This email is a confirmation of our phone discussion today. You called about your first BLM contract pay request for $190,000, being sent to the Contracting Officer (CO) today.
Your concern was that, under the terms of your federal contract, the BLM wants you to fill out forms that will tell the BLM how much of the $190,000 is being paid to which specific subs and suppliers.
You are only paying out $100,000 of the $190,000.
Thus the BLM is going to know that Joe Funk Construction is making about $90,000 in margin this month on your contract. And because it is a unit priced contract they'll know that you'll be making $90,000/month for the life of the contract; nearly half of the full contract price is profit. What if you are asked to explain the huge profit margin?
OK - I got the picture and understand your concern. Here's what I explained to you:
First - it is OK to make A LOT of money on a federal contract, so there is no need to suffer guilt. My $960,000 Walter Reed Army Medical Center contract cost $308,000 to complete, so the profit on that job was $652,000 - a whopping 68% of the contract! Our bonding company, when they saw the numbers, actually asked if we were laundering drug money (in all fairness, the job was in Washington DC when its Mayor, Marion Barry, was jailed for drug possession and use).
Like I said, it is OK to make A LOT of money in this business and you don't have to explain it - you are just really good at what you do because you learned how to greatly increase margins and revenues by "The Industry Expert".
Given the fact that your BLM project was competitively bid and you were the low bidder by $4,000, Uncle Sam already received the benefit of competition in the marketplace.
Second - Understand the agency budget - over $1.1 Billion. Get familiar with each agency you work with and let them know that you have studied what they need and why they need it. Tell each one that you work with that you want to be a valuable resource for them. Over time they might surprise you with a request to take over a project for them.
Building relationships with Federal procurement officials brought me many millions of dollars in contracts that never went out for bid. A couple of the attachments to this email should help you to become conversant in the language of the BLM budget, requirements and goals.
Third - the more money Joe Funk Construction makes from doing federal contracts, the more resources it will put toward the effort to get more of them. That's a BIG PLUS for us taxpayers; We want and need competition. Profits always breed competition, so high profits are very good for the economy.
That all said, I really want you to know how proud I am that you came to the workshop, took notes, followed through with the phone calls, attended the webinar and followed the Blueprint exactly as it was laid out for you. And your first six months results of over 42% average profit margin and more than $480,000 profit have been even more impressive than my average over the past 35 years; Commendable indeed!
Attached are some of my comments regarding the "Sales Dance" as posted on the LinkedIn "Construction Business Owners" Group.
All the best to your continued success with our program,
cc: Rusty Norris, President, Joe Funk Construction Engineers, Inc.
Attachments: Doug Reitmeyer's "The Selling Dance"
BLM Budget Priorities