Part I – Which Proposals SHOULD Cost More?
This may seem like a self-evident question at first glance, but there is more to it than the obvious “larger proposals for larger contracts” answer. Some proposals should cost more for very differing reasons that are not related to the size of the contract being bid. First of all, do we mean overall cost, or just the cost of the proposal preparation? We all know that Bid and Proposal (B&P) dollars are precious. For the purpose of this discussion, let’s assume we mean the total cost to win the work, all-inclusive, from the time of target identification until contract award. Let’s also assume a typical sales cycle – we visit with the potential customer, update the Capture Plan as required, fill out our required Bid/No-bid forms, and follow any other “Must Have” requirements from our marketing toolbox or ISO process. Given that we now have a baseline to work from, the answer to the question is (now that all things are equal) proposals for competitive type contracts, governed by the Federal Acquisition Regulation (FAR) Part 15, which work generally takes the most money to prepare, with A&E type Standard Form (SF) 330 responses much less, and commercial “letter proposals” being the least. Likewise, single-function contracts are cheaper to bid than multi-function contracts, as a single-function proposal response is more “cookie-cutter” in nature. Of course, the first one you produce will always cost much more that the ones that follow, as there is no source material to draw from and you have to create it from scratch, so to speak. Another factor impacting cost is the estimate itself. Construction type (design-build, etc) proposals cost more to estimate than service contracts (unless the estimate is based on a coefficient, such as a Deliver Order Contract). Whereas 1 or 2 people can estimate a typical service contract proposal, it takes many more people to do design drawings, material takeoffs and prepare a construction estimate dependent on design schedule/completion and other factors. Costs for Construction vs. Service Contracts
There is a general rule of thumb that the B&P for an “average” proposal (RFP issue through Award) should be about one percent of the expected contract revenue. While this is a good rule for a $300 to 700 Million-dollar Operations and Maintenance (O&M) contract, it simply does not work for Engineering Procurement and Construction (EPC) work. In fact, for a small EPC job, quite the opposite is true. It takes just as much effort and manpower to do an estimating for a $60 million contract as for a $300 million job. And in service contracting, while it works at the $300 to $700 Million-dollar range, at over $700 million, 1% is too high, and below $200-250 it is unreasonably low. Most $50 million dollar service contract proposals will still take $220-300 thousand to prepare unless they are single function and you have done some already. If they are single function, and you have the source material (previous proposals), then one person can prepare the response and one cost person can develop the cost volume. This gets single function costs done into the $50-75 thousand ranges. So the answer here is that construction proposals cost more than services, but for unavoidable (assuming all processes are cost effective) reasons due to the nature of the beast. Company / Corporate Paradigms Affect on Cost
Most companies recognize the need for account managers and sales people, but a “Proposal Manager” is sometimes not so much a position, as it is a function performed by either the sales lead or proposed Project Manager (PM) as a transitionary task to be performed prior to assignment to the job. In other cases, it is looked upon as a clerical position that can be performed by administrative-type personnel. This could not be further from the truth. The fact of the matter is that the work is highly complex and challenging and demands highly skilled professionals to do the job properly. Government work is solicited under very strict and ridged procurement rules, primarily governed by the Federal Acquisition Regulation (FAR) and supported by FAR supplements (each federal agency’s version of the same). At current, there are literally thousands of Mandatory and Discretionary acquisition documents. The FAR alone is made of seven Volumes with 99 Chapters, and thousands of Parts and Subparts [as one example: Volume 3, Chapter 2, entitled Defense Acquisition Regulations System, Department of Defense contains nine subchapters, with 48 subparts]. It is simply unreasonable to expect a future Project Manager to be fluent or even cognizant of the complex and often confusing or obscure requirements involved. A violation of these can have serious consequences to the company, including expensive fines, disbarment from federal contracting altogether, or imprisonment. This makes it a cost contributor if we try to teach a future project manager procurement basics (much less strategy) during a proposal effort. Yet it seems that many proposals have been attempted using just this approach. This was in no way related to the management or leadership capability of the future Project Manager, but simply a function of his being plunged into a new and unfamiliar environment where the rules are much different than his base of reference. The point here is that the company using this approach is doomed to repeat this on the next proposal, and will have to learn the same lessons again, only with a different Project Manager or team. Proposal teams should be formed of skilled and knowledgeable proposal professionals, and stay together, so that they can take lessons learned forward from effort to effort. Proposed Key Personnel Affect on Cost
Another paradigm that contributes to proposal cost is that many companies tend to believe that only an existing, long-time company employee can be named as “Key” in a proposal. While on some efforts this is certainly true, in other cases, we sometimes search for one when the customer does not actually specify that current employees score higher in the evaluation, so we spend unnecessary time and costs, trying to “mold” a qualified candidate out of a marginal-at-best employee. On most service contract proposals, for example, the customer does not generally care about how much the PM knows about his own company, but does care a great deal about his level of experience in performing similar work, and how responsive he will be to the Contracting Officer’s needs. The cost contributor comes from not conducting the Key Personnel search properly. During the Pursuit Phase, the company (Capture Manager/Sales Team) should be sitting down with the customer, and a critical point of discussion should be Key Personnel. Which positions will be considered key? What are their qualifications? Should they be current company employees? These are all questions that must be answered so that the company can conduct a personnel search within the company and outside as well. This is a minor cost contributor at best, and then only when the search is either began too late, such as after the solicitation is already issued, or when too much time is spent in finding and qualifying existing resources that may not be interested in leaving their current position, (resulting in numerous time consuming and expensive searches for the next most qualified candidates), or when third party recruitment (headhunters) must be engaged to find qualified personnel at the last moment.
Copyright secured by Digiprove © 2010 James Movich
-- http://www.azmo.org
http://businessdevelopment.co
This may seem like a self-evident question at first glance, but there is more to it than the obvious “larger proposals for larger contracts” answer. Some proposals should cost more for very differing reasons that are not related to the size of the contract being bid. First of all, do we mean overall cost, or just the cost of the proposal preparation? We all know that Bid and Proposal (B&P) dollars are precious. For the purpose of this discussion, let’s assume we mean the total cost to win the work, all-inclusive, from the time of target identification until contract award. Let’s also assume a typical sales cycle – we visit with the potential customer, update the Capture Plan as required, fill out our required Bid/No-bid forms, and follow any other “Must Have” requirements from our marketing toolbox or ISO process. Given that we now have a baseline to work from, the answer to the question is (now that all things are equal) proposals for competitive type contracts, governed by the Federal Acquisition Regulation (FAR) Part 15, which work generally takes the most money to prepare, with A&E type Standard Form (SF) 330 responses much less, and commercial “letter proposals” being the least. Likewise, single-function contracts are cheaper to bid than multi-function contracts, as a single-function proposal response is more “cookie-cutter” in nature. Of course, the first one you produce will always cost much more that the ones that follow, as there is no source material to draw from and you have to create it from scratch, so to speak. Another factor impacting cost is the estimate itself. Construction type (design-build, etc) proposals cost more to estimate than service contracts (unless the estimate is based on a coefficient, such as a Deliver Order Contract). Whereas 1 or 2 people can estimate a typical service contract proposal, it takes many more people to do design drawings, material takeoffs and prepare a construction estimate dependent on design schedule/completion and other factors. Costs for Construction vs. Service Contracts
There is a general rule of thumb that the B&P for an “average” proposal (RFP issue through Award) should be about one percent of the expected contract revenue. While this is a good rule for a $300 to 700 Million-dollar Operations and Maintenance (O&M) contract, it simply does not work for Engineering Procurement and Construction (EPC) work. In fact, for a small EPC job, quite the opposite is true. It takes just as much effort and manpower to do an estimating for a $60 million contract as for a $300 million job. And in service contracting, while it works at the $300 to $700 Million-dollar range, at over $700 million, 1% is too high, and below $200-250 it is unreasonably low. Most $50 million dollar service contract proposals will still take $220-300 thousand to prepare unless they are single function and you have done some already. If they are single function, and you have the source material (previous proposals), then one person can prepare the response and one cost person can develop the cost volume. This gets single function costs done into the $50-75 thousand ranges. So the answer here is that construction proposals cost more than services, but for unavoidable (assuming all processes are cost effective) reasons due to the nature of the beast. Company / Corporate Paradigms Affect on Cost
Most companies recognize the need for account managers and sales people, but a “Proposal Manager” is sometimes not so much a position, as it is a function performed by either the sales lead or proposed Project Manager (PM) as a transitionary task to be performed prior to assignment to the job. In other cases, it is looked upon as a clerical position that can be performed by administrative-type personnel. This could not be further from the truth. The fact of the matter is that the work is highly complex and challenging and demands highly skilled professionals to do the job properly. Government work is solicited under very strict and ridged procurement rules, primarily governed by the Federal Acquisition Regulation (FAR) and supported by FAR supplements (each federal agency’s version of the same). At current, there are literally thousands of Mandatory and Discretionary acquisition documents. The FAR alone is made of seven Volumes with 99 Chapters, and thousands of Parts and Subparts [as one example: Volume 3, Chapter 2, entitled Defense Acquisition Regulations System, Department of Defense contains nine subchapters, with 48 subparts]. It is simply unreasonable to expect a future Project Manager to be fluent or even cognizant of the complex and often confusing or obscure requirements involved. A violation of these can have serious consequences to the company, including expensive fines, disbarment from federal contracting altogether, or imprisonment. This makes it a cost contributor if we try to teach a future project manager procurement basics (much less strategy) during a proposal effort. Yet it seems that many proposals have been attempted using just this approach. This was in no way related to the management or leadership capability of the future Project Manager, but simply a function of his being plunged into a new and unfamiliar environment where the rules are much different than his base of reference. The point here is that the company using this approach is doomed to repeat this on the next proposal, and will have to learn the same lessons again, only with a different Project Manager or team. Proposal teams should be formed of skilled and knowledgeable proposal professionals, and stay together, so that they can take lessons learned forward from effort to effort. Proposed Key Personnel Affect on Cost
Another paradigm that contributes to proposal cost is that many companies tend to believe that only an existing, long-time company employee can be named as “Key” in a proposal. While on some efforts this is certainly true, in other cases, we sometimes search for one when the customer does not actually specify that current employees score higher in the evaluation, so we spend unnecessary time and costs, trying to “mold” a qualified candidate out of a marginal-at-best employee. On most service contract proposals, for example, the customer does not generally care about how much the PM knows about his own company, but does care a great deal about his level of experience in performing similar work, and how responsive he will be to the Contracting Officer’s needs. The cost contributor comes from not conducting the Key Personnel search properly. During the Pursuit Phase, the company (Capture Manager/Sales Team) should be sitting down with the customer, and a critical point of discussion should be Key Personnel. Which positions will be considered key? What are their qualifications? Should they be current company employees? These are all questions that must be answered so that the company can conduct a personnel search within the company and outside as well. This is a minor cost contributor at best, and then only when the search is either began too late, such as after the solicitation is already issued, or when too much time is spent in finding and qualifying existing resources that may not be interested in leaving their current position, (resulting in numerous time consuming and expensive searches for the next most qualified candidates), or when third party recruitment (headhunters) must be engaged to find qualified personnel at the last moment.
Copyright secured by Digiprove © 2010 James Movich
-- http://www.azmo.org
http://businessdevelopment.co
