ARDAK’s Wrap Rate Development Methodology utilizes significant organic Intellectual Property (IP) providing a parametric data driven view of our client’s customers and competitors. Each analyst has at least 10 years of experience utilizing ARDAK’s IP for all Competitive Intelligence (CI) activities performed. This gives the analyst an objective view of each pursuit, despite each individual’s past experience with individual competitors. ARDAK’s Wrap Rate IP consists of three major components as follows:

  1. Data Sourcing and Scrubbing – ARDAK’s IP utilizes a number of data sources available within the public domain. The largest and most recognized data source is the Federal Procurement Data System Next Generation (FPDS-NG). Although FPDS-NG yields a significant amount of contract awards, the data has been consistently error prone for years. As a result ARDAK developed sophisticated data scrubbing algorithms that utilizes other data sources to rectify discrepancies in the FPDS-NG data feed. Examples of additional data sources available within the public domain that ARDAK’s software utilizes include but are not limited to latitude/longitude, CONUS/OCONUS USG military facility locations, and contractor’s annual reports. Once ARDAK’s scrubbing routines have been executed against these and other data sources, the cleansed data is stored in ARDAK’s DataMarts. After the contractual data has been scrubbed ARDAK analyzes competitor’s annual reports, 10K’s, and 10Q’s for vital financial data, which is also stored in ARDAK’s DataMarts.
  2. Rate Derivation (RD) Algorithms – Once a competitor’s financial and contractual data has been scrubbed and stored in our DataMarts, ARDAK runs a series of algorithms to populate a sophisticated software model. The model is an integral component of ARDAK’s IP, and is currently on version 13.5. Upon receipt of a wrap rate request the model validates that the request is for a valid cost center that has been awarded contracts from the USG. ARDAK’s IP is continually updated based upon industry feedback and changes in the Defense Contract Audit Agency (DCCA), Defense Contract Management Agency (DCMA), and Federal Acquisition Regulation (FAR) requirements.
  3. RD Reporting – The results of each Wrap Rate Summary, Low Level Decomposition, Material Handling, and Fee Analysis are stored in a repository delineated by year, market sector, and competitor cost center. This capability allows ARDAK to contrast and compare results from year to year to validate accuracy, but most importantly given the competitive nature of the A&D industry allows our customers to benchmark their competitiveness at the Wrap Rate Level, Wrap Rate High Level Decomposition (Fringe, Overhead, and G&A), and each element of Fringe, Overhead, and G&A within dozens of market sectors that ARDAK maintains e.g. Professional Technical Services, Systems Integration, Logistics, etc.

IP: Wrap Rate Derivation (RD) Models

ARDAK’s Wrap Rate Model is proprietary software that is used to parametrically analyze ACES data combined with competitor historical and current financial elements and other factors to estimate the competitor plant and site wrap rates.

By separating Data Sourcing/Scrubbing, RD Algorithms, and RD Reporting, ACES’ open architecture facilitates the use of contract actions from one cost center and the financial data from a different cost center. This deliberate decoupling allows ARDAK to accurately develop Predictive and Notional Wrap Rate Derivations for JV’s and M&A’s prior to their completion. For example ARDAK’s clients have purchased wrap rate for GDIT/CACI/CSRA and DXC/Vencore prior to the merger AND before contracts were actually awarded. There are multiple variants of the Rate Derivation Model including:

  • Standard DoD / Civil Composite Cost Basis (widely recognized as the industry standard)
  • Engineering & Manufacturing
  • Intelligence Community (IC)
  • Joint Venture (JV)
  • State & Local
  • Commercial
  • Foreign
  • Predictive
    • Forecasting M&A’s
    • Unpopulated JV’s
    • Notional (adding/removing significant contract base, work mix, location, etc.)

IP: Wrap Rate Derivation (RD) Summaries: Numerical Value

Approximately 25% of Wrap Rate Requests that ARDAK receives are for cost centers that are not valid due to a number of reasons e.g. contracts novated to different cost centers, the request is for an operating unit versus a cost center, the requested cost center was not actually the incumbent, the request is for a field office rather than an actual cost center, etc. A significant differentiator from ARDAK’s competitors, the first step upon receipt of a Wrap Rate request is to validate the cost center. In the case where a cost center cannot be validated ARDAK performs additional analysis on alternative cost centers based upon contract novations, contracts of similar size, scope, procuring office, and iterate the request with our client until the cost center is validated. Once the alternative cost center has been approved by the requestor, ARDAK will begin the Wrap Rate analysis. An exemplar is provided below:

IP: Wrap Rate Derivation (RD) Summaries: Numerical Value – DynLogistics

IP: Wrap Rate Derivation (RD) Low Level Decomposition – DynLogistics

IP: Wrap Rate Low Level Decomposition (LLD): Price To Win Trending (PTWT)

ARDAK applied historical PTW pricing techniques for each procurement class listed below.

  1. Priority (A priority win for an operating unit within the competitor cost center; some flexibility may exist regarding G&A, Fringe, but corporate flow-downs are fixed.)
  2. Must Win (A must win for an operating unit within the competitor cost center; greater flexibility exists regarding G&A, Fringe, and corporate flow-downs)
  3. Strategic (A strategic win for an operating unit within the competitor cost center; affects entire company)

Rate Reduction Rationale: Price To Win Trending (PTWT)

All rate reductions were accomplished based upon the assumption that the factors reduced could be justified to a local DCAA auditor. In general this meant a zero sum game, that is, the increase in base from the increased business would justify the rate reduction. A similar argument would be made to corporate in regards to the corporate flow down reductions in that they (corporate) would receive the same amount albeit at a lower rate. This strategy results in varying proposal value pursuit thresholds for the target cost centers.

Priority

Applied to this category were assumptions of a younger work force to reduce short term and long term disability, a small reduction in indirect labor and a slight reduction in discretionary B&P.

Must Win

In addition to the reductions as reference for the Priority Pursuit, the Must Win category assumptions included a reduced class of office space to reduce the occupancy rate and the discretionary B&P was further reduced. Reducing the discretionary B&P implies that some “unpaid” proposal work would be required.

Strategic

In addition to the reductions referenced in the Priority and Must Win Pursuits, the Strategic Pursuit category includs reductions to the corporate expense. Again the desired effect is to affect a zero sum game where the reductions are absorbed by increased business base.

Pursuit Category Thresholds: Price To Win Trending (PTWT)

A $30M proposal pursuit would not garner any sympathy for rate reductions for a large defense contractor while it would for smaller firms. The table below shows the assumed proposal category thresholds as a function of target cost center.

Pursuit Category Summary: Price To Win Trending (PTWT)

In each category (Priority, Must Win and Strategic) there were further reductions from the previous category with a calculation as to how there would be, in essence, a zero sum game as justification to the hypothetical DCAA auditor. The contract pursuit rate reduction thresholds varies as a ratio of opportunity’s value to that of the cost center’s annual revenue as function of the cost center under analysis with pursuit values determined that would have the required financial impact. An example of this analysis is provided below:

In each category (Priority, Must Win and Strategic) there can be further reductions from the previous category with a calculation as to how there would be, in essence, a zero sum game as justification to the hypothetical DCAA auditor, that is, the increase in base from the increased business would justify the rate reduction.

DynCorp International, Inc., DynLogistics (LLD) – Priority Win Pursuit (PTWT)

DynCorp International, Inc., DynLogistics (LLD) – Must Win Pursuit (PTWT)

DynCorp International, Inc., DynLogistics (LLD) – Strategic Pursuit (PTWT)

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