We're developing an application on a contract basis for an arm of a governmental organization.
At the moment, we're students, and payment was slated to done using student funding avenues. However, I've just heard word that we'll need to set up a business, write up formal requirements and a proposal, and assist in comparing bids of similar scope and domain.
I don't understand how you could bid on a contract (by submitting a proposal) and also evaluate the bids of other vendors. Or are you a single-source vendor and you are looking at past bids from previous projects? If the latter then OK, if the former there appears to be a huge conflict of interest and you might want to seek legal advice before proceeding down this path.
Assuming that everything is OK from a legal perspective (and disclaimer here that I am not a lawyer and am not dispensing legal advice):
Is there any browsable/searchable system for comparing prices of similar projects?
This depends on the government or the agency. Your best bet is to ask the agency if they have that kind of information available, by and large in western democracies you should have access to costs for past projects. If the agency you are dealing with is having you compare bids from past similar contracts you should be asking them if they have a searchable system.
What is the typical way to "compare costs" for a project?
The experience that I've had with US Federal gov't contracts is that you as the vendor don't get to compare costs, bids are sealed. I do know that they look for discrepancies between vendors in terms of time, scope, resources, budget. So if one vendor out of five says the effort will take half as long as the other vendors a red flag goes up as the vendor may not know what they are doing or haven't put much thought into the bid. With larger RFPs points will be assigned to different sections to try to make evaluation more objective.
Does the requesting agency simply seek out other bids based on the same requirements document we'd generate?
Again based on my experience the agency sends out requirements as an RFP to a number of eligible vendors. The requirements would be the same for all vendors. Vendors may have been pre-selected (e.g. based on past experience, research on capabilities, etc) or it may be a more general thing.
More generally, government contracts are a complex thing, and given that no two will be alike you are kind of on your own beyond some basic guidelines:
- Base your costs on your estimates and not others. You don't know what your competitor's margins are, if they are more or less efficient than you, etc. Make a best guess on how much time the work will take you and give a price based on your hourly rate. That hourly rate will need to factor in all of your overhead over the period of performance of the contract, including in your case the costs to set up your business. Trying to undercut the competition to ge the contract is a good way to either lose money or tick off the agency you are dealing with or both.
- Factor in financial risk. Government contracts are usually firm fixed price, so what they pay is what is in the contract regardless of how much it costs you. That is a good chunk of the reason why government contracts are as expensive as they are.
- Clearly define scope. Again, contracts are usually FFP so you need to be clear and precise about what is/is not included in the end deliverables.
- There will likely be significant oversight costs. I say significant in the sense that oversight costs will be a larger proportion of your overall costs than you would think. Regardless of contract size there will be someone at the government's end that fills the role of a contract officer, andn is responsible for ensuring you are doing your job. Expect to devote a non-negligible proportion of your work week on documenting what you have done and reporting it.