International Government Contracting Workshop:

Contracting / Business Development – Mistakes Not to

MakeMarch 2017

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Agenda

Marketing, Proposal focus

Price-to-Win Questions

Basis of Estimate

International workforce considerations

Risk register

Cash flow considerations

Contract close-out

Lessons-learned

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International Business Lifecycle

Marketing Proposal Execution Closure

• General marketing, other pursuit activity

in-country.

• Assessment of Export, counterintell., and

competitive risk

• Cross-functional expertise identified,

consulted.

• Legal entity and con ops research.

• SOFA / cooperative agreements.

• Work visa, taxes

• Sponsorship and other third party vendor

quals.

• Specific opportunity identified.

• Preparation of proposal, BOE /

pricing.

• Legal entity setup, green-fielding or

changes to existing entities.

• SOFA / cooperative agreement

implementation.

• Start SOFA, work visa, etc.

• Final quals for candidate (CRC,

Medical, SPOT, etc. ).

• Contract performance and /

or sale delivery.

• Local entity operational.

• Knowledge workers -employees in-

country temporarily or long-term. Local

nationals under local company contract.

• Relocation, travel, work visa, SOFA, etc.

• Expatriate management and administration.

• Contract concluded.

• Final delivery of product.

• Termination of assignments,

repatriation of employees.

• Final invoices.

• Close tax issues.

• Close reserves.

• Contract close.

• Finalize contract expense records.

• Legal entity disposition.

CONTRACT LIFECYCLE

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Price-to-Win – International Considerations What are our options for workforce performance

Can we perform without receiving entity/PE?

If not, can we afford / should we invest to greenfield?

What are the workforce options meeting customer addressable budget

Resourcing

• Expatriates/deployments (travel, relo., allowances, incentives, accompanied, taxes, etc.)

• Local nationals or third country nationals

• Rates: Direct or ODC for contract (e.g., Local labor law, relo, HOLA, COLA, danger

premium, travel?)

• Rates: Indirect or wrap rate items (e.g., local labor law, relo,?)

• Compensation: range penetration, levers for cross-border workers, policies

Black-Hat review: what is our competition estimate for workforce and pricing

Resourcing options, legal entity and operations locally?

Rates

Compensation

Localize non-labor costs?

What are the risks and our company approach to those

Assume, note in risk tool/register

Project or Financial reserve?

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Basis of Estimate – International Considerations

Cost build-up

Labor, Material, Indirect

Wrap or pool rate(s)

Vendor/SubK quotes to your estimates estimates

Clear SOW – RFQ and terms to your teaming partners, potential vendors

Materials and ODCs

Subcontractor Labor & Travel

Pricing Assumptions

Identify the sources of data along with the estimating methods used

Discuss the rationale behind the estimating methods applied to the basis of

estimates

Price risk issues?

Evacuation/medical issues

Labor law

Fx – payment terms, direct or indirect costs in foreign currency

Guarantees, bid or performance bond

PE

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Generic Risk Register

Risk Probability

(75%, 50%,

25%)

$

Risk

Weighted $ Mitigation Plan – If Appropriate

SOFA contract denial or delays Pre-proposal Q&A, FOIA, RFP

analysis, Package prep pre-award

SOFA employee / subK denial or delays Candidate pre-screening includes OR

analysis, template resume, forms

Business traveler vs. worker visa status

(and delays)

Pre-proposal country research, out-

source LN, TCN to host country , Gray

passport, etc.

Local labor laws (costs not bid,

productive hours impact) or

subcontractor labor issues

Harmonize in sponsorship agent

countries, non-USG contracting

countries

Evacuation, Medical, NEO, etc. Back-stop through WC, DBA, Gap

employee medical insurance plan or

international medical plan mandatory

election by employee

Permanent Establishment Secondment / inter-company

contracting

Value-Added Tax USG as importer of record, price to

customer, exception as Foreign

company or SOFA

Miscellaneous unbillable costs

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International Workforce ConsiderationsScope of

Work

Country Information Contracting Parties Exceptions and Terms Workforce

Information

Knowledge

workers

• Location of work

• Commercial site

• Embassy /

consulate

• U.S. / Joint

installation

• Foreign

government

• End user and contracting

relationships - Contract parties:

• USG,

• Foreign Gov’t,

• Comm’l

• Party relationships and delivery:

• Prime,

• subs,

• inter-company

• Beneficiary in host

• SOFA/cooperative agreement

vs. business visitor or worker

• SOFA / host end user

sponsorship

• Work authorization

• Tax: corporate,

individual

• Social programs:

Totalization,

Totalization with host

requirements, or host

• Sending company

• Home payrolling

entity

• Prime, subK

• ICs

Negotiation

, sale

Anticipated time and scope:

•Business visitor in time and

scope?

•Residency issues

•Work – visa, permit based

on activities

International offset requirements • Receiving Company

• None

• PE

• Inter-company

• Third party

Export and

import

• Citizenship(s)

• Home

• Host

• TCN

Manufactur

ing

• Workforce status; history

in host

• Immigration/visa

• Residency

• Tax

• Family

• Supra-national

zone

• Incumbents

• Job information: title, job

description

• Compensation, policy

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International Workforce Considerations - 2Scope of

Work

Country Information Contracting Parties Exceptions and Terms Workforce

Information

Knowledge

workers

• Location of work

• Commercial site

• Embassy /

consulate

• U.S. / Joint

installation

• Foreign

government

• End user and contracting

relationships - Contract parties:

• USG,

• Foreign Gov’t,

• Comm’l

• Party relationships and delivery:

• Prime,

• subs,

• inter-company

• Beneficiary in host

• SOFA/cooperative agreement

vs. business visitor or worker

• SOFA / host end user

sponsorship

• Work authorization

• Tax: corporate,

individual

• Social programs:

Totalization,

Totalization with host

requirements, or host

• Sending company

• Home payrolling

entity

• Prime, subK

• ICs

Negotiation

, sale

Anticipated time and scope:

•Business visitor in time and

scope?

•Residency issues

•Work – visa, permit based

on activities

International offset requirements • Receiving Company

• None

• PE

• Inter-company

• Third party

Export and

import

• Citizenship(s)

• Home

• Host

• TCN

Manufactur

ing

• Workforce status; history

in host

• Immigration/visa

• Residency

• Tax

• Family

• Supra-national

zone

• Incumbents

• Job information: title, job

description

• Compensation, policy

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International Export ConsiderationsScope of

Work

Country Information Contracting Parties Terms

Knowledge

workers

• Location of work

• Commercial site

• Embassy / consulate

• U.S. / Joint installation

• Foreign government

• End user and contracting relationships -

Contract parties:

• USG,

• Foreign Gov’t,

• Comm’l

• Party relationships and delivery:

• Prime,

• subs,

• inter-company

• Beneficiary in host

• Shipper of Record

• Technical information, translation of

content, etc.

• Export classification of material

• Defense service or equipment

• Commercial items

• SOFA/cooperative agreement vs.

business visitor or worker

• SOFA / host end user

sponsorship

• Work authorization

• Tax: corporate, individual

• Social programs: Totalization,

Totalization with host

requirements, or host

Negotiation,

sale

Anticipated time and scope:

•Business visitor in time and scope?

•Residency issues

•Work – visa, permit based on

activities

Licensing, etc.

Export and

import

Manufacturing

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Generic: Cash Flow Considerations

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-1

-0.2

0.34 0.35 0.36 0.36

-1.02

-3

-1 -1.2-0.86

-0.51-0.15

0.21

-0.81

-2.79-$4.0

-$2.0

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

2017 2018 2019 2020 2021 2022 2023 2024

Net Cash ($Ms) Cum Net Cash ($Ms) Receipts ($Ms) Disbursements ($Ms)

Green-fielding: Cash Flow Curve

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Contract / Host Work Close Considerations

Trailing tax program costs: post revenue, bill with reserve

SOFA

Notification to authority, forms/process for deregistration

Repatriation/end of assignment travel

Non-SOFA work

Host notice and/or information/consultation periods

Sponsorship agent and other vendors

Terminal indemnity / end of service gratuity

Notice periods

Clearing any deposits: WPS, housing, vehicles

Compensation: retain allowance information and incentive

records

Allowances and incentives: source data, dates, methodology

Policies

Centralized or decentralized records

Reconcile, close Project / Financial reserve

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Lessons-Learned

SOFA is not automatic

Processes vary by country, contract, position, company, location specific: not “portable”

LOA, Travel Orders vs. SOFA vs. SOFA dependent vs. “Ordinarily Resident”

FAR/DFAR Local Labor Law clause, regional deviations from FAR/DFAR (e.g., ASG

Kuwait, CENTCOM AOR work)

SOFA and individual logistics support

Home indirect rate pools vs. host harmonization costs

Involve export control early and often

Employment law: harmonize when?

Legal entities need “form and substance”

Leasing company (secondments, transfers to PE-blocker)

Payroll, HR programs needed (local remittance, labor laws, social security)

Security: cage-code coverage of U.S. legal entities and the FOCI issue

In the absence of explicit tax exclusion under the host country SOFA, worry about:

Work visa obligation day 1, and resulting implications (e.g., personal tax?)

PE/entity and tax obligations

BOE and Risk considerations

Customer budget, your workforce options, and realism

Vendor, 3rd party quotes, and terms

Fx, export, security / FOCI, etc.

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Questions

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