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 • • • • • • 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.) • • • • • 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?