Course 2
Pricing Government Contracts Deep Dive
Teaches users how to build realistic prices from cost, risk, labor, subcontractors, options, and cash-flow requirements instead of guessing or racing to the bottom.
What This Course Helps You Do
- Understand contract type risk.
- Build direct, indirect, and profit elements.
- Calculate loaded labor rates.
- Price wage/fringe, option years, CLINs, and subcontractors.
- Use walk-away pricing and cash-flow analysis.
Templates
Module 1Pricing Mindset
2 lessons
Lesson 1
Price Is Not Just a Number
Price is a promise to perform at a defined amount. It must cover the real cost of labor, materials, subcontractors, compliance, overhead, cash flow, risk, and profit.
Lesson 2
The Bad Win Problem
A bad win happens when the contractor wins at a price that cannot support compliant performance. Bad wins damage cash flow, quality, labor compliance, customer trust, and future past performance.
Module 2Contract Type and Pricing Risk
3 lessons
Lesson 1
Firm-Fixed-Price
FFP shifts significant cost risk to the contractor. If the contractor underestimates labor, materials, or workload, the government does not automatically increase the price.
Lesson 2
Time-and-Materials and Labor-Hour
T&M/LH pricing uses labor rates and hours, often with ceilings and support documentation. Rates must include wage, fringe, payroll burden, overhead, G&A, and profit as allowed.
Lesson 3
Cost-Reimbursement and Hybrid Structures
Cost-reimbursement requires allowable cost discipline and usually stronger accounting systems. Hybrid contracts combine different risks across CLINs.
Module 3Cost Model Basics
2 lessons
Lesson 1
Direct Costs
Direct costs are tied to the contract: labor, materials, travel, subcontractors, equipment, shipping, and contract-specific tools. They should be tied to scope and assumptions.
Lesson 2
Indirect Costs and Profit
Indirect costs include overhead and G&A that support the business. Profit should compensate for risk and capital use after costs are covered.
Module 4Labor Pricing
2 lessons
Lesson 1
Loaded Labor Rates
Base wage is not labor cost. Loaded labor may include wage, fringe, payroll taxes, workers comp, benefits, PTO, holidays, nonproductive time, overhead, G&A, and profit.
Lesson 2
Wage Determinations
For labor-covered contracts, wage determinations can set required wage and fringe. Pricing must map actual duties to classifications and include fringe obligations.
Module 5CLINs, Options, and Subcontractors
3 lessons
Lesson 1
CLIN Pricing
CLINs define how work is priced, funded, invoiced, and evaluated. Each CLIN may have different unit, quantity, risk, and documentation rules.
Lesson 2
Option Years and Escalation
Option years must account for labor, materials, inflation, wage changes, and performance learning. Do not copy base-year pricing blindly.
Lesson 3
Subcontractor Pricing
Subcontractor quotes should include scope, assumptions, exclusions, labor basis, validity, and compliance requirements. Prime markup should account for management burden and risk.
Module 6Price Evaluation and Cash Flow
2 lessons
Lesson 1
Reasonableness, Realism, and Cost Realism
Price reasonableness asks whether the price is too high. Price realism asks whether it is too low for the proposed approach. Cost realism is used in cost-type contexts to evaluate probable cost.
Lesson 2
Cash Flow and Walk-Away Price
A contract may be profitable on paper and still require cash the business does not have. A walk-away price is the lowest price the company can accept without creating unacceptable risk.
Final Exercise
- Select a labor-heavy opportunity.
- Build a cost model with direct, indirect, profit, wage/fringe, options, subcontractors, and cash-flow forecast.
- Determine walk-away price.
Final Takeaway
Pricing is the discipline of proving that the company can perform the contract compliantly, profitably, and without running out of cash.