Transcript Chapter 3 Proposed Solutions

Chapter 3
Proposed Solutions
Learning Objectives
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Second phase
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starts when the RFP becomes available
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ends when an agreement is reached with a contractor
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Building relationships with customers & partners
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Proposal marketing strategies
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Bid/no-bid decision
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Development of a winning proposal
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Preparation process; elements in a proposal
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pricing considerations
The evaluation of proposals
Types of contracts
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Real World Example
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Vignette: Renovating the Baltimore Arena
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Baltimore Civic Center was reopened after renovations in
1986, and renamed the ‘‘Baltimore Arena.’’
In 2004, the Maryland Stadium Authority began soliciting
proposals to build a new indoor sports and concert arena.
As of November 2007,seven prominent developers
submitted proposals. The proposed plans differ on many
factors, including location, cost, and size.
One major debate is whether or not the new arena should
be built on the current site. Another unresolved debate is
the size of the new arena.
Baltimore Development Corporation to decide fate of the
new Baltimore Arena, after taking many factors into
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account.
Real World Example
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Vignette: Enterprise Application Suites Fading Out
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In 2002, FleetBoston Financial decided to automate the
process of identifying potential customers for new products,
so they sent out an RFP.
Two proposals were received - one from CRM giant Siebel
Systems, and the other from MarketSoft, a smaller vendor.
Fleet decided to pursue MarketSoft’s more targeted product,
utilizing a best-of-breed management resolution.
MarketSoft required a much more direct approach, fewer
changes to the current business process and had the
potential to pay for itself within one year
Strong proposal won the contract for MarketSoft
Good proposal review process worked for FleetBoston
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Proposed Solutions
In many situations an RFP does not involve
soliciting competitive proposals from
external contractors, and the second phase
of the project life cycle may be completely
bypassed.
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Building Relationships with
Customers & Partners
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Relationships establish the foundation for
successful funding and contract
opportunities.
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Requires being proactive and engaged
Must be a good listener and a good learner
Contacts with potential clients should be
frequent
Focus should not remain on discussing
potential contract opportunities alone.
Establishing and building trust is key
Ethical behavior in dealing with clients and
partners is imperative for building trust
Building Relationships with
Customers & Partners (contd)
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Keep in mind:
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Control emotions and be tactful and not
confrontational in discussions with clients
Maintain a positive and can-do attitude in
dealings
Build credibility based on performance
Always put the client first
It is important to build relationships with
several key people in a client or partner
organization.
Pre-RFP/Proposal Marketing
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Should not wait until formal RFP
solicitations are announced before
starting to develop proposals
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Develop relationships with potential
customers
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Maintain frequent contacts with past and
current customers
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Pre-RFP/Proposal Marketing
(Cont.)
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Be familiar with a customer’s needs and
requirements
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Consider this marketing or business
development; no cost to the customer
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May prepare an unsolicited proposal
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Efforts are crucial to the foundation for
winning a contract
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Bid/No-Bid Decision
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Factors to consider:
 competition
 risk
 mission
 extension of capabilities
 reputation
 customer funds
 proposal resources
 project resources
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Bid/No-Bid Decision (Cont.)
Be realistic about probability of winning
the contract
 A lot of non-winning proposals can hurt
a contractor’s reputation
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Developing a Winning
Proposal
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A selling document – not a technical report
Convince the customer that you are the best
one to solve the problem
Highlight the unique factors that differentiate
you from competing contractors
Emphasize the benefits to the customer
Write in a simple, concise manner
Address requirements as laid out in the RFP
Be realistic in scope, cost, and schedule
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Proposal Preparation
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Can be a straightforward task performed
by one person or a resource-intensive
effort requiring a team
May designate a proposal manager
Schedule must allow time for review and
approval by management
Can be a few pages or hundreds of pages
Customers do not pay contractors to
prepare proposals
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Proposal Contents
Proposals are organized into three sections:
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Technical Section
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understanding of the problem
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proposed approach or solution
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benefits to the customer
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Proposal Contents (Cont.)
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Management Section
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description of work tasks
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deliverables
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project schedule
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project organization
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related experience
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equipment and facilities
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Proposal Contents (Cont.)
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Cost Section
 labor
 materials
 subcontractors and consultants
 equipment and facilities rental
 travel
 documentation
 overhead
 escalation
 contingency or management reserve
 fee or profit
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Pricing Considerations
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Be careful not to overprice or underprice
the proposed project
Consider:
 reliability of the cost estimates
 risk
 value of the project to the contractor
 customer’s budget
 competition
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Proposal Submission and
Follow-Up
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Submit proposals on time
Hand deliver expensive proposals or send
2 sets by different express mail services,
if necessary
Continue to be proactive even after
submission
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Customer Evaluation of
Proposals
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Some look at the prices and select only
from the three lowest-priced proposals
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Some screen out prices above budget or
whose technical section doesn’t meet all
the requirements
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Some create a proposal review team that
uses a scorecard
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May submit a best and final offer (BAFO)
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Customer Evaluation of
Proposals (Cont.)
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Criteria that might be used in evaluating:
 compliance with SOW
 understanding of the problem or need
 soundness of the proposed approach
 contractor’s experience and past
success
 experience of key individuals
 management capability
 realism of the schedule
 price – reasonableness, realism, and
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completeness
Types of Contracts
A contract is:
 A vehicle for establishing customercontractor communications and arriving at
a mutual understanding and clear
expectations
 An agreement between the contractor, who
agrees to provide a product or service, and
the customer, who agrees to pay
 Must clearly spell out the deliverables
 Two types of contracts: fixed price and
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cost reimbursement
Types of Contracts (Cont.)
Fixed-price contract
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Price remains fixed unless the customer
and contractor agree
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Provides low risk for the customer
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Provides high risk for the contractor
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Is most appropriate for projects that are
well defined and entail little risk
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Types of Contracts (Cont.)
Cost-reimbursement contract
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Provides high risk for the customer
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Provides low risk for the contractor
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Is most appropriate for projects that
involve risk
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Customer usually requires that the
contractor regularly compare actual
expenditures with the proposed budget
and reforecast cost-at-completion
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Contract Provisions
Miscellaneous provisions that may be
included in project contracts:
 Misrepresentation of costs
 Notice of cost overruns or schedule
delays
 Approval of subcontractor
 Customer-furnished equipment or
information
 Patents
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Contract Provisions (Cont.)
 Disclosure
of proprietary information
 International considerations
 Termination
 Terms of payment
 Bonus/penalty payments
 Changes
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Measuring Success
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Measure success of proposal efforts by:
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Number of times proposals are selected, and/or
Total dollar value of proposals that are selected
Popular methods:
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Win ratio - the percentage of the number of
proposals won out of the total number of
proposals submitted over a particular time
period
Total dollar value of proposal won as a
percentage of the total dollar value of all the
proposals submitted during a specific time
period