Best Practices in Subcontracting

Report
Best Practices in Subcontracting:
Lessons Learned from $1 Billion of Contract
Performance as both a Prime Contractor and
Subcontractor
Presented by: Carlos Garcia
Owner / CEO
KIRA, Incorporated
Date: June 17, 2014
Agenda
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Introduction
Teaming as a small business
Case Studies and Lessons Learned
Teaming as a large business
Important Questions to Ask Before Teaming
Predictions
Introduction
• What does the world of subcontracting look
like?
– Yesterday, Today and Tomorrow
• What are the different ways to partner on a
contract?
– Large and Small Business Subcontracting
Differences
Teaming as a Small Business
Let’s begin with two case studies
Case Study: KIRA and CH2M HILL
• Partnership began when KIRA was a small
business
– Won Philadelphia US Army Corps of Engineers MATOC (small
business set-aside)
– KIRA was a subcontractor to CH2M HILL on Post-Katrina repair
work at Keesler Air Force Base in Mississippi
– Won USAF Academy BOS contract
• Full and open joint venture with KIRA as 40% owner
• KIRA provided 3 of the 5 past performance references
• Contract value of $200 million
• Carlos Garcia serves on the Board of Directors
Case Study: KIRA and CH2M Hill (Cont.)
• KIRA and CH2M HILL have entered into a
teaming partnership to bid additional
contracts with $700 million in KIRA value
– First bid to be submitted later this year
– KIRA will provide 3 of the 5 past performance
references
– Total value of this relationship, including future
teaming, totals over $1 billion
Case Study: KIRA and CSC Corp.
• Won Army BOS contract at Fort Carson
– KIRA is prime and CSC is the principal subcontractor
– Value of $300 million
• Won Keesler Air Force Base BOS
– CSC is prime and KIRA is the principal subcontractor
– Full and open contract
• Won Navy BOS contract at AUTEC
– CSC added KIRA to their team as their largest subcontractor
even though there was no small business subcontracting
required
Case Study: KIRA and CSC Corp. (Cont.)
• We are currently exploring additional full and
open contracts to partner on
• Total value of the relationship is over $400
million
Lessons Learned
• Focus on a small number of large Prime
contractors
– This helped us win three major contracts with
three different companies
– We also continue to have strong relationships and
continue to bid with these companies today
Lessons Learned (Cont.)
• Start by building strong relationships with large
business partner companies
– Strengthen these relationships through many trips
to their headquarters
– Develop relationships with multiple executives
– Understand their internal goals and objectives
Teaming as a Large Business
The Challenge
• Most contracts large businesses would like to
bid are now Small Business Set-Asides
– 90% of our bids, going forward, will be as a
subcontractor to a small business
• Large businesses must partner with small
business in order to survive
– Ten of our direct competitors have been acquired
by larger companies
Have a Strategy
• Determine the right solicitations to bid
– Contracts must be large enough for your business to
get a reasonable share
– The work that you perform must be in your sweet
spot
– Choose to only bid contracts where you can validate
your estimate before you submit
– Only bid contracts that you believe will be awarded,
not cancelled
Important Questions to Ask a
Potential Partner before Teaming
Determine the right small business partner
• Does the small business have a specific contract
vehicle/subsidiary eligible to bid?
• Is the small business willing to invest the appropriate
amount of money in the bid effort?
• Does the small business possess the appropriate team of
BD employees and consultants to win?
• Is the small business and its leadership willing to make
this bid a priority and limit the number of other bids they
submit?
• Is the small business prepared to price the proposal, including G
& A and fee, competitively?
Questions (Cont.)
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Is this bid a priority to the small business?
Has every possible naysayer signed off on the bid?
Are the internal politics stable at the small business?
Is the CEO secure at the small business?
Does the small business have the resources to both bid
and execute the contract?
• Does the small business have a history of lawsuits?
Questions (Cont.)
• Can the small business provide the names of large
businesses that they have successful multiple contract
relationships with on non-sole source contracts? Does
the small business have past performance similar in
size and scope to the opportunity under consideration?
• Will the small business past performance contract
performance align with the past performance submittal
requirement on the opportunity under consideration?
Questions (Cont.)
• Can you obtain third party verification that the past
performance of the small business was acceptable?
• Can you obtain third party verification of the financial
condition of the small business and its owners?
• Will the small business agree to an equitable teaming
agreement?
• Will the small business agree to an equitable
subcontract agreement?
Why should you go to such lengths
before teaming?
• These agreements involve hundreds of millions
of dollars
• These agreements will last for at least five years
• One bad contract wipes out the profit of 20
good contracts
• Most teaming agreements don’t actually win
contracts
• Most companies will not team twice
Predictions
Predictions
• ANCs that are not best-in-class in a specific industry
will eventually fail
• ANCs that do not lower their costs and prices to the
levels of large businesses will eventually fail
• ANCs that fail to focus on a limited number of
industries, and exit the ones they are not best-in-class
in, will eventually fail
• Prices in the most industries are falling
– Make plans to lower your prices by 10% on upcoming bids
Predictions (Cont.)
• Most large businesses (other than my company)
will no longer be willing to team with ANCs for
certain work
• Large businesses are being rolled up into bigger
companies. Those companies have little interest
in $5 million/year subcontracts
• There are fewer and fewer large businesses with
current past performance on contracts less than
three years old
Predictions (Cont.)
• There will be fewer full and open
opportunities for large business in many
industries, such as facilities maintenance
• Build your company according to these new
realities. We will be one of very few large
businesses structured, specifically, to be a
best-in-class principal subcontractor in
facilities maintenance
Contact Information
Carlos Garcia
(303) 619-2275
[email protected]
Kim Thorpe
(720) 590-9704
[email protected]
Booth No. 16
Questions?

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