Pricing Models
Firm Fixed Price (FFP)
- Fixed total price
- Contractor assumes risk
- Higher profit potential
- Best for defined scope
Time & Materials (T&M)
- Labor rates + materials
- Flexible scope
- Shared risk
- Ceiling price limits
Cost Plus Fixed Fee (CPFF)
- Reimbursable costs + fee
- Government assumes risk
- Lower profit margins
- Complex requirements
Cost Build-Up Example
| Cost Element |
Rate/Amount |
Calculation |
Total |
| Direct Labor |
$75/hr × 2,080 hrs |
Base salary |
$156,000 |
| Fringe (35%) |
35% of labor |
$156,000 × 0.35 |
$54,600 |
| Overhead (65%) |
65% of labor+fringe |
$210,600 × 0.65 |
$136,890 |
| G&A (15%) |
15% of subtotal |
$347,490 × 0.15 |
$52,124 |
| Fee/Profit (8%) |
8% of total cost |
$399,614 × 0.08 |
$31,969 |
| Total Price |
|
|
$431,583 |
Competitive Pricing Strategies
Price to Win
- Analyze competitor rates
- Review historical pricing
- Understand budget constraints
- Balance price vs. technical
Value Pricing
- Emphasize cost savings
- Highlight efficiencies
- Demonstrate ROI
- Risk reduction value