The Total Economic Impact™ Of Deltek Costpoint

New Market Opportunities

Evidence and data. For several interviewees’ organizations, the need to become or remain compliant with evolving Department of Defense cybersecurity regulations was the impetus for upgrading their hosting and data storage environments. Interviewees said Costpoint Cloud offered a secure cloud hosting environment that helped their organizations meet these requirements and opened up a larger pipeline of contracts for which they were now eligible to compete.

• By moving to a secure ERP solution that helped contractors meet the CMMC 2.0 standard, the CFO at a defense contractor said their company unlocked hundreds of millions of dollars a year in potential contract revenue. The CFO said: “In 2023, there were contracts that we knew we were going to be awarded, for which we needed to have this level of compliance. This tool is foundational, and we knew we needed it to manage those contracts. Over the long term, moving to an ERP system [with secure data storage] allowed us to [meet those new requirements and] continue pursuing those kinds of contracts.”

• The senior technical manager of business applications and IT at a defense contractor said moving to Costpoint’s GCCM Cloud opened up $50 million in solid contract opportunities in the first year alone.

• According to the same interviewee: “There are certain federal solicitations that say right in the solicitation, ‘You must be CMMC compliant.’ If you’re not in a cybersecure business system, you can’t even compete. Our sales team asked me to add a checkbox in our CRM so we could identify every opportunity that we couldn’t compete for if we weren’t FedRAMP compliant. We tracked it for eight months, and that total was probably $15 million. While we might not win every time, we had a viable shot. That’s more than $1 million a month of business that we could not even have entertained the idea of pursuing. For a company our size, those are big numbers.”

Modeling and assumptions. Based on the interviews and publicly available data, Forrester assumes the following about the composite organization:

• The composite unlocks $300 million in additional DoD contract opportunities for which it is now eligible to compete due to its improved cybersecurity compliance posture. Forrester determined this based on the following information:

  • According to the Government Accounting Office, the Department of Defense spends $240 billion annually on professional services.⁴ Forrester assumes that 15% of that total annual spend comes from new contract offerings (as opposed to task orders added to existing contracts or the renewal of existing contracts).
  • Of those net-new bid opportunities, Forrester assumes that 40% are higher-level knowledge-based services (as opposed to administrative services) and that another 40% of those knowledge-based services would require handling of CUI (and therefore require compliance with CMMC 2.0).
  • Finally, Forrester assumes that 5% of that subset involves work that is relevant and applicable to the composite’s business capabilities.

• Forrester assumes that this benefit is entirely attributable to the company’s new enterprise security controls (i.e., no other underlying business processes or service offerings changed at the same time).  

• Win rates for new contract bids in government contracting are very low. For this analysis, Forrester assumes that the composite organization’s capture rate for these new contract opportunities is 1.5%, considering that the company cannot submit proposals for all potential opportunities due to resource constraints and that it is only likely to win a small percentage of the bids it does submit.  
  According to the US Small Business Administration (SBA), competitively awarded federal contracts typically receive an average of four to five bids, which makes the proposal win rate for federal government contracts in the range of 20% to 25%.⁵ Some industry advisors estimate that, for newer or less established firms, the proposal win rate is more in the 10% to 15% range.⁶

Risks. The calculations to reduce total annual DoD spending ($240 billion) to the new contract opportunities unlocked for a particular organization ($300 million) involved several assumptions. There is variability in the number of contracts a specific business will be eligible for and decide to pursue. Readers of this study who are performing this analysis for their own businesses may be able to arrive at a more specific number by filtering publicly available defense spending data by the NAICS codes that apply to their particular lines of business. 

There will also be variability in an organization’s contract win rate, depending on organizational maturity, the staffing and sophistication of its proposal team, the amount of competition in its line of business, and pricing, among other factors.  

Results. To account for these risks, Forrester adjusted this benefit downward by 20%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.1 million.

Improved Project Cost Control

Evidence and data. Interviewees said that Costpoint gave them more timely access to more accurate project-based numbers, which allowed them to make critical adjustments while projects were still in progress.

• Interviewees from smaller organizations consistently spoke of data trust and confidence as a key benefit of moving to Costpoint. According to the CFO for a small defense contractor: “[Moving to Costpoint] allowed us to calculate overhead rates very easily and accurately and to be able to tell target versus actual very quickly. Being able to provide job profitability quickly was a must. That was the first time we set up an overhead budget and a G&A [general and administrative] budget that we could compare to. So Costpoint gave us a lot of controls, and it gave us data really quickly. That was a huge move.”

• The same interviewee also highlighted the confidence factor: “Since moving to Costpoint, I have confidence that our monthly close numbers are correct. That’s a 100% improvement.”

• Interviewees from the larger organizations said that data trust and confidence were already reasonably solid before Costpoint, but its efficiencies and time savings enabled more timely reporting, which allowed teams to make key cost-control adjustments while projects were still in progress as opposed to waiting until after project close to capture lessons learned for next time. Most interviewees highlighted this benefit.

• The controller from a 20,000-employee defense contractor said: “We saw improved accuracy because we’ve removed manual data manipulation, and we’re just using the data out of the system of record. We’ve taken out the middleman.”

• The CFO from a smaller defense contractor said: “[As far as project budget and profitability insights], we used to only get those numbers a month after the project closed. Now we’re able to alert our project managers while the project is still in process. We’re watching it mid-project stream, and we’re able to alert people when the profit margin ranges out of tolerance.”

• This interviewee also said that the move to Costpoint coincided with a reduction in cost overruns from 10% of projects to 0%, while the director of finance, business analytics, and planning from one of the larger organizations said that Costpoint helped their company reduce its unbillable costs by 5% overall, noting, “We were able to manage projects better and course-correct faster.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• Before moving to Costpoint, 10% of the composite’s projects go over budget. Because project sizes are highly variable, Forrester applies the 10% cost-overrun metric across total annual project revenue of $1 billion.

• According to an Oxford/Aalborg University study frequently cited by GAO, DoD, and OMB, the average US government cost overrun is in the range of 20% to 45%, with defense and infrastructure projects often at the high end.⁷ In firm-fixed-price and fixed-price-incentive contracts, the vendor can recover a very small portion of those cost overruns, if any.

• For the composite, Forrester assumes a 25% average cost overrun for the portion of projects that go over budget.  

• With Costpoint’s enhanced project-level visibility, the composite can better see and anticipate cost overruns before projects close, which allows it to make key adjustments before final billing. This allows the composite to reduce cost overruns (and potential unbillable costs) by 10%, which allows it to recapture a total of $2.5 million annually in unbillable costs.

Risks. The frequency of project cost overruns is highly variable based upon the size, expertise, business process consistency, and maturity of the organization. Even a well-established organization may experience higher cost overruns on certain projects if it diversifies into a less familiar area of business.

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $5.3 million.

Administrative Time Savings

Evidence and data. Interviewees spoke about the time savings Costpoint enabled across several administrative functions, including time and expense reporting, monthly close of books, routine financial reporting, and audit preparation.

• The CFO said their 100-employee defense contractor moved from paper timecards to an online timekeeping system, saving each employee 20 minutes per week. Their managers also saved an additional 2 hours per week from not having to correct as many errors. According this interviewee: “[Moving to Costpoint] allowed us to automate timecards. It allowed us to control who was using what job number, so people were not working without having a legitimate job number. It allowed us to calculate overhead rates very easily and accurately and to be able to tell target versus actual very quickly. I would say we probably saved 20 minutes per week per person, and even more for approvers — plus another 20 minutes per week for payroll. Now that we’re not collecting everybody’s timecards manually, we’ve probably saved 2 hours a week.”

• Several interviewees said their organizations still struggled with manual, multistep data manipulation. The director of business enterprise systems for a medical research contractor said: “Costpoint’s time and expense module helped in several ways. One is that now, you have everything in a single system. Previously we used to have to export all the data out of one system and process and transform it before loading into Costpoint.”

• Similarly, the controller for a defense contractor said: “We used to export all of our invoices from our former ERP into [spreadsheets], reformat all the data, then do multilevel review by billing specialists and program analysts to find and correct errors, looping back multiple times, then send to the client who might find an error and send it back, when the clock would start over. Now, our system spits out the invoice and that’s it.”

• Interviewees also spoke of significant time savings for employees across the company. The controller for a defense contractor shared that Costpoint’s Expense Reporting Wizard took their expense report submission time down from 2 hours to 15 minutes, a substantial time savings that was widely appreciated across the company. The interviewee said, “We have hundreds of project managers who travel frequently across a company our size.”

• Routine financial reporting also became more efficient under Costpoint, according to interviewees. The CFO from a defense contractor said their report generation for project completion status used to take 10 hours per month; now it takes 2 hours per month.

• The director of finance, business analytics, and planning and the controller both said their individual organizations’ move to Costpoint enabled a one- to two-day shortening of the monthly close process. The controller, who spoke of the reduction in back-and-forth to create accurate invoices each month, said that streamlined invoicing process saved every member of their team 4 to 6 hours of overtime every day during the first half of every month.

• This same interviewee shared that the time savings also gave their team more time for analysis during the lead-up to the company’s annual SEC reporting deadline: “For our annual SEC reporting, it used to be ‘hurry up and wait.’ We’d have to wait on the financial data, then work overtime to consolidate everything and do the analysis and reporting. We’d be leaving the office at 2 a.m. and coming back the next day at 8 a.m. Now we have an extra day or two for analysis, which is huge.”

• When it comes to financial audits, interviewees shared that their organizations undergo three major audits per year, and they sometimes have additional project-based audits. According to interviewees, Costpoint allowed their financial teams to prepare and respond with less effort. The CFO at a defense contractor said: “At least two of the big defense contractors that we subcontract with will do a superficial audit of our system annually, and we manage through those quite easily now. Before, I really didn’t know what our books were saying. It was pretty messy.”

• The director of finance, business analytics, and planning also validated the audit-prep savings: “We’ve seen a 15% to 20% time savings on audit preparation. Our move to Costpoint has helped our people focus more of their time on revenue-enabling services rather than compliance services.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• Across an organization of 2,000 employees, 20% of the workforce (400 employees) hold project manager roles with extensive travel. These employees submit expense reports monthly. Each manager realizes a 1.5-hour time savings per expense report submission after the company moves to Costpoint. Forrester assumes 70% of this time savings are recaptured across other productive work.

• The composite needs four full-time people to support a major audit, the preparation for each of which takes five weeks. The composite experiences an average of four audits per year, and Costpoint supports a 20% reduction in audit preparation time. The financial employees reapply 70% of that time savings to other productive work.

• Prior to Costpoint, the accounting team takes two weeks to generate invoices and close the books every month. Forrester assumes that each of the 20 employees involved in monthly close applies 70% of their 160 work hours during that two-week period to monthly close activities. Costpoint’s efficiencies reduce that time investment by 30%. Again, those employees recapture 70% of that time savings across other types of productive work.

Risks. Publicly traded companies that engage in both government and commercial work may have some duplication of data across multiple reporting streams, especially if they use a separate ERP system for their commercial (nongovernment) projects. This can offset some of the administrative time-efficiency savings outlined here. The director of finance, business analytics, and planning for a defense contractor spoke to this situation: “Costpoint works perfectly for what it is supposed to do — keep the government side of the business sacrosanct. But as a publicly traded company, there is some additional work that has to occur [when we prepare for our annual SEC filings] because we have to [re]combine our government and commercial project finances when we report externally.

Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.2 million.

Technology Cost Savings

Evidence and data. Whether they moved from another ERP system to Costpoint Cloud or from Costpoint on-premises to Costpoint Cloud, interviewees said their organizations experienced significant cost savings — one even mentioned “headache savings” — from no longer having to be responsible for hosting infrastructure, maintenance, and testing and deploying updates.

• The senior technical manager of business applications and IT at a defense contractor said: “There’s a cost to having on-premises systems. We had to maintain several servers, and we had to have backup servers. If you eliminate enough servers, you can eliminate server rooms, and there’s a whole air conditioning and electrical cost that goes with that plus the employees to maintain everything. So there was a huge cost savings.”

• The director of business enterprise systems at a medical research contractor said: “On average, every time we had upgrades, it usually involved at least two to three days of downtime where the system was basically down. That’s now completely gone away. Everything happens overnight. Whenever there’s an upgrade, you come in the morning, you log in, and production is upgraded.”

• Interviewees also noted that support, maintenance, and “headache” costs were compounded when the prior ERP solution was highly customized to fit the needs of government contracting. The director of finance, business analytics, and planning for a defense contractor said: “The problem with customization is that every time there’s an upgrade or a new version, it breaks. We did a lot of manual customization within our ERP for our GovCon business.”

Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:

• The company is sunsetting an ERP system with licensing costs of $200,000 per year.

• On-premises hosting costs, such as servers, server infrastructure, data backups, and utilities, cost the organization a total of $50,000 per year.

• The composite also incurs substantial customization costs to support an ERP not specifically designed for GovCon. This high degree of customization, which must be reconfigured with every ERP update, means that the composite needs five application managers working 60% of their time to support its prior ERP solution.

Risks. The extent of this benefit will vary based on:

• The ERP solution an organization uses prior to Costpoint.

• The length of time the business has had the solution.

• The applicable pricing and bundling.

• The complexity of their tech stack (e.g., if an organization uses separate tools outside of Costpoint for functions like payroll and workforce management, or if the company does both government and commercial work and maintains two separate ERP systems for each side of the business, they may see a lesser degree of technology cost savings).

Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.7 million.

Unquantified Benefits

Interviewees mentioned the following additional benefits that their organizations experienced but could not quantify:

• Ability to always run the latest release. Several interviewees said their organizations used to fall several versions behind with their on-premises ERP solution because testing and implementation took too much time. According to the senior technical manager of business applications and IT for a defense contractor: “In a perfect world, you should test everything in a sandbox first. But in the real world, that is very difficult to do — to get teams to stop their actual work and recreate dummy general ledger transactions. So the testing was kind of half-baked, and we wouldn’t always implement all the upgrades that were available, because we weren’t confident it wasn’t going to break anything. Now, it just automatically updates, and to the users, that process is invisible.”

• Access to Costpoint’s enhanced UX. Automatic product upgrades also made some interviewees eligible for Costpoint’s newest version, Harmony, which they said has received positive reviews for its enhanced UX. The director of business enterprise systems a medical research contractor said: “Last year, they rolled out Harmony, which is their redesigned user experience. It’s simplified and more modern, and our time entry users have been very appreciative. They feel they can instinctively understand where things are and how everything works. It’s definitely an improvement.”

• Enhanced in-house technical capabilities. The director of business enterprise systems for a medical research contractor said they were able to redeploy several employees from server maintenance and troubleshooting to higher-end roles, which allowed their team to extend its capabilities under Costpoint: “We moved some of our people to higher-end roles. Now, they’re looking at the application logic, or trying to understand how to improve a particular feature, or they’re looking at extensibility. We have people now who do some of that work.”

• Improved employee experience and work-life balance. Interviewees noted that the around-the-clock support that came with a cloud-hosted solution like Costpoint improved employee experience for IT teams as well as ERP uptime. According to the director of business enterprise systems for a medical research contractor: “We are not a 24/7 shop. We typically work 9 a.m. to 6 p.m. [Before moving to Costpoint Cloud], if something happened after hours, we had to scramble to get somebody to come in. Now, that support is there 24/7.”

Flexibility

The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Costpoint and later realize additional uses and business opportunities, including:

• More efficient business integration through M&A. Several interviewees spoke about the benefits of Costpoint Cloud concerning mergers and acquisitions, which was a frequent occurrence in the GovCon industry and a primary means of business growth in this sector. The Department of Defense estimated that hundreds of defense companies undergo mergers and acquisitions each year.⁸ While the likelihood of a merger or acquisition affecting a particular company during any given three-year period is difficult to quantify in a financial model, interviewees provided substantial evidence that Costpoint enhanced the efficiency of business integrations when M&A occurred.  

The controller, who was the interviewee from the largest organization, provided some context on the scale of effort required to integrate financial systems after a merger. This interviewee said: “A Costpoint-to-Costpoint merger is usually much easier than a non-Costpoint-to-Costpoint integration. Those usually take three months, burning everyone out with 12- to 14-hour days with all the mapping of accounts and there could be 200 people involved.”

Another interviewee worked at an organization that had undergone several acquisitions and divestitures during their tenure. The senior technical manager of business applications and IT for a defense contractor said: “When we sold off one of our divisions, we froze the system on a certain date with a transition period of about six weeks. By the third week, the buyer was able to operate 100% of their transactions in their own system. It was almost hands-off for us. Had we been using our previous ERP system, we would have had to do all that internally, and that would have easily been several hundred hours of monkeying around with spreadsheets. Whereas when it’s coming out of Costpoint, it was just, here’s the data and it’s accurate. No corrections needed.” This interviewee added: “If your CEO finds the right thing — the right partner or a complementary product — they buy it when the opportunity presents itself, and the organization has to support it. I used to live in fear of an acquisition. Now I don’t.”

• Flexibility to adapt to changes in political administrations. Interviewees said the multi-year run-up to the implementation of CMMC 2.0 involved a great deal of discussion and uncertainty about whether changes in leadership might affect the extent or the timeline of the regulatory phase-in. The senior technical manager of business applications and IT for a defense contractor stated: “The political scenario is constantly changing from administration to administration, and nobody knows what’ll happen five, six, or eight years from now. But now we’re ready [for CMMC 2.0], and there’s no downside to us being in this compliant posture, even if the regulations do get simplified. We’re ready for whatever comes, so we’re in a good spot.”

• Access to nascent AI-enabled capabilities that speed up mundane tasks. The company leaders who participated in this study said they were eagerly anticipating a new feature in Deltek Costpoint that will use automation to link employee time entry to commonly used collaboration software and an embedded AI agent that will allow employees to submit timecards and expense reports in a chat window with a few conversational prompts. While this feature was available on the market at the time of this study, it was so new that none of the interviewees had yet implemented it across their organizations. However, it is a flexibility benefit that organizations using Costpoint could realize in the future.

• Cash flow improvements. Some interviewees said that Costpoint’s process efficiencies and improved project cost controls enabled their organizations to accelerate their cash flow, reducing their Days Sales Outstanding (DSO) by one or two days. For larger companies, receiving invoice payments even a couple of days sooner could create substantial capital savings. The director of finance, business analytics, and planning for a defense contractor said: “Our DSO improved by one to two days. That accelerated $2 million to $3 million of revenue, saving capital costs annually of $500,000 to $1 million.”

While this benefit did not apply to the composite organization for this study — which works in professional services and does not have inventory costs — government contractors whose work involves cost of goods sold may realize this financial benefit from Costpoint’s improved cost controls.

Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Total Economic Impact Approach).