Chapter 3Proposed Solutions

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Learning Objectives Second phase

starts when the RFP becomes available ends when an agreement is reached with a contractor

Building relationships with customers & partners Proposal marketing strategies Bid/no-bid decision Development of a winning proposal

Preparation process; elements in a proposal

pricing considerations The evaluation of proposals Types of contracts

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Real World Example

Vignette: Renovating the Baltimore Arena 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 account.

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Real World Example Vignette: Enterprise Application Suites Fading Out

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.

Building Relationships with Customers & Partners

Relationships establish the foundation for successful funding and contract opportunities. 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)

Keep in mind: 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.

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Pre-RFP/Proposal Marketing Should not wait until formal RFP

solicitations are announced before starting to develop proposals

Develop relationships with potential customers

Maintain frequent contacts with past and current customers

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Pre-RFP/Proposal Marketing (Cont.)

Be familiar with a customer’s needs and requirements

Consider this marketing or business development; no cost to the customer

May prepare an unsolicited proposal

Efforts are crucial to the foundation for winning a contract

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Bid/No-Bid Decision 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

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 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:

Technical Section

understanding of the problem

proposed approach or solution

benefits to the customer

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Proposal Contents (Cont.) Management Section

description of work tasks deliverables project schedule project organization related experience equipment and facilities

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Proposal Contents (Cont.)

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 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

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

Some look at the prices and select only from the three lowest-priced proposals

Some screen out prices above budget or whose technical section doesn’t meet all the requirements

Some create a proposal review team that uses a scorecard

May submit a best and final offer (BAFO)

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Customer Evaluation of Proposals (Cont.)

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

completeness

A contract is: A vehicle for establishing customer-

contractor 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 cost

reimbursement19

Types of Contracts

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Types of Contracts (Cont.)

Fixed-price contract Price remains fixed unless the customer

and contractor agree Provides low risk for the customer Provides high risk for the contractor Is most appropriate for projects that are

well defined and entail little risk

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Types of Contracts (Cont.)

Cost-reimbursement contract Provides high risk for the customer Provides low risk for the contractor Is most appropriate for projects that involve

risk 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 considerationsTerminationTerms of paymentBonus/penalty paymentsChanges

Measuring Success Measure success of proposal efforts by:

Number of times proposals are selected, and/or Total dollar value of proposals that are selected

Popular methods: 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