors bookkeeping systems would allow for timely generation of any required cost data in the format required for the proposed type of contract. Firm-fixed-price can only be used if- (1) the contractors accounting system is sufficient to supply data that supports negotiations of definitive price revisions for costs and incentives; and (2) sufficient cost or price information is available to set a reasonable firm objective during initial contract negotiations.
Specific contract types vary from firm-fixed-price, where the contractor has complete liability for the performance costs and the resulting profits (or losses), to cost-plus-fixed-fee, where the contractor has only a minimum liability for performance costs, and where negotiated fees (profits) are fixed. A fixed-price incentive contract is a type of government contract where the pay-outs or profits are adjusted according to the ultimate agreed-upon fees and overall results of a contractors performance. In some situations, when products and services may be obtained at lower costs, the fixed price is not applicable, and incentive contracts are most commonly used in order to achieve better delivery or technical results. Because it is generally in the governments interest to allow contractors to take on a significant amount of responsibility for costs, and to take a fair share of cost risks, fixed-price incentive contracts are preferred where contract costs and performance requirements are fairly certain.
These contracts are prevalent in cases in which the United States Government wishes to motivate performance qualities, and where targets of cost, technical performance, or schedule are hard to predict before awarding the contract. IDIQs typically stipulate a contractor provides the least amount of suppliers and services, and negotiates a fixed timeline and maximum price cap for a contracted work. Because a master contract does not include a fixed amount or a fixed time of delivery, contractors must supply in their proposal the minimum amount of supplies or services, the maximum price, and the set timeline of delivery.
The government is generally not required to compensate the contractor for costs that exceed the estimated contract value, nor is the contractor required to proceed with work after the estimated contract value has been reached. Cost-reimbursement, or cost-plus, is a contract type where a government contractor is paid all its allowed costs up to a agreed-upon limit, plus extra money so that the government contractor can earn a certain amount of positive income. Since the government contractors are working on a fixed-price, fixed-term contract, this gives them the greatest benefit in keeping costs in check and successfully accomplishing a project, without placing an undue administrative burden on either of the contracting parties. Firm fixed-price (FFP) contracts require that the US Government pays the contractor a fixed amount, regardless of what it costs for the contractor to do the job.
Incentive-Funded fixed-price-FPIF contracts allow adjusting margins and set final contract prices taking into account the negotiated total value and the overall cost goal. FFP contracts may be used when a government uses sealed-bid procedures in awarding contracts, when a government is purchasing a commercial product or service, or when the work that is to be performed is sufficiently defined that a contractor may make a knowledgeable judgment about the costs of performing the contract. Under Section 16.301 of the Federal Acquisition Regulation, cost-reimbursement contracts may be used when factors under section 16.104 are taken into account; the written acquisition plan has been approved at least one level above the awarding official; the contractors bookkeeping system is sufficient for the determination of costs as applied to the contract; adequate Government resources are available for the awarding and administration of a non-FFP contract.
*This article was written by AI
Any person entering into an agreement with the Federal Government to produce materials for, or perform services for, national defense. Contracts with the United States federal government span many different industries, ranging from major defense contracts to smaller contracts for goods and services found on general schedules. This does not include contracts for procurement of goods and services by the federal government. Once authorization has been granted by Congress, other branches of the government can then begin contracting for purchases from vendors.
Government purchasing contracts are used by the U.S. government to negotiate agreements with vendors to buy goods and services. Although the same fundamental principles of standard contract law are applied in government procurement contracts, since public funds are used for purchasing these goods and services, further provisions are needed to regulate how companies awarded contracts work within them. When procuring trade services, time-and-materials contracts, or work-hours contracts, can only be used if awarding a contract or order is made using competitive procedures.
Used only when a contracting official determines that another type of contract is not appropriate. Cost recovery contracts set out a total cost estimate for purposes of the committed funds, and set out a cap which a contractor cannot exceed (except on their own account) without approval by the contracting officer. Firm-fixed-price (FFP) contracts deliver goods or services for a fixed price, without being adjusted on the basis of costs incurred by the contractor.
When a Government contract is valued in excess of $100,000, and when a highly technical product or service is required, the Federal Government can issue a Request for Proposal (RFP). A Schedule A SFBA is a non-funded, long-term contract listing the prices that the federal government has agreed to pay for the products or services provided by a provider. Orders written by a military department or Defense Agencies procurement office that require a non-defense federal agency to provide supplies or services from their inventory, internal production facilities, or contracts.
A data universal numeral system (DUNS) number is a unique, nine-character identifier provided to entities that are interested in contracts with the federal government. This means the primary purpose of the federal contract is the procurement of goods or services directly benefiting or being used by the federal government. Unlike grants and cooperative agreements, which are aid mechanisms, the federal contract is a purchasing mechanism.
So far, there are four ways that public agencies can award contracts. Contracting by Negotiation, which generally occurs when only one firm is uniquely suited to supply a product or service needed by the U.S. government. Government procurement contracts are also used to lease office buildings, storage facilities, and other real estate used by the government.
We help clients evaluate risks associated with acquiring and selling government contractors, negotiate proper protections provisions into the purchase agreements, and obtain the necessary government approvals (contract amendments and other) required by statutes and regulations. We assist with litigation in the Government Accountability Office, U.S. Court of Federal Claims, state courts, and administrative agencies.
Our practice includes a strong bench of litigators representing clients in administrative, state, and federal court proceedings concerning claims related to government contracts and subcontracts, including claims before the Contract Appeals Board, as well as appeals under the Contract Disputes Act. Providing “cradle-to-grave” assistance to government contractors, our comprehensive integrated practice of Government Contracts & Acquisition Policy provides counsel, litigation, and regulatory representation across the spectrum of acquisitions law. Representing national and international clients in all areas of federal procurement for supplies, services, and construction, our Government Contracts Law Team advises clients in matters relating to business entity and ethical compliance with complex rules and laws that govern federal contracting.
The standards are required to be used by all executive agencies, as well as contractors and subcontractors, when calculating, accruing, and reporting costs, relating to the pricing and administration of, and resolution of disputes concerning, the awarding of major contracts and procurements for subcontracts with the government. Both current and prospective government suppliers are required to enroll in SAM to be awarded contracts and paid by the federal government. The Veterans Entrepreneurship Act allows EDVOBs to obtain contracts, either through a single-source or limited-competency basis, for goods and services used by the U.S. government.
The eMaryland Marketplace Advantage (eMMA) is an online purchasing system used to link the supplier community with contract opportunities from State, County, and Local Government entities. GSA Fleet Rent vehicles to federal agencies through the GSAs professional, full-service fleet management organization. Government contracts can be a lifeblood to many businesses, and if you are interested in selling your goods or services to the U.S. government, be sure you fully understand the process.
With about one in every 10 dollars spent on the federal government going to contractors, it is critical for contractual actions to produce the best possible return to taxpayers. In FY2020, the Federal Government spent over $665 billion on contracts, more than a 70-billion dollar increase over FY2019. We also included sources for those looking for historical information about contracts.
*This article was written by AI
There are also other benefits for agencies purchasing via the Cooperative Catalog, in addition to the cost. Below is a review of Cooperative Contracts, with an emphasis on the products typically purchased, as well as key benefits from these agreements. Cooperative contracts are also known as Cooperative Agreements, Cooperative Procurement, or Government Contracts. These agreements are established between local, state, or federal governments and businesses. The contracts set pricing points, delivery times, and other terms under which the offices and agencies within the locality may acquire goods. Cooperative contracts–also known as co-procurement or co-op agreements–are agreements between government and businesses created in an effort to reduce costs for the purchase of goods or services commonly needed by several entities.
Cooperative contracts are cost-effective, as customers can select goods and services under one contract rather than seeking out bidding, quotes, or proposals from various outlets. Not all contracts that are promoted by a local government are co-operative, however. Any public office or entity may generally purchase through the contract as long as a local government sets up the arrangement.
Typically, members then buy goods and services, either through negotiations with participating vendors, placing buy orders, or entering into contracts, according to rates or prices listed in a cooperative procurement plan agreement or in contracts with vendors. Membership in the program can give entities access to lists of agreements or contracts to buy goods and services for a set rate or price.
Agencies must develop procedures to effectively utilize a list of parties excluded from federal procurement or nonprocurement programs in order to ensure they are not providing assistance to listed parties in violation of Executive Order 12549. Consistent with all applicable legal obligations of agencies, all Federal agencies that administer programs involving grants and cooperative agreements with state, local, and Indian tribe governments (grantees) shall comply with the policies set forth in this circular. Federal agencies use contracting for acquisitions and a variety of forms of financial assistance (grants, cooperative agreements, and others) to provide funds to individuals and organizations in order to accomplish an authorized mission of the agency.
If the goal of a funded activity is to support or spur activities not directly beneficial or useful to the Federal Government, a grant or assistance agreement (cooperative agreement) can be used. If the primary purpose of the funded activity is to deliver something that is for the direct benefit or use of the federal government, a contract is an appropriate statutory tool that should be used. Procurement contract grant cooperative agreement The Executive Branch shall use a contract of purchase as a legal instrument reflecting the relationship between the government and the state, local government, or other recipient when: (1) the primary purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the U.S. Government; or (2) the Agency determines, on a particular occasion, that use of a procurement contract is appropriate.
Procurement Contract Grant Cooperative Agreement An executive agency shall use a procurement contract as the legal instrument reflecting a relationship between the Government and a State, a local government, or other recipient when — (1) the principal purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government ; or (2) the agency decides in a specific instance that the use of a procurement contract is appropriate. This chapter does not require that when the United States Government receives money for more than one project, the United States and the state, local government, or another recipient, to create a single contract that involves amounts drawn from more than one program or appropriation, different relationships are otherwise appropriate for different parts of a project. The persons exclude Indian tribes, tribal organizations, or any other Indian entities that are eligible to obtain Federal contracts, grants, cooperative agreements, or loans from an agency, but only as to Indian tribal expenditures made for purposes specified in clause 3.802(a) and authorized under other Federal laws.
The act requires each Federal agency to identify, in consultation with the Secretary of Commerce, the date(s) on which metric systems of measurement shall be used in agency purchases, grants, and other trade-related activities. This section requires awardees to indicate, in any announcement announcing awards for contracts totaling $500,000 or more, the amount of Federal funds to be used for financing such acquisition.
State and local recipients of grants, loans, cooperative agreements, or other instruments funded with eligible Federal funds must prioritize, as part of their procurement programs, purchases of recycled products consistent with the Environmental Protection Agencys guidelines. Federal agencies shall not allow grantees to use assets acquired through grants to compete unfairly against the private sector.
Even with that limitation, cooperative agreements are an intriguing funding tool that contractors, and state and local governments, should watch for as they pursue a new path toward federal contracting. As the federal contracting landscape becomes more and more complicated, Cooperative Agreements present an opportunity for certain contractors to transition into a more optimized mechanism of obtaining federal funds.
If more than one bureau is involved in one project, or receiving new equipment and supplies, the cooperative arrangement makes ordering those new items easier. RINGCENTRAL & COoperative ContractsCooperative contracting offers cost and efficiency advantages when multiple agencies under one governmental umbrella are procuring the same goods or services. Because there are many advantages of cooperative contracts–including better utilization of resources and lower overall costs of government–these types of agreements are a benefit for citizens in both big and small governments. Under the federal Grants and Cooperation Agreements Act of 1977 (FGCAA), the primary goal of both relationships is the transfer of values from federal government to state, local, and private entities.
The myriad of other alternative contracting vehicles used by the Federal government include Cooperative Agreements, Other Transaction Agreements (OTAs), Cooperative Research and Development Agreements (CRADAs), Space Act Agreements (SAAs), Technology Investment Agreements (TIAs), and Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards.
*This article was written by AI
Government Contract Opportunities
This site is maintained by SBA and is an online tool of the United States Government for listing small businesses that are eligible to receive Federal Contracting Opportunities. The annual U.S. Small Business Administration (SBA) Small Business Contracting Scorecard FY2021 shows record levels of Federal Contracting Dollars awarded to SDBs, the category, according to Federal law, in which economically distressed Black-owned, Latino-owned, and other minority-owned businesses are allowed to compete for Federal contracting opportunities. Each year, the federal government awards approximately 10% of all Federal contract dollars, or approximately $50 billion worth of contracts, to small, disadvantaged businesses. The Federal Government spends approximately $500 billion on contracts every year, and the current law requires 23 % of those dollars be awarded to small businesses.
The United States government spends billions every year in contracts, and much of this money goes to contractors as payment for their services. The U.S. government offers federal contracting opportunities in a variety of fields, locations, and industries, as it is so vast. Government contracts enable businesses to receive payment for providing products and services that help the government achieve its goals. No matter how large or small, businesses have a chance to apply to government contracts if they are interested in doing business with the United States government.
The purpose of a contract is significant, though, as federal agencies are legally required to contact and consider smaller businesses for contract opportunities. By law, federal agencies are required to set contracting goals so that 23% of all purchases made by the government are intended to be made to small businesses. Public Law 100-656 requires agencies to develop and provide access to forecasts about the procurement opportunities available for small businesses, including those who are minorities, women, in metropolitan areas, veterans, and veterans with disabilities. Public Law 100-656 requires agencies to compile and make available projections of contracting opportunities that small businesses (including minority, women-owned, HUBZone, veteran-owned, and service-disabled veteran-owned) may be able to perform. In addition to establishing targets, Small Business Act 15(g)(1) further provides that the United States Government has the policy that every agency shall establish a target annually representing, for that agency, the maximum practicable opportunity for the participation in contracting activities by the smaller business concerns, the small business concerns owned and operated by veterans with disabilities, qualified HubZone Small Business Concerns, small businesses owned and operated by individuals with social and economic disadvantage, and women-owned and controlled by women.
Businesses, individuals, or agencies seeking to do business with the Federal Government must register in the System for Award Management (SAM). Contract Opportunities in System for Award Management (SAM.gov) — A contract opportunity is an award notification issued by the federal agency that awarded the contract. Public Disclosure of justifications – In accordance with Federal Acquisition Regulation 6.305, the Education Departments Office of the Contracting Clerk posts justifications at the Point of Entry to the State, SAM.gov.
The Contracting and Acquisition Administration is pleased to offer electronic vendor (online) vendor registration capabilities to assist with the identification of businesses and other organizations that are available to supply equipment, supplies, or services. The eMaryland Marketplace Advantage (eMMA) is an online purchasing system used to link the supplier community with contract opportunities issued by State, County, and Local Government entities. Marylands Procurement Technical Assistance Program (PTAP) helps companies to identify, bid, and execute on state contracts with federal, state, and local governments.
Contract opportunities are posted by state and local government buyers through Georgia Procurement Register (GPR), a free, Web-based public notice system. DPPas Goods and Services Acquisition Brochures offer procurement process guidelines, and can offer general information shared with other State entities posting contract opportunities. Below, we highlight a few of the entities that issue the majority of Stateas contracts, but vendors should know that other entities, including colleges and universities, can also issue contracting opportunities.
Businesses interested in seeking federal contracts have a variety of options to present their companies to prospective government buyers, explore opportunities available on the federal market, and learn about the competition. Anyone interested in doing business with the federal government can use this system to explore opportunities that are open. Use the Contract Opportunities Search Tool to find federal contracting activity opportunities by location, keywords, NAICS Code, or Requesting Number.
You must either have been awarded a Schedule, GWAC, or MAC contract, or have been working with a current awardee, first in order to gain access to opportunities available through these contract vehicles. Local governments and other SmartBuy participants in Texas may benefit from Statewide Schedules and other managed contracts, as well as TXMAS contracts developed through Federally-Procured Contracts. Commodity and service contracts developed by the SPD are available via the Texas SmartBuy Portal, or purchased directly from contracted providers.
Included are sources for large, agency-specific contracts, and the GSA schedule, which offers government-wide opportunities and may benefit smaller businesses specifically. SBA also has a subcontracting opportunities directory that lists, by state, primes that have subcontracting plans. Schedule 70 is one of the most widely used procurement vehicles within the Federal Government for IT procurements, and is GSAs largest schedule by number of awardees and sales. The GSA Schedule contract is the easiest contract to obtain for a government entity, as it is a long-standing agreement with a commercial industry that provides the United States government with access to millions of commercial services and products at an affordable cost.
One of the most common contracting methods used by the Federal government is the aggregate procurement programs, including GSA Schedules, Governmentwide Acquisition Contracts (GWACs), and other multi-award vehicles from the GSA. Acquisition reform has led to the introduction of a number of new and/or altered acquisition vehicles–multiple award contracts–such as Multi-Agency Agreements and Government Wide Acquisition Contracts (GWACs). For example, the Federal Aviation Administration (FAA), which is set to award up to $4 billion over the next four years, has expanded the use of competitive setting–whereby contracts are opened up solely to small businesses–targeting SDBs, Hubzones, women-owned small businesses, and women-owned and economically-disadvantaged small businesses. Searchable by keywords, this site contains extensive government procurement information, including details about newly awarded contracts, agency summaries, and more.
*This article was written by AI