Why Partnering Is Better, and Why Your Rate Is What It Is.

Over the years I’ve had discussions with people on the independent contractor side where I needed them for a project, and on the business side looking to hire me to write proposals, project plans, and process engineering documents where they felt like my rate or my margin was excessive. Now, I’m all about calling out some of the ridiculous rates the federal government pays for things. But then the truth is that I charge a rate that makes sense for my business and has a viable return and benefit to my client/partner/techs/leaders. And I don’t compete on price. Ever.

I compete on capability, confidence in an effective solution, agility of my team, and innovation in the services and capabilities we deliver.

That said, I’ve had some experts looking to work with me who thought I was wanting too much of “their cut.” Here’s one conceptual discussion I’ve had dozens of times with experts I needed on my projects:

Si3: I am super excited to have you on this project and to present you to the client as an Si3 solution expert. I can pay you fifty percent of the billable rate for your work.

TECH PROFESSIONAL: This is an exciting project and I want to work with you serving this client. I just don’t see why I should bring my expertise and only get half of my billable rate - since I’m bringing a ton of very unique skills and experience.

Si3: I’m excited to have you on board and present you to the client! I’ll be able to pay you 50% of the billable rate that I charge the client for your work on this project, and I can give you as many hours as is feasible for those tasks.

TECH PROFESSIONAL: Fifty percent still seems like an excessively high cut for you to keep on the work I do for your client. This is what’s wrong with corporate America today.

Si3: How much of your billable rate do you believe I should be passing on to you?

TECH PROFESSIONAL: I was thinking more along the lines of 80% for me and 20% for you. It's straightforward, and that’s just on my part of the project, right?

Si3: Unfortunately, it's not feasible for me to go that low.

TECH PROFESSIONAL: It feels like folks in your sector are just looking to make a huge profit of my labor and expertise. Given your many ventures and federal projects, surely there's room to negotiate?

Si3: I understand your concern, but there's a lot you may not be considering. You’re welcome to submit your portion of the project to the government and find other subject matter experts, project and contract managers, and client process experts to compete for the project.

TECH PROFESSIONAL: But I don't have the setup or know-how for federal contracts, and it's not my area. I’m great at what I do; not all that other stuff.

Then we get creative.

Si3: I’ll tell you what. For a bit more than 20%, I could guide you through what it takes to get and manage these contracts. You'd save in the short term, and consider the value of the knowledge and infrastructure you'd gain and be able to compete any time.

TECH PROFESSIONAL: Sounds fair, but what all would I need to do exactly?

Si3: First off, you'd need millions in specialized insurance and a robust cybersecurity infrastructure. Then there's the federal contractor registration, not to mention the Federal Acquisition Regulation compliance and all the terms and conditions of the bidding process, which is a complex task on its own.

TECH PROFESSIONAL: I hadn't realized the insurance costs would be that high, and I'm not set up for compliance and proposals and all the other SMEs needed. What if you just use me as a sub-partner for part of it?

Si3: Exactly. That’s a viable option.? Plus, I can offer my expertise and the established reputation that Si3 brings. It’s what the third “i” in Si3 is all about - Incubation. We've already navigated the complexities of securing and managing defense and intelligence tech contracts successfully. We know how to bring a concept to fruition and to deliver operationally on mission-critical solutions for our clients.

Here are some of the things we cover under Si3 so you don’t have to do them as an independent contractor:

A. Specialized Insurance Costs: Operating in the defense and tech sectors requires substantial insurance coverage to mitigate risks associated with client and project-specific liabilities.

B. Tech and Corporate Infrastructure: Implementing and maintaining robust corporate and technology elements is essential.

C. Federal Registration and Compliance: Staying compliant with federal regulations requires ongoing registration and maintenance in systems like the System for Award Management (SAM.gov). This also involves understanding and adhering to the Federal Acquisition Regulation (FAR) and agency-specific regulations, which dictate how contracts are managed and executed.

D. Bidding Process Management: identifying, preparing and submitting proposals for federal Requests for Proposals (RFPs) can be a complex and resource-intensive, requiring thorough research, precise budgeting and costing, detailed project planning, and often, the drafting of technical and management plans that meet strict client criteria.

E. Project Management and Reporting: Federal contracts typically necessitate stringent project management and reporting requirements, including regular progress reports, financial accounting, and compliance audits, all of which require dedicated personnel and systems.

F. Legal and Regulatory Expertise: Navigating the legal complexities of federal contracts demands specialized legal support. This can encompass contract negotiation, intellectual property rights protection, compliance with labor laws, and handling disputes or litigation.

G. Training and Certifications: Keeping staff trained and certified to meet the demands of client and federal contracts is a critical investment.

H. Quality Assurance Processes: Implementing and maintaining quality assurance systems compliant with federal standards to ensure the highest levels of product and service quality.

I. Supply Chain Management: Ensuring a reliable and compliant supply chain for materials and components is essential, especially with regulations like the Buy American Act and the need for secure and trustworthy sources.

J. Infrastructure and Equipment: Investing in the necessary infrastructure and equipment to perform on federal contracts, including secure facilities, advanced software tools, and specialized machinery or technology.

K. Overhead and Administrative Costs: Beyond direct project costs, there's significant overhead in running a company that can handle federal contracts. This includes HR processes, financial management, IT support, and the physical spaces needed to house internal operations.

That’s enough to convey the message.

I’ve been on both sides: the independent contractor and the contract technology firm. In my experience, these costs can make it pretty exclusive to compete on these projects yourself. Most of the fifty percent of your billable rate that I keep go to cover these things.

TECH PROFESSIONAL: That's a lot more involved than I thought. And I only have a limited window to get things moving. And I only want to do my part of the project.

Si3: I completely understand. I prioritize Si3’s resources, capabilities and partnerships to ensure we can deliver quality work efficiently. Unfortunately, that means I can't just adjust project rates to what seems a better fit for you.

TECH PROFESSIONAL: I see your point. It might actually be better to let Si3 handle the whole complex bid/proposal/delivery, and I just take 50% of my rate. I appreciate the time you're saving me and the headache I'm avoiding. And I would like to gain the experience of working with you!

Si3: Wise decision. Let's get the paperwork started, and I'll ensure we hit the ground running. It's about delivering value, not just completing a task. And even though we are a better cost value to our clients than most of the big firms, we simply don’t compete on price.

TECH PROFESSIONAL: Great! I’m happy to be part of Team Si3. Please do include me in the proposed team and let me know how I can help!

This slightly over-simplified discussion actually mimics several discussions I’ve had with contractors over the years. There are many unseen values and investments that Si3 puts into the mix before we bid a project.? And expertise that goes into delivering a winning proposal and then the professional services, highlights the importance of understanding and respecting the intricacies of specialized federal contracts, and addresses many of the hidden costs involved in these projects.