Effective project management is the backbone of successful projects. It encompasses a comprehensive approach, starting from understanding the project's intricate requirements to establishing various project baselines. This guide aims to outline the systematic steps in managing a project, ensuring clarity, efficiency, and alignment with the project's goals and objectives. By following these structured steps, project managers can navigate the complexities of project execution, mitigate risks, and enhance overall project delivery.

Step 1: Understand the Project Requirements

One key directive for all PMs is “Manage to your contract.” This implies having a thorough knowledge and understanding of the contract type. It is also important to recognize that the contract type we proposed or that is required by the RFP may not be the same contract type we negotiated with our subcontractors. There are several factors that impact this decision including the type of subcontractor service or product and subcontractor performance risk.

Understanding the requirements is one of the best risk mitigation strategies a PM can employ. If you were not involved in the proposal process, obtain a copy of the technical and pricing proposal. Your local proposal staff can assist you in obtaining necessary Privia access. Following contract award, proposal documents are maintained as part of the contract file. Your local contracts administrator can assist you with obtaining needed proposal documents.

Compare the commitments and assumptions we made in the proposal with your understanding of the RFP/SOW requirements. Make a list of any ambiguities and anything you aren’t sure you can complete. Obtain clarification of these items from the Contracts Administrator. Remember, that a failure to manage to the contract requirements usually results in significant problems including contractor failure to deliver and requirements scope creep. It is very important for the PM to understand full pricing approach behind the pricing proposal sent to the government customer. These detailed pricing files are maintained in the corporate pricing database. Your responsible contracts administrator can assist you in obtaining the necessary pricing files that detail cost and profit factors used in developing the price proposal. Identify any gaps between what was proposed and your plan. It is not unusual, especially on larger procurements, for there to be a long time between proposal submittal and contract award. Your company salary guidelines and overhead costs may have changed and circumstances such as product releases and resource availability may impact your ability to deliver to the proposed schedule. All these factors will need to be taken into consideration and, where necessary, coordinated with the Contracts Administrator upon contract award.

There are several critical IT support elements that need to be coordinated with your company IT department. These include determining whether your project will be using Government Furnished Equipment (GFE) at the client site or will require your company servers at a company location. Your project’s network access, remote access and system administrator support will also need to be identified. In addition, you should make sure to understand which of your IT equipment will be considered General Support Equipment versus Project Specific Equipment as this will impact your budget and how these items are charged.

There may be facilities requirements that need to be coordinated with the company facilities department to ensure you and your staff have the necessary facility support on day one. Early interaction with your Group Security Team is critical to the successful implementation of any security requirements, such as clearances, facilities, IT systems, etc., identified in your contracts. The understanding of the security requirements could have an impact on your technical approach and the successful implementation of them will have a positive impact on your program’s success.

The first step in the PM Planning process for procurements with sufficient lead time between proposal submittal and contract award is to hold a meeting with the proposal manager and the capture manager to confirm your understanding of the key elements of the project. This meeting will provide much of the background information necessary to begin development of the PM Plan. The following checklist describes the key elements of a proposal hand-off meeting:

• Contract type
• Contract duration
• Technical approach
• Deliverables
• Key milestones
• Key personnel
• Cost proposal
• Project risks
• Contract set-up sheet
• Client stakeholders
• Client issues and hot buttons
• Security requirements

The Project Manager will create a Document Management Matrix (DMM). The DMM provides key details relating to the control and management of project documents, records, and written work products, such as the current version of the document, storage location, monitoring method, back up method and frequency, access rights, and retention period. The initial records to be included in the DMM are specified below:

• SOW
• Questions and/or clarifications submitted during the proposal phase, and responses received.
• Your company's technical proposal (both written and oral materials)
• Cost proposal assumptions (Revenue and Profit details) and associated projected level-of-effort estimates. A copy of the Risk Log prepared during the proposal process.

Other contract or project records are collected and added as work on the project progresses. Pay attention to all the “shall” statements (what your company shall do) and “will” statements (what the government will do) in the request for proposal (RFP). These requirements are usually documented in the proposal traceability compliance matrix. Look to see if there are any ancillary requirements such as special equipment, security clearances, technology specialists, certifications, or unique training. Also, make sure you understand how and when you will be reporting to the customer.

Step 2: Identify all key stakeholders.

It is critical that you identify the key individuals who are project decision makers or influencers. These individuals are not always readily apparent. For instance, many projects are funded by a client’s operational unit whose buy-in is needed both in the requirements phase and to obtain delivery acceptance.

In addition, internal company support organizations play a critical role in ensuring your success. Your efforts to effectively communicate with them in a timely and responsive manner will pay huge dividends. A stakeholder analysis matrix, such as the one shown below, can be used to assess how much and what kind of attention you should pay to various stakeholders.

More complicated programs with numerous stakeholders with conflicting interests can be further analyzed using an influence map. This is a diagram that shows the relationships between every key player.

A Project Authority Matrix is a useful management tool to document the role each stakeholder has in determining your project's success. This example illustrates a simple matrix for a small subset of project stakeholders. This matrix should include everyone you will communicate with during the execution of your project.

[Email us for a Template - Project Authority Matrix]

Step 3: Identify the Staffing Requirements

Assembling your Project Team is one of your most important tasks – getting the right people with the right skills at the right time. This is especially true on professional services contracts and when there is a need for cleared staff or highly specialized key personnel. So, it is important to devote as much time to this as you do to developing your work plan and budget.

This activity usually begins with the development of a project organization and roles and responsibilities matrix – basically, a table describing the role of each key member of the Project Team. This can most effectively be accomplished using an Excel spreadsheet.

Provide a detailed itemization of the resources to be allocated to each major work activity in the project WBS. Specify the numbers and required skill levels of personnel for each work activity. You must also comply with any labor qualification requirements in your contract. Use a separate line item for each type of resource for each work activity.

It is important to get a copy of any teaming agreements to understand the commitments that may have been made as well as RFP and proposal subcontracting requirements so you can factor these into your staffing plans.

You should then develop a staffing approach including the desired mix of internal assignments versus new hires. You should also ascertain internal staff availability and skill match. Also, be sure to balance personnel qualifications and skill levels with contract labor requirements and your budget.

Once you have identified your staffing needs, you should follow the recruiting department’s defined process (see figure for an example) that should be followed to ensure your recruiting needs are met. In parallel, you should also notify your company HR Department of your staffing needs for possible internal fulfillment. Additionally, HR/Recruiters will work with your security team to ensure pre-screening is completed and clearance processing initiated as part of the hiring and on-boarding process.

Fill out any necessary hiring requisitions in your Company's Recruiting System. This workflow system will then route the requisition to the recruiting department for approval and the recruiting search.

Step 4: Build the Work Breakdown Structure (WBS)

A preliminary project work breakdown structure (WBS) will provide you with a structure that defines how the job will be done – a way to organize the work elements and to ensure that all the necessary activities have been considered. By developing an initial version of this before contract award, you will be prepared to start on day one. Not all projects, for instance level of effort labor contracts, require a WBS.

Development of the final WBS should be a team activity to build consensus and understanding of the scope and work plan necessary to complete the project. A WBS should decompose the project deliverables to successively lower levels of detail but no further than necessary to assist with the management of the project. Some of your company projects require earned value management (EVM). In these cases, you will need to factor these discrete work packages when developing the WBS. There are tools like Dekker Tracker that can be used to set-up and track earned value management status.

There are several approaches to define a WBS – for instance, by deliverable, process (function) or by activity. Regardless, it should clearly identify necessary tasks and should be used to develop schedules, cost estimates, skill sets, and project risks.

Deliverable based WBS Example:

Build a computer-based training course

• Section one
  • Plan
  • Implement
  • Accept
• Section two
  • Plan
  • Implement
  • Accept
• Section three
  • Plan
  • Implement
  • Accept

Deliverable based WBS Pros:

• Maps directly to deliverable items
• Provides visibility into costs at the product level.
• Easy to explain to customers.

Deliverable based WBS Cons:

• Performance cost accounts spread throughout WBS.

Recommended use:

• Delivery of infrastructure (i.e., HW and SW) components or whenever low labor costs relative to material costs

Process (function) based WBS Example

Build a computer-based training course

• Plan
  • Develop plan
  • Review with the boss
  • Finalize plan
• Implement
  • Identify requirements
  • Design the system
  • Develop the contents
  • Finalize the training material
• Accept
  • Review with users
  • Incorporate changes
  • Release new course

Process based WBS Pros:

• Maps directly to define your company practices/processes.
• Reusable across multiple projects (i.e., needs only be defined once then tailored for each specific instance)
• Facilitates schedule planning & tracking
• Supports rapid response to customer needs.

Process based WBS Cons:

• Actual product component costs not readily visible
• Requires additional customer interaction to convey benefits of approach.

Recommended use:

• Delivery of repeatable services (e.g., consulting services, integration services, etc.), configured packaged solutions (e.g., ERP system, CRM system, etc.), or whenever schedule is of paramount concern.

Clearly a WBS can be created in different ways to emphasize different views of the project. For example, customers often supply their own product focused WBS. PMs may need an organizational view of the project so that he or she can understand the budgets relative to the organization and follow the cost build-up within the components of the project organization. Other WBS structures might be created to view materials and labor separately or to separate various categories of expense. The need for different views of the work can and often does lead to the implementation of multiple WBSs. In this situation, a mapping across WBSs must be maintained. While the WBS is used to breakdown the work and budget into more easily understood pieces, it also serves as a device to communicate within the project the work to be done and the budget assigned to that work. Too many WBSs on one project can create extra work and cause confusion. For small projects, a single WBS view aligned to meet the Project Team’s needs is best.

It is sometimes easier to picture the relationship between the various work elements in a graphical representation such as the one pictured in the following figure: How the contract cost elements are defined will depend on whether the project is a development contract or a labor-based contract, how you choose to manage the various project elements, and the project progress reporting requirements. Each work element or activity should have a measurable milestone such as a milestone completion review and, if possible, a definable output or deliverable. The start/end events should be clearly defined. The activity duration & cost should be easily estimated. Work assignments should be independent and definable.

Don’t overwork the WBS. It should be only as detailed as necessary to manage the project. Keep in mind the burden being placed on your company support staff of dealing with too many work and cost elements. A general rule of thumb is that a task should be broken down until it is below 80 hours to adequately monitor and control that task. Because it corresponds to a client desired output as opposed to the process, the deliverable (product) based WBS is the preferred Your company standard. However, this may not be possible on certain types of labor support contracts. It is sometimes easier to picture the relationship between the various work elements in a graphical representation such as the one pictured here:

The following Table illustrates the design phase of a company system development project.

This is only a part of the overall WBS but illustrates the decomposition of two major tasks into subtasks. These subtasks are discrete activities that can be measured and, if required, for which earned value can also be tracked.

A preliminary project WBS provides you with a structure that defines the tasks and/or work that needs to be performed to meet project objectives. It organizes and defines the total scope of the project.

Development of the final WBS should be a team activity to build consensus and understanding of the scope and work plan necessary to complete the project.

A WBS should decompose the project activities to successively lower levels of detail but no further than necessary to assist with the management of the project. It is important to understand that this process is about defining how you will do the job not just a regurgitation of the Government's Statement of work.

Some of your company projects require earned value management. In these cases, you will need to factor in earned value discrete work packages WBS elements. Use an earned value tracking tool to set-up and track earned value management status.

The WBS will also need to reflect whether you are planning a fixed price product, a level of effort or a defined task project. Finally, your WBS must also take into consideration quality review activities.

As illustrated in the following Figure, if an activity does not possess all five of these attributes, then decompose or consolidate it further until the answer to all the questions is yes.

How to structure your WBS will be influenced by several factors including: how the contract cost elements are defined, whether the project is a development contract or a labor-based contract, how you choose to manage the various project elements, and the project progress reporting requirements.

Each work element or activity should have a measurable milestone such as review complete and, if possible, a definable output or deliverable.

The start/end events should be clearly defined. The activity duration & cost should be easily estimated. Work assignments should be independent and definable.

One final point – be certain to check all the special requirements in the RFP. For instance, many Department of Defense contracts specify Military Standard 881 that gives specific direction regarding WBS development.

Step 5: Establish the Financial (cost estimate) Baseline

There are two basic proposal cost estimating methods, top-down which is based on similar projects and bottom-up which is developed by estimating each cost or WBS element of a project.

Make sure you understand your cost proposal – including the year one, two and three pricing strategy since you will have to manage to this proposed budget. You can request proposal copies from the contracts department. Where possible, you should support the proposal activities to validate pricing estimates. Prior to award, it is a good idea to create a Microsoft Excel spreadsheet to track weekly or monthly labor hours by staff member fully burdened billing rate so upon award you are ready to keep track of your budget versus actual cost status. You should make sure the final contract burden and profit has been included in the hourly rates.

Since you will be the person responsible for managing to your budget, you should balance staff assignments to stay within proposed labor categories. Clearly this is also critical on fixed price contracts. Pay particular attention to labor rate changes if there has been a significant lapse of time since proposal submittal. Also, study the teaming arrangements with any subcontractors so that you can factor their labor and other costs into your budget. In some cases, subcontractor work share may decrease over time. Or, in other cases, the RFP may require a specific percentage of work be allocated or set aside for different categories of small business.

Financial Rate Terminology

Some of the common terms used to refer to labor rates and cost structure are:

• A labor rate (sometimes called a direct rate) is a term that needs to be modified with either the word unburdened or burdened to make complete sense. An unburdened labor rate is the hourly rate being paid to an employee.
• A sell rate is the hourly labor rate fully burdened with G&A, overhead and fee that your company is proposing to the government for a specific labor category. See your Project Control Analyst to get the financial related overhead structure you should be incorporating into your budget estimate.
• A billable rate or fully burdened rate is the final negotiated hourly labor rate on the approved contract.
• A wrap rate is a factor that when multiplied by an hourly labor rate equals the final fully burdened rate minus profit.
• An operating unit is a collection of similar work within a defined organizational unit that applies the same wrap rate to hourly labor rates. In other words, an operating unit, sometimes called a cost center, has the same overhead & G&A structure.

The following table is an example from a construction project WBS.

This is only a part of the overall WBS but illustrates how you can document the labor hours for each of the WBS subtasks and then calculate corresponding budget dollars by multiplying the hours times the fully burdened labor rate. A general rule of thumb is that a task should be broken down until it is below 80 hours to adequately monitor and control that task.

Check the contract for specific financial reporting requirements. The Department of Defense specifies the CSSR system with associated Contract Data Requirement Lists (CDRL) and Data Item Descriptions (DID). Civilian agency contracts have a variety and, unfortunately, inconsistent set of financial requirements.

Cost Estimation

The PM should understand the two basic proposal cost estimating methods, top-down which is based on similar projects and bottom-up which is developed by estimating each cost or WBS element of a project. If you are not aware how the project was priced in the proposal, then make sure you understand your cost proposal – including the year one, two and three pricing strategy since you will have to manage to this proposed budget.

• On fixed price delivery and performance-based contracts, your cost tracking will be for internal cost management to make sure you manage to your budget. The actual invoices will reflect pre-determined fixed price deliverables.

• On labor hour contracts, your cost tracking will be reflected on the invoices you will be submitting through your biller to the client for approval and payment.

Specify the estimated cost for activity personnel, and include as appropriate, the costs for travel, meetings, computing resources, software tools, special testing and simulation facilities, and administrative support. By comparing a top-down estimate with your own bottom-up estimate, you can identify any areas of staff or schedule risk and, in some cases, the need for additional resources.

Next, with the assistance of your Group Project Control staff, create an Excel spreadsheet (or use an approved Group project control spreadsheet/tool) to track weekly or monthly labor hours by staff member fully burdened billing rate. You should make sure the final contract burden or overhead and profit have been included in the hourly labor rates in your spreadsheet.

Specify the estimated cost for activity personnel, and include as appropriate, the costs for travel, meetings, computing resources, software tools, special testing and simulation facilities, and administrative support. By comparing a top-down estimate with your own bottom-up estimate, you can identify any areas of staff or schedule risk and, in some cases, the need for additional resources.

Ultimately, you are the person responsible for managing to your budget. On labor-based contracts, it is important to balance staff assignments with negotiated labor categories. Clearly this is also critical on fixed price contracts. In some cases, the cost proposal will have been constructed to achieve a lowest credible cost and will not include a management reserve budget amount to accommodate unplanned requirements. This management reserve is a certain percentage of the overall budget that is set aside for unplanned contingencies. In other instances, you might be able to build a management reserve dollar into your budget estimate as a risk mitigation method.

Pay particular attention to labor rate changes if there has been a significant lapse of time since proposal submittal. Also, study the teaming arrangements with any subcontractors so that you can factor their labor and other costs into your budget. In some cases, subcontractor work share may decrease over time. Or, in other cases, the RFP may require a specific percentage of work be allocated or set aside for different categories of small business.

• On fixed price delivery and performance-based contracts, your cost tracking will be for internal cost management to make sure you manage to your budget. The actual invoices will reflect pre-determined fixed price deliverables.
• On labor hour contracts, your cost tracking will be reflected on the invoices you will be submitting through your Biller to the client for approval and payment.

Assigning Charge Numbers

Upon award, your company biller (or designated finance personnel) will set up the contract in your company's cost accounting system (i.e. Deltek or PeopleSoft) according to the internal cost accumulation requirements and billing requirements in the contract. You should discuss your WBS with your designated contract set up personnel, prior to award if possible, so the coding structure they set up is consistent with your WBS. This will make it much easier for you to use the resulting financial reports to manage your project.

Companies have their own unique contract identification guidelines. A contract often has multiple projects or tasks. Each of these will need a unique project ID. Here is a simplified example of a Deltek project structure that was been set-up to be consistent with the project WBS.

Contract #XXXX (Department of Homeland Security)

Project ID #XXXX (specific project or task under this contract)

• 12 – Direct Labor - Customer Site - $50K
• 13 – Direct Labor – Contractor Site - $50K

Contract Line 1 - Labor - $100K

• 20 - Travel - $100K
• 45 – Employee Travel

Contract Line 2 - ODC - $100K

There are often four key individuals who have a specific role in the development of the project financial baseline.

• PM: provides project budget and financial setup information.
• Program control analyst: Assists PM with setting up initial project budget and spreadsheet.
• Finance analyst/accounts receivable specialist sets up new cost, time, labor, and billing structures in the cost accounting system.
• Subcontracts administrator: sets up new vendors and subcontractors in the cost accounting system.

Step 6: Establish the Schedule Baseline

A project schedule may or may not have been required during the proposal process. However, a high-level schedule should be developed as part of the PM Plan prior to award, if possible. It should be consistent with the RFP requirements and the major elements of the initial WBS. As with the other steps in this pre-award section, it might not be possible to develop a schedule until after contract award.

You might also need to adjust the schedule as necessary to meet the proposed end date. However, you need to accept a reasonable management challenge of getting more done for less to avoid adopting a schedule that is unsupportable by the available resources. The WBS, cost estimations and personnel assignments all come together to create a project schedule.

An effective schedule, as illustrated in this figure, should show the interdependence of project tasks.

It should identify project duration and reveal the project’s critical path. This will expose project risks that can then be mitigated. Also, don’t forget to factor facility and IT needs into the schedule.

Create a list of tasks that need to be carried out for each deliverable. For each task identify the amount of effort (hours or days) required to complete the task and the resource(s) who will carry out the task.

Once you have established the amount of effort for each task, you can work out the effort required for each deliverable and an accurate delivery date. Update your deliverables section with the more accurate delivery dates.

The next step is to network the project activities together to define the predecessor (input) relationships and successor (output) relationships between activities to identify the project critical path. This will help you to identify where the highest degree of schedule risk exists on your project - the project critical path.

At this point in the planning, you should use a project scheduling application to create your project schedule. Here is a sample schedule using Microsoft Project:

Input all the deliverables, tasks, durations, and the resources for each task. You can explore various schedule planning and reporting options including:

• Milestone charts
• Activity lists
• Activity Gantt (bar) charts
• Activity networks, critical path networks (project critical path)
• PERT charts

A common problem discovered at this point is when a project has an imposed delivery deadline from the sponsor that is not realistic based on your estimates. If you discover that this is the case, you must contact the sponsor immediately. The options you have in this situation are:

• Renegotiate the deadline (project delay)
• Employ additional resources (increased cost)
• Reduce the scope of the project (less delivered)
• Use the project schedule to justify pursuing one of these options.

Depending on the nature of the project, you might also need to adjust the schedule as necessary to meet the contractual project end date. However, keep in mind that you need to accept a reasonable management challenge of getting more done for less. But, do avoid adopting a schedule that is unsupportable by the available resources.

Step 7: Establish the Contracts Baseline

It is very important for project managers to understand the contract type and the associated technical, schedule and cost management risks. Both you and the contracts administrator should read the contract carefully and make note of any discrepancies or areas of concern.

• Verify contract documents against RFP and proposal.
• Check clauses, terms and conditions, assumptions. (Are they the same as RFP and our proposal?)
• Check payment terms (EFT or check)
• Verify amounts (labor, travel, other direct costs)
• Verify contract type (FFP, T&M)
• Confirm key personnel Requirements
• Check for any contract options

Upon verification that all parts of the documents are as requested/bid, the contracts administrator will negotiate with the government contracting officer and then sign the final contract.

You should then receive a copy of the fully executed contracting documents back from contracts administrator. It is important to note that only the contracts administrator is authorized to commit company resources beyond the scope of the contract.

There are several different contract types, each with its own advantages and disadvantages. Your project management strategy needs to take into consideration the contract type. Familiarize yourself with the FAR Part 16 (available by searching on Google). It describes the federal regulations for each of these contract types.

You need to be conscious of the various clauses in your contract. In the case of task or delivery orders, there are usually additional clauses in the basic contract. Most of the clauses are described in the Federal Acquisition Regulation.

There are two major types of contract clauses: Standard Federal Contract Clauses and GSA Contract Clauses. For contract vehicles like GWACs and IDIQs, must adhere to clauses explicitly written in the task order contract and the overarching contract.

• Firm Fixed Price (FFP). The contractor is paid a price for performing the work and must complete the work to receive this pre-established price regardless of the actual cost incurred by the contractor:
  • If the costs are greater than the price the contractor will suffer a loss.
  • The lower the costs the greater the profits.
  • If the work is not satisfactorily completed on time, the contractor will be liable for breach of contract. This could entail the contract being terminated for default (failure to perform) which may result in the contractor being held liable for any additional costs incurred by the customer to re-procure the contract items from another contractor.
• Fixed Price Incentive (FPI). A fixed-price incentive contract provides for adjusting profit and establishing the final contract price by application of a formula based on the relationship of total final negotiated cost to total actual cost. It is a compromise between a firm fixed-price arrangement and a cost reimbursement one. The major FPI elements include:
  • Target Cost - The amount against which final costs are measured.
  • Target Profit - The profit for target cost at target performance.
  • Target Price - The sum of target cost and target profit.
  • Ceiling Price - The maximum dollar amount for which the customer will be liable.
  • Sharing Formula - An arrangement for establishing final price, expressed as a customer/contractor share ratio, e.g. 60/40.
• Cost Plus Award Fee (CPAF). This is a cost-reimbursement contract in which the fee is earned in part upon satisfactory performance. The fee typically consists of (a) a base amount (which may be zero) fixed at inception of the contract and (b) an award amount that the contractor may earn in whole or in part during performance. The amount of award fee to be paid is subjectively determined by the customer regarding contractor performance relative to the criteria stated in the contract. This determination is made unilaterally and is not subject to dispute.
• Cost Plus Fixed Fee (CPFF). The negotiated fee is fixed at contract inception and does not vary with actual cost. (It may be adjusted, however, because of changes in the work to be performed.) The contract may take one of two basic forms - completion or term.
  • The completion form describes the scope of work by stating a definite goal and specifying a product. The completion form is preferred whenever the work can be defined well enough to permit the development of reasonable estimates to complete. The completion form requires the contractor to complete and deliver the specified product (e.g., a final report) within the estimated cost, if possible, as a condition for payment of the fixed fee.
  • The term form describes the scope of work in general and obligates the contractor to devote a specified level of effort for a stated period. The term form shall not be used unless the contractor is obligated to provide a specific level of effort within a definite period. Under the term form, if performance is deemed satisfactory, the fixed fee is payable at the expiration of the agreed-upon period. (The contractor must provide a certificate that the specified level of effort has been expended.)
• Cost Plus Incentive Fee (CPIF). A cost-plus-incentive-fee contract is a cost reimbursement contract that provides for an initially negotiated fee (target fee) to be adjusted later by a formula (share ratio) based on the relationship of total allowable cost to target cost. This contract type includes the following elements:
  • Target cost
  • Target fee
  • Share Ratio
  • Minimum fee
  • Maximum fee After contract performance, the fee payable to the contractor is determined in accordance with the share ratio.
• Task Order Contracts. Under a task order contract vehicle, a firm quantity of services or supplies is not pre-specified. Instead, this type of contract provides for the issuance of delivery or task orders for the delivery of supplies during the contract. The orders become the firm contract obligation. These contracts are commonly referred to as IDIQs. (Indefinite Delivery,
• Indefinite Item Indefinite Quantity (IDIQ) contracts and Basic Ordering Agreements (BOA). The IDIQ contracts contain a "minimum" order provision that establishes the "consideration" necessary for contract information. BOAs do not commit the customer to procure a specific quantity of services or supplies and therefore are "agreements" in lieu of "contracts" but often establish such things as labor rates. They are often used to purchase management and professional services, studies, analysis and evaluations, and engineering and technical services as well as supplies. The contractor proposes the particulars for each task order. These proposals may be competitive or sole source depending on the contract/agreement. The customer attempts to award multiple task order contracts except when there is only one capable contractor, or the cost of administration is prohibitive. The customer believes that competitive pressures result in better price/terms.
• Time and Materials (T&M) Contracts. The T&M contract provides for payment for direct labor hours at a specified fixed hourly "wrap" rate that includes profit. Materials (i.e., other direct costs and subcontracts) are cost reimbursable and are paid at cost (without profit). A contract-ceiling price is established at award.
• Commercial Contracts. Commercial contracts may be Firm-Fixed-Price or Time & Materials type contracts. In certain situations, commercial customers may establish a Basic Ordering Agreement with fixed labor rates. The actual labor categories and number of hours are separately negotiated for each order under a BOA. FFP contracts include firm specifications on hardware deliverables. Sometimes schedule penalties are included in a contract to provide an incentive for your company to maintain project schedule.
  • Warranties. Usually a 1 or 2-year replacement warranty is the minimum. Warranty reserves may need to be set up to cover the cost of replacements and provide product support.
  • Risk. Commercial contracts are inherently riskier while also offering potentially higher profit margins. Risk is not bad, but it must be understood and mitigated. Backup or Contingency plans are essential in successfully dealing with risk. Also, the higher the risk the more the need to make sure management understands the contract.
  • Intellectual Property. If a customer pays for the development of a product, it is not unreasonable to provide the customer with some sort of exclusive sales rights for their specific components. In general, your company maintains all ownership and other rights to the design.
  • Indemnification. If a component is designed by your company and the Intellectual Property rights reside with your company, customers will want your company to provide them with some sort of patent infringement protection from third party lawsuits. This is not unreasonable, but the cost risk should be capped at a value acceptable to business unit management. This typically means that the cost risk is limited to the value of the contract.
• International Considerations. Proper and timely review of export licensing requirements is critical to your business. Export of technology, know-how, and hardware are a major concern in international contracts and even in domestic contracts with foreign national employment, VISAs, visitors, consultants, or access to programs. Your company may be involved in many areas and technologies that are controlled because of DOD and U.S. Government interests.

Export laws were enacted to control the flow of vital U.S. technology for national security purposes, implement foreign policy, control U.S. technology, and to halt the proliferation of weapons of mass destruction. The Department of State (DOS) is charged with controlling exports and defense services under the International Traffic in Arms Regulations (ITAR), which contains the U.S. Munitions List (USML). The ITAR restricts the export of USML articles and services that may be used for military applications. The Department of Commerce (DOC) implements and enforces the Export.

Administration Regulations (EAR), which contains the Commerce Control List. The DOC administers the export of commercial and dual use items, and their associated software and technical data.

In some cases, exports governed by the EAR require prior written assurances from the foreign customer that the export not be further released to other countries. Specific statements may also be required on the shipping documents. The use of exemptions may require written reporting. The following activities, if conducted prior to obtaining DOS and/or DOC approval, could constitute a violation of a U.S. Law:

• Talking to or emailing a foreign person - here in the U.S. or overseas - about data/technology.
• Permitting access or conducting a plant tour through sensitive areas (areas that are not necessarily classified) showing manufacturing know-how.
• Carrying technical documents (or memory device) on a business trip overseas.
• Shipping parts, components, or hardware.

The key steps are to identify what is an export; determine when the export may/will take place; if there are any foreign national issues, and take adequate measures to obtain advance approval from the DOS or DOC. Not all government contracts are the same. Some place a greater financial and performance risk on the client and others on the contractor. It’s extremely important to know the difference. Here is a very rough overview of this risk continuum.

• Cost-plus fixed fee – Kind of like investing in certificates of deposit. A lower known profit with no upside potential but minimal financial risk.
• Cost-plus award fee – Either some or all the potential profit is awarded based on pre-defined performance criteria. A good deal for reliable companies – not so good for poor performers.
• Cost-plus incentive fee – Same protection from overruns but with performance-based fee.
• Time and materials – Depending on how the contract is written, there is the potential for higher profit if you hire and manage to your negotiated labor rates. The opposite is also true.
• Cost-plus with rate limits – Something for everyone and, if you ask some people, nothing for anybody!
• Firm-fixed price level of effort – Too many variables that can go wrong for labor contracts. Usually best to avoid these.
• Performance based – Not “officially” a contract type. But very suitable when the government knows what it wants. When it doesn’t, this can be a nightmare. Hence it is higher on the risk spectrum.
• Fixed price deliverable – Depending on the product or service to be delivered, this isn’t necessarily that risky. But it is particularly onerous for system development projects including commercial off-the-shelf software procurements that need considerable enhancements to meet the customer's real, often unstated, requirements.

iMMIX Group has produced an excellent overview of the different contract types and their key differences in the following document:

[Contract Type Diagram]

Step 8: Establish the Subcontracts Baseline

Most contractors and project managers eventually face the need to engage the support of one or more subcontractors to win and then perform on government contracts. There are several project initiation requirements that involve subcontract management. Companies doing business in the United States are required by FAR Part 6 to provide for full and open competition when selecting subcontractors to perform work on a government contract. This competitive process is usually accomplished during the proposal phase in compliance with your company's procurement policies. In limited cases, a subcontractor may be selected on a sole source basis if the written justification complies with the FAR.

Subcontractors – individuals or companies – must sign a subcontract with your company to be able to perform work. Only the Subcontracts Department can sign a subcontract. In many cases, your company itself is the subcontractor in which case the contracts department will be negotiating and signing a subcontract with your prime contractor. There are several reasons your company might use a subcontractor. These include:

• Positive relationship with client
• To help with workload
• Unique skill set or technology
• Unique key personnel
• Extra qualifications necessary to win
• Low-cost reliable provider
• Strategic Your company partner
• Socio economic requirements

Finalize which parts of your statement of work and corresponding WBS tasks each subcontractor will perform. This is usually described at a high level in an attachment to the teaming agreement but needs to be clarified as necessary to be compatible with the final contract requirements and project WBS.

• Subcontract Agreement. The subcontract agreement formally defines the work to be performed by the subcontractor, and the terms and conditions for performance of that work. It is required for all subcontractors providing services. The subcontract agreement may be drafted prior to the award of the project contract but is not finalized until after project award (for fixed price contracts subcontracts should be negotiated prior to project award). Specific items from your company's contract with the customer flow down into our agreement with the subcontractor.

The subcontract management plan forms the basis for the technical work to be performed under the subcontract by major subcontractors and should be an attachment to the subcontract agreement. The business unit develops the technical aspects of the plan, and your company subcontracts representative develops the contractual aspects. Note that your company policy requires that an authorized company representative, typically a contracts manager, sign the agreement on behalf of your company.

• Purchase Order. The purchase order formally defines the services and products to be delivered by a vendor and the requirements for delivery. A purchase order is required for all subcontractors providing services and products. A request for quote may be drafted prior to the award of the project contract for costing purposes, but the purchase order is not issued until after project award or approval of a work authorization permitting the order to be placed. The subcontract management plan forms the basis for identifying purchase order line items. Your company's delivery organization identifies the specific services and/or products needed via a purchase requisition (PR) and the company procurement representative prepares the purchase order. Prepare a purchase requisition in the cost accounting system to include this subcontractor statement of work. Assist the Subcontracts Administrator by reviewing your company's prime contract and the intended subcontract contract to assure that all applicable Ts&Cs (which is contract slang for terms and conditions) such as contracts clauses and invoicing have been incorporated.
• Support the negotiation process between your company and the subcontractor. Ensure that the appropriate management personnel approve the intended negotiations prior to actual implementation. All subcontract commitments and scope changes should be approved by a company executive and the Contracts Director. Your company's Subcontracts Administrator should be involved in all contractual communications with your subcontractors. Fixed price subcontracts have some additional requirements including the need to agree on an interim payment schedule that is tied to time or specific project deliverables. The subcontractor payment schedule also needs to be synchronized with your company’s payment schedule.

Step 9: Establish the Facilities Baseline

Having the appropriate facilities and information technology (IT) support infrastructure to support your project is a critical component of successful product or service delivery.

There are numerous possible facilities configurations depending on whether your project staff will work at your company facilities or at a government site or both. Your company's facilities manager can help you define these requirements and coordinate with your client to ensure you and your staff’s office needs are met. Because of the criticality of these requirements, it is wise to identify and communicate these needs as soon as possible. Where possible, this planning should begin prior to contract award.

Step 10: Establish an Information Technology Baseline

IT requirements are not always completely spelled out in a proposal. So, it is incumbent on the PM to carefully assess these needs both from a Project Team support perspective and IT system solution delivery needs. Identify IT hardware and software needed to support Project Team daily activities and to implement engineering prototyping, design, development, and test requirements.

Your company's IT department can assist with this assessment. Where necessary, additional and/or changed IT requirements may have to be factored into your revised budget and then discussed with your client through the contracts department. In some cases, some of this hardware and software will be provided as Government Furnished Property by your customer.

Step 11: Establish the Security Baseline

Many of your company’s contracts require cleared personnel and access to classified information. Having a good and successful security program equals good business for your program and the company’s reputation. You are a critical element of your programs security posture by setting a good security example for your team. As with all support functions, there are security compliance requirements that are contractually binding. Your security department can help you find the balance between your requirements and the security compliance requirements. Successful customer security inspections of your program and the company, along with full compliance with security requirements and minimal security incidents, will ensure high customer satisfaction and repeat business.

The details of the security requirements for your contract are most often spelled out in a DD-254 (Contract Security Classification Specification), the statement of work (SOW), Section H, J, or some other part of the contract depending on the customer. To try and explain all the variations from our customers here would be nearly impossible, therefore we have identified a few things for you to think about and address as you begin your project planning.

1. Involve security early - preferably in the capture and proposal process. It is easier to tailor a security program and support if it’s resourced and written into the proposal.
2. Security can be a direct charge.
3. Security costs should be part of your program plan. Need a safe? Lock replaced? Access control system? Alarms? Classified IT system? Facility?
4. Clearance processing times can vary from a few days to months and is a function of the clearances required, who you hire for the team, and the customer. Your understanding of the customer specific timelines will help you plan your program schedule, budget, and ability to deliver your services or products.
   • Clearances are contract specific. If a person does not need a clearance to work on a contract, they are not authorized to have one.
   • Clearances or accesses are not always transferrable between contracts, customers, or companies in the case of a new hire.
5. Facilities and IT systems needed to process classified information may have to be designed, built, and approved before you can perform the work. Of course, you may be able to take existing facilities and IT systems and convert them, but this is not always the case. The costs of setting these up may or may not be reimbursable under the contract.
6. Contracts are issued to legal entities, not the Groups. If you wish to use other company legal entities on a project, unless they are specified in the contract, for security purposes you must treat them like a subcontractor. Many companies use Inter-organization Work Agreements as the subcontracting mechanism.
7. Security works with Recruiting and Human Resources to ensure candidate employees are screened and clearance processing starts during the on-boarding process. Your action is to provide security with the essential information such as level of access required, a written justification and the contract number. So, no contract number – no clearance. Clearances are tied directly to a contract.
   • You may not submit clearance requests to a customer until a signed offer letter is on record with your company. You can, however, initiate all the paperwork and have it ready.
   • You cannot do a company required background check until you receive a signed consumer authorization release from the perspective employee. Normally an offer letter will not be issued until the company background check is completed.

The bottom line is your company security department is part of your team. Talk to them often!

Step 12: Establish a Material/Purchasing Baseline

Depending on the type of project, you may have numerous material requirements. You and your Project Team will need to have these ordered by your company's Procurement Specialist in accordance with approved government acquisitions procedures. A Procurement Specialist can walk you through the standard company procurement process so that you don’t deviate from accepted company and government practices.

It is important to identify all material on a bill of materials and then carefully communicate these requirements using your company purchase requisition via the cost accounting system and determine as soon as possible if any of these items fall on the project critical path. The PR-to-purchase order approval process can take up to several weeks.

A bill of material (BOM) is a descriptive listing of the components (hardware and software) that make up a sub assembly and/or an end item product. Typically, a BOM is generated by engineering and priced by material estimating and/or purchasing based on the descriptions provided by the engineers. The organization of the BOM should be tiered from the lowest sub-assembly level to the end item. This type of BOM is known as an “Indentured Bill of Material.” BOMs are usually listed as parts that make up an end item without the necessity of sub-assemblies. The following table is a simple BOM for the same end item shown in indentured and non-indentured form.

For purposes of obtaining a quote and to ensure the adequacy of the BOM, the function (engineering, procurement) responsible for each piece of information should be noted.

Step 13: Establish the Configuration Change Control Baseline

The project manager of a new project needs to define the process for measuring, reporting, and controlling changes to the project requirements. The impact of requirements changes on product scope and quality as well as changes on project schedule, budget, resources, and risk factors also need to be managed. Here is an example of the company's configuration management process:

Specify the schedule control activities by identifying the processes to be used for the following purposes:

• To measure the progress of work completed at the major and minor project milestones.
• To compare actual progress to planned progress, and to implement corrective action when actual progress does not conform to planned progress.
• Specify the methods and tools that will be used to measure and control schedule progress.
• Identify the objective criteria that will be used to measure the scope and quality of work completed at each milestone, and hence to assess the achievement of each schedule milestone.
• Specify the methods and tools that will be used to track the project cost. Identify the schedule milestones and objective indicators that will be used to assess the scope and quality of the work completed at those milestones.
• Specify the use of a mechanism such as earned value tracking to report the budget and schedule plan, schedule progress, and the cost of work completed.

Indicate whether earned value tracking will be used to report the budget and schedule plan, schedule progress, and the cost of work completed.