Lessons from Brittany Chiang
In the complex world of government contracting, pricing strategy often determines the difference between winning and losing contracts. At the October 2024 Minority GovCon Business Summit, Brittany Chiang, CEO of Flatter Inc., a $32 million federal contractor, shared invaluable insights into the intricate art of pricing government contracts.
Understanding the Strategic Landscape
"Before you even think about pricing, you need to figure out what you're trying to accomplish," Chiang emphasized during her presentation. "Are you a low-cost provider? Are you going to try to beat an incumbent on cost, or are you going to try to beat them on innovation?" (B. Chiang, personal communication, October 19, 2024).
Breaking Down the Wrap Rate
The foundation of government contract pricing lies in understanding wrap rates, a concept Chiang thoroughly explained during her session. At its core, wrap rates consist of two major components: direct costs and indirect costs. Direct costs encompass the fundamental expenses directly tied to contract execution, including base labor rates, equipment, materials, and travel expenses. These costs form the foundation upon which all other pricing elements are built.
Indirect costs, on the other hand, represent the broader operational expenses necessary to sustain your business while executing government contracts. These include fringe benefits, which typically account for approximately 30% of direct labor costs, overhead expenses required to maintain operations, and General and Administrative (G&A) costs. The final layer is profit margin, which Chiang suggests should target 15-20% for healthy, sustainable contracts.
Real-World Example: The Math Behind the Rate
To illustrate these concepts, Chiang walked attendees through a practical example that clearly demonstrated how a base salary transforms into a government billing rate. Starting with a direct cost of $100,000, she showed how adding fringe benefits ($30,000), overhead ($25,000), and G&A expenses ($25,000) results in a total cost of $180,000. This calculation produces a wrap rate of 1.8, a figure that serves as a crucial benchmark for government contracting success.
Key Strategic Insights
Market position plays a vital role in government contract pricing. Successful contractors must develop a deep understanding of their competition's pricing strategies while maintaining awareness of their customer's budget constraints. This knowledge enables strategic positioning within the market, allowing contractors to differentiate themselves effectively while remaining competitive.
Price realism represents another crucial element of successful government contracting. Contractors must ensure their rates are not only competitive but also sustainable over the long term. This requires careful documentation and justification of pricing structures, along with consideration of long-term contract sustainability. Without proper attention to price realism, contractors risk either leaving money on the table or pricing themselves out of opportunities.
Compliance requirements form the third pillar of successful pricing strategy. Contractors must understand and adhere to Defense Contract Audit Agency (DCAA) requirements, maintain proper accounting systems, and thoroughly document price reasonableness. These elements work together to create a pricing approach that satisfies both government requirements and business sustainability needs.
Common Pitfalls
Underpricing represents one of the most dangerous traps in government contracting. Many contractors, especially those new to the field, fail to account for all costs or submit unsustainably low bids in an attempt to win contracts. This approach often leads to financial strain and can damage a company's long-term viability in the government contracting space.
Overpricing, while less common, can be equally problematic. Contractors who price themselves too high risk losing competitiveness and missing market expectations. This can lead to a cycle of lost opportunities and declining market share, making it increasingly difficult to maintain a presence in the government contracting arena.
Documentation gaps present a third major pitfall. Insufficient cost justification, missing price reasonableness documentation, and inadequate accounting records can all lead to rejected proposals or compliance issues. Proper documentation serves not only as a defense against audits but also as a tool for understanding and improving pricing strategies over time.
Action Steps for Success
Immediate Actions:
Review current pricing methodology
Document direct and indirect costs
Research competitor pricing strategies
30-Day Goals:
Develop pricing templates
Establish accounting systems
Create price-to-win strategies
90-Day Goals:
Implement compliant accounting system
Develop competitive rate cards
Build pricing models for different contract types
Looking Forward
Chiang emphasized that successful pricing in government contracting is both an art and a science. "You need to understand your numbers inside and out," she advised, "but you also need to understand your market position and how to strategically price for growth."
Take the Next Step
Ready to master the art of government contract pricing? Join us at the April 2025 Minority GovCon Business Summit in Fredericksburg, VA. Our expert speakers, including industry leaders like Brittany Chiang, will provide deeper insights into:
Advanced pricing strategies
Competitive positioning
Cost analysis techniques
Compliance requirements
Growth strategies
Don't miss this opportunity to transform your government contracting business. Early bird registration is now open.
References
Chiang, B. (2024, October 19). The Art of Pricing Government Contracts [Conference presentation]. Minority GovCon Business Summit, Fredericksburg, VA.
Defense Contract Audit Agency. (2024). Contract Audit Manual. Retrieved from [DCAA website]
About the Speaker
Brittany Chiang, PMP, ICF ACC is the Chief Executive Officer of Flatter, Inc., a premier support services company delivering professional services to Defense and Homeland Security Federal customers. With over 21 years of experience at Flatter, Inc., Brittany leads a $32 million federal contracting organization that holds both prime and subcontracts with DHS, DOS, DoD, and other civilian agencies. She holds a Master's Degree in Homeland Security from The George Washington University and brings deep expertise in government contracting, program management, and pricing strategies.
Connect with Brittany:
LinkedIn: www.linkedin.com/in/bechiang
Company Website: www.flatterinc.com
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