Cost of Procurement

I am looking for information on the cost of a procurement from RFP/RFQ/IFB to Contract. I am trying to come up with a figure as to how much savings agencies can realize in soft dollars by riding or bridging another agencies contract.

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Joe Williams

I can share my experience. We have a goal of 180 days from RFP release to contract award. For our larger procurements ($25 million or higher in value), I typically use seven full-time SEB members and a dozen or more as-needed support people during that time, which I’ll ignore for this exercise. Using seven members for half a year at, say $135k per person per year, works out to about $500k. Hope that helps.

Chris Hamm

Hi Tom.

GSA makes a lot of the contracts that we think others should use instead of full blown RFPs. I have read a few studies calculating the cost avoidance of using existing vehicles. There was a detailed GAO audit of the GSA Schedule program that suggested that Government-wide, the savings are measured in the hundreds of millions annually.

But to your point, a bottom up estimate is more instructive. Joe Williams’s estimate of $135K per person year is one data point. That is a little high for the direct cost of most of the acquisition community, but low when you add in all the overhead and benefits. I use a number closer to $200K.

From there, the problem is not terribly different than estimating any project. There are established procedures for full & open competition. Granted, there are variations between Part 15 and Part 12, but you could estimate them separately. The steps in full & open are the most robust (e.g., more time up front to synopsize, make set aside determinations, and more on the back end doing cost/price analysis to determine fair & reasonable. Once you have all the documented steps, add durations. Another subtlety I would add is to start with the Acquisition Planning and not RFP release, as the up front time also takes longer without an existing contract.

Next, do the same for RFQs under GSA Schedule or Task Order Requests under GWACs. Eliminate any steps that do not apply (e.g., remove FBO and synopsis, lower level of effort for evaluation due to a lower number of responses, shorter evaluations).

In my office, using an existing vehicle can reasonably cut the acquisition time from a 12 month process down to a 6 month process. From a cost perspective, we find GWACs and GSA schedules to save between 35% and 50% of the overall acquisition cost. Easily a few hundred thousands of dollars saved in productivity gains.

There are many externalities and assumptions that you can consider to arrive at a more exact estimate.

Last note: The lawyers do not like it when we say in an Acquisition Plan that we are avoiding cost by using an existing vehicle and quantifying the amount. I am not sure why.

Jaime Gracia

Tom – I think the use of parametric estimates is really the key to realizing the more accurate costs, which of course assumes the past actual cost reflects true costs within a smaller margin of error on past efforts for use on future work. The most important tools that should be used in any cost structure for IGEs should be OMB A-94, and the GAO Cost Estimating and Assessment Guide. Effectively using these two tools together really can help with the bottom-up estimate, which combined with the analysis of parametric costs, is the best way to develop your estimate.

I would also like to know why the GSA lawyers @Chris mentions do not like the cost estimates of cost avoidance. It gets to the heart of “should cost” estimates, in addition to true cost-benefit and cost effective analyses of OMB A-94, again requirements of a well-structured Acquisition Plan per FAR Subpart 7.105. Isn’t the point of the acquisition mission to service the taxpayer at the best price, and ensuring cost, schedule, and performance parameters are best met with the tools available to the Contracting Officer and the Project Manager?

Peter G. Tuttle

Tom: How do contracting professionals in your agency account for the time they spend on daily tasks? I mention that because if your time keeping is granular enough, you can probably ask (probably beg) folks to keep close track of their activities on selected acquisitions and then compare the results. This way you will have actual data from which to start computing cost avoidance, as opposed to anecdotal, subjective data. Anyway, it’s one approach.