Organizational Changes for Increased Competitiveness
Those of you responding to RFPs, getting business by winning government grants and contracts learn a new rule. In the past, cost was not a determining factor to win a contract. If you could deliver exceptional results, you could have been funded regardless the fact that your proposal might not have been the cheapest. Now, you are competing with your cost proposals as well.
Discussions on necessary changes to make you more competitive for current and future work with local, regional and the federal government are must-haves. Let’s take a quick look at what the major discussion items are for these purposes:
Your direct cost (labor hour in particular) is the biggest item on your proposal. Comparing pay ranges to your competitors on the marketplace would be able to pinpoint a very telling issue you need to look into. If your employees are making 5-10-15% more than your competitors, you need to look into it.
Changes to fringe benefits could be very sensitive. Fringes include paid time-off, holidays, insurance payments such as health, dental, vision, long- and short-term disability. Also, employer taxes, 401K or other retirement plans are included in this pool. Employees are usually most sensitive to changes to insurance benefits. You may be able to change the carry-over limits, or change the vacation-sick leave ratio with positive impact to your bottom line but without major disagreement of your workforce. However, it may not be enough.
It is important to understand why fringes are as imperative to look at as it can be. In terms of government billing (and proposal preparation), direct labor equal the hourly rate of the employee times your fringe rate! So if you are working on a cost reimbursable proposal it is imperative to be sensitive to this matter. The below example demonstrates what it means:
Joe, a manager, is proposed on the upcoming grant application. He makes $50/hour. The company’s fringe rate is 30%. Putting all these together, the direct labor cost for the funding agency to have Joe working on the job is $65/hour. ($50 x 1.3 = $65)
You need to ask yourself the question: Is it my employee’s hourly rate or my company’s fringe rate that makes me less competitive? Or maybe both?
When it comes to overhead and G&A costs, your office space and “corporate officers” come to mind. Reducing office space needs could be achieved by being creative when offering telecommuting schedules. With the Cloud being available from everywhere, it is much more a question of finding positions that could telecommute.
The cost of a traditional corporate office is a very different question. Every business needs to look into options to outsource accounting, bookkeeping, HR, web issues and related matters. Need to look at the costs, risks and benefits. With the today technological advancements in virtual services, it may offer significant savings increasing the company’s competitiveness.
Remember, staying competitive and profitable in the today’s marketplace requires old-school and new-bee leaders to look into options that may first look overachieving or out of your comfort zone. It makes business sense to see how even small changes could increase your competitive edge when it comes to cost.
My name is Sylvia Pacher and I am always here to assist your company with strategic advice and recommendations on how to make your company more competitive and profitable in the today’s marketplace. Please feel free to reach out to me personally to discuss your special needs and challenges (spacher@myvirtualcorporate.com).
Discussions on necessary changes to make you more competitive for current and future work with local, regional and the federal government are must-haves. Let’s take a quick look at what the major discussion items are for these purposes:
Your direct cost (labor hour in particular) is the biggest item on your proposal. Comparing pay ranges to your competitors on the marketplace would be able to pinpoint a very telling issue you need to look into. If your employees are making 5-10-15% more than your competitors, you need to look into it.
Changes to fringe benefits could be very sensitive. Fringes include paid time-off, holidays, insurance payments such as health, dental, vision, long- and short-term disability. Also, employer taxes, 401K or other retirement plans are included in this pool. Employees are usually most sensitive to changes to insurance benefits. You may be able to change the carry-over limits, or change the vacation-sick leave ratio with positive impact to your bottom line but without major disagreement of your workforce. However, it may not be enough.
It is important to understand why fringes are as imperative to look at as it can be. In terms of government billing (and proposal preparation), direct labor equal the hourly rate of the employee times your fringe rate! So if you are working on a cost reimbursable proposal it is imperative to be sensitive to this matter. The below example demonstrates what it means:
Joe, a manager, is proposed on the upcoming grant application. He makes $50/hour. The company’s fringe rate is 30%. Putting all these together, the direct labor cost for the funding agency to have Joe working on the job is $65/hour. ($50 x 1.3 = $65)
You need to ask yourself the question: Is it my employee’s hourly rate or my company’s fringe rate that makes me less competitive? Or maybe both?
When it comes to overhead and G&A costs, your office space and “corporate officers” come to mind. Reducing office space needs could be achieved by being creative when offering telecommuting schedules. With the Cloud being available from everywhere, it is much more a question of finding positions that could telecommute.
The cost of a traditional corporate office is a very different question. Every business needs to look into options to outsource accounting, bookkeeping, HR, web issues and related matters. Need to look at the costs, risks and benefits. With the today technological advancements in virtual services, it may offer significant savings increasing the company’s competitiveness.
Remember, staying competitive and profitable in the today’s marketplace requires old-school and new-bee leaders to look into options that may first look overachieving or out of your comfort zone. It makes business sense to see how even small changes could increase your competitive edge when it comes to cost.
My name is Sylvia Pacher and I am always here to assist your company with strategic advice and recommendations on how to make your company more competitive and profitable in the today’s marketplace. Please feel free to reach out to me personally to discuss your special needs and challenges (spacher@myvirtualcorporate.com).
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