Financial Stability

RGII is a financially sound and fiscally responsible company. Its accounting policies and procedures are consistent with Generally Accepted Accounting Principles (GAAP) and all government regulations. The Company’s cognizant agency is Defense Contract Audit Agency (DCAA) and, therefore, is subject to audit by DCAA of its accounting system and its annual incurred costs. RGII’s accounting practices are the direct result of management’s desire to provide our customers with not only quality services, but also assurance that the project costs are being accounted for properly and are being man-aged properly based on the financial outputs. Our primary goal in developing accounting procedures is to ensure that costs charged to our customers, whether directly or indirectly, be proper, accurate, allocable and allowable as defined by the Federal Acquisition Regulations (FAR).

See additional discussion of RGII’s financial capability in Appendix 2.

Financial Institution – Resources/Line of Credit

RGII maintains a $4 million line-of-credit with a large national bank. Given our ability to generate working capital, RGII is able to effectively operate while maintaining an average borrowing rate of less than 20% of its existing $4 million line-of-credit. Therefore, at any given time, RGII has approximately $3.2 million available to it. Additionally, if necessary due to continued growth and expansion, our bank would be available to increase our line-of-credit based upon our excellent credit and financial strength.

Accounting System

RGII Technologies, Inc. utilizes the DELTEK GCS Premier accounting system. The DELTEK GCS Premier accounting system is utilized as a standard software for the conduct of public and private sector project cost accounting, as well as financial accounting. In fact, this accounting system is widely recognized as the defacto standard for entities operating in a government contract environment. DELTEK provides project and corporate management and clients with multiple levels of cost budgeting, accumulation, and reporting and sufficient flexibility to track costs by and within multiple-tasks (work segments). The system is designed to meet, and does meet, all of the requirements of Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS). Additionally, DELTEK accounting systems have received continuous approval from the Defense Contract Audit Agency (DCAA). The DELTEK system provides a means for management of budgets at all levels and provides for the management and tracking of individual projects/tasks through accumulation of job costs and the generation of various project management reports. Typical project management reports include labor summary reports, direct costs summary reports, job summary reports and job status reports.

Labor/Staffing

As noted in the introduction to this section, RGII’s goal is to price this proposal in the most realistic, reasonable cost-effective manner while recognizing current labor market conditions that allow RGII to attract and retain high quality and experienced staff to perform the highest quality of services for PTO.

Based upon our experience with similar projects of comparable size and scope, RGII analyzed the requirements outlined in the Statement of Work (SOW) and developed a work breakdown structure (WBS) and a staffing plan for the necessary labor mix and personnel required to accomplish the required tasks in the most cost-effective manner utilizing our management’s experiences in deriving various operating efficiencies that allow RGII to accomplish more with less staff. We have identified and pre-qualified high caliber candidates within our current staff and potential candidates from our recruiting department database. RGII maintains a resume database of both current employees and prospective employees that allows RGII to meet our staffing needs and immediately react to the needs of our customers.

The labor rates utilized in pricing this proposal were derived from the following:

Credible professional, technical and management compensation surveys.

ECS Geographic Report on Professional and Scientific Personnel Compensation, ECS Geographic Report on Supervisory Management, ECS Geographic Report on Technician and Skilled Trades Personnel and the ECS Geographic Report on Office Personnel Compensation published by Watson Wyatt Data Services. These reports provide the user with position descriptions and a significant variety of compensation data for all regions of the country. The Watson Wyatt Data Services reports are widely recognized and utilized as the standard for compensation surveys, especially within the government contracting industry. In fact, DCAA utilizes this Company and its compensation surveys in assessing the reasonableness of labor rates.

William Mercer Salary Survey for positions that correlate to the requirements of this program. These reports provide the user with position descriptions and a significant variety of compensation data. Numerous companies and government agencies use this survey.

Various Salary Survey Data from websites such as:

www.salary.com

www.careerjournal.com

www.salaryexpert.com

www.wageweb.com

www.abbott-langer.com

Actual RGII Labor Rates - RGII Technologies, Inc. utilized either the actual salaries of current staff members to be utilized on this project or the average compensation rates of current employees whose skills, education and background are comparable to those labor categories required to effectively and efficiently perform the services outlined in the SOW.

Wage Escalation Factors

RGII’s direct labor escalation factors utilized in pricing this solicitation were as outlined below. These rates are in line with the U.S. Department of Labor, Bureau of Labor Statistics, Employment Cost Index for Wages and Salaries and other economic forecasting services.

Contract Year	Escalation

Factor
Base Year	0.0%
Option Year 1	3.5%
Option Year 2	3.0%
Option Year 3	3.0%
Option Year 4	2.5%
Option Year 5	2.5%
Option Year 6	2.0%
Option Year 7	2.0%
Option Year 8	2.0%
Option Year 9	2.0%
Uncompensated Overtime

The labor rates proposed by RGII in its cost proposal in response to this solicitation were NOT based upon “uncompensated overtime”.

RGII Technologies, Inc. maintains a full-time accounting policy. Under this policy, employees record all time worked including those hours worked in excess of forty (40) hours whether or not they are authorized, paid or not, voluntary or required, for the employee’s development or corporate benefit, regardless of whether or not the employee “expected” to work 40 hours for his/her salary. This policy results in uncompensated overtime for some of the Company’s employees. The Company’s labor distribution system automatically calculates the uncompensated overtime rate each time period based upon the “normal” number of hours for that period.

RGII overtime policies are in accordance with the Fair Labor Standards Act (FLSA). Non-exempt employees, as defined by FLSA, are compensated at a rate of one and one-half (1 ½) times their hourly rate. Generally, exempt employees receive their normal salary regardless of the number of hours worked during the period. However, some exempt employees, either due to contractual requirements or special management agreement, are compensated at their normal hourly rate for all overtime hours.

Indirect Rates and Audits

The indirect rates utilized in this cost proposal were based upon RGII’s forward pricing methodology. In developing our provisional indirect rates, RGII utilizes a forward pricing methodology. Under this methodology, RGII prepares cost models that estimate its direct and indirect costs based on current contract efforts and various projected new efforts. Both fixed and variable expenses to support this volume of business are accounted for in the projections. The individual elements of expense in each burden pool are reviewed monthly and adjustments are made to the burden rate if any major variations are foreseen.

PTO’s solicitation requires the offerors to propose three separate overhead rates m, including onsite (government site) with furniture provided, onsite without furniture provided and offsite (RGII site). In addition to the requirement for three separate rates, the solicitation, amendments and the related Questions and Answers (Q&A) require that the contractor provide computer equipment and peripherals for its employees whether onsite or offsite. RGII’s established cost structure includes onsite (government site) cost pools. However, these onsite cost pools do not provide for the supply of onsite employees with either furniture or computer related equipment. Given the unique requirements for this contract and the requirement under FAR 31.202(a) and 31.203(a) that like costs be treated the same, RGII has created a new cost center with new overhead pools that include the three types of overhead structure required by the solicitation. This new cost center and overhead structure is necessary to ensure that RGII is not in violation of cost accounting standards and regulations that prohibit like costs to be treated differently between contracts and to avoid an inequitable allocation of costs.

The indirect rates applied in pricing this solicitation are as follows:

Overhead – Government Site (With Furniture Provided)
Overhead expenses for effort at Government facilities (With Furniture Provided) are calculated as 32 percent of the onsite direct labor (With Furniture Provided). RGII maintains an intermediate fringe benefit cost pool in which all expenses in the pool are allocated to the appropriate lower tier pool. Therefore, this overhead rate includes fringe benefit costs such as paid absences, unemployment taxes, FICA taxes, workers compensation and other related costs.

Overhead – Government Site (Without Furniture Provided)
Overhead expenses for effort at Government facilities (Without Furniture Provided) are calculated as 33 percent of the onsite direct labor (Without Furniture Provided). RGII maintains an intermediate fringe benefit cost pool in which all expenses in the pool are allocated to the appropriate lower tier pool. Therefore, this overhead rate includes fringe benefit costs such as paid absences, unemployment taxes, FICA taxes, workers compensation and other related costs.

Overhead – Offsite (Contractor Site)
Overhead expenses for effort at RGII’s site are calculated as 39 percent of the offsite direct labor. RGII maintains an intermediate fringe benefit cost pool in which all expenses in the pool are allocated to the appropriate lower tier pool. Therefore, this overhead rate includes fringe benefit costs such as paid absences, unemployment taxes, FICA taxes, workers compensation and other related costs.

Subcontractor/Material Handling Expenses
This is a value added cost pool in which a specific burden is applied to specific cost elements. This rate is applied at 4.5 percent to subcontractor costs and materials in lieu of applying G&A. This pool includes costs associated with subcontractors and the procurement of materials (i.e. subcontract administration labor, purchasing labor, receiving function, etc.).

General and Administrative Expenses (Value-Added Base)
G&A expenses are calculated as 7.5 percent of the Total Cost Input (TCI) less subcontractor and material costs. Total Cost Input (TCI) includes all allowable expenses except for G&A expenses and B&P expenses. Total costs include, but are not limited to, direct labor, overhead and Other Direct Costs (ODCs) other than subcontractors and materials.

Under a recently submitted proposal, RGII proposed to establish a value-added G&A rate and a separate Subcontractor/Material Handling rate. As of this date, our cognizant audit agency, DCAA, has not issued an opinion or approval for this proposed revision to our indirect rate structure. Although RGII is not CAS covered, we are following the guidelines provided in CAS 410-50(d)(2). This section states that a “Value-added cost input base shall be used as an allocation base where inclusion of material and subcontract costs would significantly distort the allocation of the G&A expense pool in relation to the benefits received, and where costs other than direct labor are significant measures of total activity. A value-added cost input base is total cost input less material and subcontract costs”. Based upon a review of our contract costs, including the award of this contract, we believe that the inclusion of these costs in the G&A bases would cause a significant distortion described in the CAS reference. As such, we have proposed to establish this value-added pool.

RGII indirect rates and the basis of allocation for these rates are detailed below:

Indirect Rate	Basis of Allocation
Overhead Expenses – Government Site (With Furniture Provided)	Direct Labor – Government Site (With Furniture Provided)
Overhead Expenses – Government Site (Without Furniture Provided)	Direct Labor – Government Site (Without Furniture Provided)
Overhead Expenses – RGII Site	Direct Labor – RGII Site
Subcontractor/Material Handling Expense	Subcontractor and Material Costs
General and Administrative Expenses	Total costs less G&A and B&P costs
Government Furnished Property Requirements

Government furnished property required under the performance of this contract will be in accordance with the solicitation.

Other Direct Costs (ODCs)

The Other Direct Costs (ODCs) for each of the years is based our technical managers assessment of the level of materials (spare parts), transportation (vans) and facilities (warehouse) required to directly support this effort. It is anticipated that any Other Direct Costs incurred during performance will be accounted for, burdened with the appropriate indirect costs and invoiced to PTO in accordance with RGII’s DCAA approved standard accounting practices.

Subcontractors

RGII Technologies, Inc. maintains strategic relationships with a number of high quality companies. From these companies, our management selected Soza & Company, Ltd., an ISO 9002 certified company. SOZA, a worldwide information technology provider, offers best-practice solutions, proven to enhance productivity and deliver measurable results. SOZA’s focused approach considers agency/corporate culture to ensure that they deliver flexible solutions that take full advantage of new and emerging technologies. They work in partnership with their customers; they recognize that the customers success is Soza’s business.

SOZA applies a full lifecycle approach to develop and deliver responsive, successful information access and management solutions. Case in Point ... For the National Institutes of Health, SOZA implemented automated information technology solutions, resulting in annual savings of $5 million. Given our philosophy and desire to provide PTO with unique and innovative solutions to its facilities maintenance and end user support that result in substantial cost savings, RGII selected Soza as its partner.

Soza’s competencies include:

Enterprise Architecture. SOZA uses its enterprise architecture methodology to assess how well its customer’s current IT systems support its business needs. They recommend integrating IT planning initiatives with customer’s strategic planning and budgeting processes. They model customer’s baseline and target architectures, and work with the customer through all phases of implementation.

Applications Development and Maintenance. SOZA applies a structured lifecycle management approach to plan, analyze, and define customer’s requirements. They design, develop, test, and implement customer’s systems, then monitor them during operational lifecycles.

Systems Integration. They conceive a functionally oriented solution to help customers solve a business problem or leverage an opportunity. They migrate and integrate customer’s legacy systems by applying proven and emerging state-of-the-art technologies.

Telecommunications and Networks. SOZA provides a full range of services to support customer’s telecommunications and network needs—interconnectivity and interoperability analysis; LAN/WAN design, implementation, and administration; and network security planning and implementation.	ADP Facilities Management. SOZA supports all aspects of computing facility operations, including systems programming; capacity planning and performance tuning; site management; and help desk support services.

Data Center Services. SOZA provides a broad range of services to analyze, operate, automate, and consolidate customer’s data center.

Systems Engineering. SOZA provides a framework for conceptualizing, designing, developing, implementing, and enhancing customer’s information systems.

Web Solutions. SOZA helps customers take their business to the web. They define, develop, host, publicize, and administer successful, productive web solutions via state-of-the-art web technology. SOZA also devises innovative e-commerce solutions, including B2B and B2C.

Enterprise Systems Security Services. SOZA provides leadership to support customer system security issues.

Election Systems Solutions. SOZA supports election logistics, training, integration, hardware, and software.
Cost Realism

RGII’S cost proposal is based upon the most current, accurate, and complete information avail-able as derived from the consistent application of our estimating methods and techniques. This proposal satisfies fully any cost realism issues.

Fee

This proposal has been priced with a 5.5% fee.

The fee used in pricing this proposal represents the return mandated by an assessment of the competitive factors inherent in this solicitation supplemented by the unique qualities and expertise RGII affords the government herein.

An experienced senior staff that can staff the project upon award.

A track record of on-schedule performance on critical government programs.

The high productivity of our personnel due to the use of RGII owned tools and equipment.

A management structure that is geared toward quick decision-making and total management commitment towards the customer.

References

RGII Technologies, Inc. has successfully furnished to the Government high quality services and has provided all required deliverable products within the schedule specified in each contract. As required by the solicitation, RGII has provided various references related to the quality of our work. We would be pleased to furnish additional references, including Government agencies, for which we have performed. We suggest that you direct all inquiries regarding this information to:

Administrative Contracting Officer
DCMAO Baltimore
200 Towsontown Blvd West
Towson, MD 21204-5299
(410) 962-9490

SBA Servicing Office

SBA Case Number:	100825
SBA 8(a) Date of Certification:	January 21, 1994
SBA Business Opportunity Specialist:	Beverly A. R. James, BOS
US Small Business Administration
Baltimore District Office
City Cresent Bldg, 6th Floor
10 S. Howard Street
Baltimore, MD 21201
Phone: (410) 962-6195, ext. 326
FAX: (410) 962-1805
Cognizant DCAA Audit Office

The cognizant DCAA audit office for RGII Technologies, Inc. is:

Defense Contract Audit Agency
ATTN: Mr. Michael Gaffney, Supervisory Auditor
Baltimore Branch Office
8441 Belair Road, Suite 102
Baltimore, MD 21236-3024
Phone:	(410)	962-3857
FAX:	(410)	962-9976

Individuals Authorized to Conduct Negotiations

The following individuals are authorized to conduct contract negotiations:

Mrs. Kathryn B. Freeland, MBA
Chairwoman of the Board/Chief Executive Officer
(410) 224-3554 x104

Mr. Christopher F. Parrotta, CPA
Chief Financial Officer
(410) 224-3554 x113

Offer Expiration

This proposal is valid for a period of one hundred and twenty (120) days.

Best Write-ups	PTO FMEUS Proposal

Cost – Write up	November 2001

RGII Proprietary & Confidential	Page 1

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birchumj

2002-01-22

Dell Computer Corporation