NCMA
May 31, 2024
Hagen McHenry, Vice President of Pricing, Estimation, and Competitive Assessment at Peraton, has more than 20 years of contracting experience. He started his career in a small management consulting firm then moved to larger businesses such as Hewlett-Packard and Raytheon, before arriving at Peraton in 2018.
Throughout his career in government contracting (GovCon), McHenry has watched the discipline of cost and pricing evolve significantly. “Early in my career, pricing was more of an accounting and financial analysis-based role that provided financial projections to the corporation for any contract they were pursuing,” McHenry says. “Now, it’s more focused on the customers. The government is evolving in the way it evaluates proposals. Contractors, in turn, are evolving their pricing practices to ensure they provide value to those customers, at the right price.”
There’s a fundamental difference between a consultative, commercial practice and the challenges of pricing in the GovCon world. “Commercial contracts are not bound by the Federal Acquisition Regulations (FAR) and negotiations are held directly with the customers,” he says. “By contrast, GovCon pricing is far more rooted in accounting principles, contract and subcontract management, audit compliance, and corporate risk and reward. It’s very different, unique, and unlike anything else out there.”
Another difference is that government funding comes from U.S. taxpayer dollars versus corporate revenue streams. Consequently, every taxpayer has a stake in their money being spent wisely and how it will be used to make a better world. “Pricing organizations have a responsibility to meet those vested interests,” he adds, and there are many regulations and laws to ensure that happens.
Today, McHenry prefers to call his practice area “pricing and growth” instead of “cost and pricing.” “We’re creating new business with every proposal we submit,” he explains, “all while expressing value to our government customers and providing them with confidence that we can successfully execute the mission for our price.”
This article appeared in the June 2024 issue of Contract Management magazine, published by the National Contract Management Association. Used with permission.
