Don’t Just Price – Price-to-Win It!

Breakout Session #: C07

Jason L. Rupinski

Date: Monday, July 25

Time: 4:00pm–5:15pm

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Agenda

• About the Presenter • Why Price-to-Win (PTW) • Defining PTW • The PTW Areas of Focus • Getting our PTW Started • Ethics

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About the Presenter

• Name: Jason Rupinski • Position: Sr. Principal Price-to-Win Strategist • Company: Leidos • Email: rupinskij@leidos.com • Phone: 719.474.8093 • Bio:

Engages in and leads all aspects of the cradle-to-grave strategic development of complex, large dollar value pricing solutions for proposals. Over 21-year career he has served as a Contracts Representative, Pricing Analyst, Deputy Program Manager, and PTW Lead. He volunteers his time serving on the Board of Directors for the City of Colorado Springs Parks, Recreation, and Cultural Services.

Why Price-to-Win? Can’t you just price my technical solution?

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Integrating PTW into Capture How does price fit into your bid development?

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Success Driven ModelTraditional Bid ApproachNot Recommended for Use

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Capture

Proposal

Post-Submission

OPP ID

Opp Qual

Pursuit

Final Bid Price & Solution

Price Strategy

PTW Proposed Solution

Post Award PTWAssessment

Price(Cost + Fee)

Proposed Solution

Final Bid

Why PTW: The Reality is…

• As Sellers: – No longer live in a world where a

superior technical offering and a reasonable price will win the day!

– The value proposition is continually drawn at or below “technically acceptable, low price”

– Notice: not lowest price, but low-price

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Why PTW: The Reality is… • Your pricing will make/break a deal…

– Therefore, be smart and begin early – Determine the value proposition of your

supplies/services and how this matches: • Corporate strategy • Micro-level strategies augment higher level

strategies • Where in your Market Segment you want to

play/price is important – Be careful: by chasing low-price today,

you may be introducing a losing proposition long-term

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Why PTW: The Reality is… • Every entity needs revenue; hence, a need to

win and win consistently • B&P dollars are harder to secure making each

pursuit ever more important; therefore, the need to increase Probability of Win (Pwin)

• Need to accurately forecast the cost in order to pinpoint an executable offering at a profitable and winning price

• The price you charge determines your expected Profit/Fee or buy-in position

• Fee/Profit is not a requirement of a Price • Price could be lower than the estimated or

actual cost to perform

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Defining Price-to-Win (PTW)

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Defining Price-to-Win • Price-to-Win (PTW) is an integral process in building a strategic

approach to critical capture decisions. – “It is worth its weight in gold!”

• PTW provides a mechanism to understanding the overall competitive

position, risk tolerance, and results in an optimal bid strategy.

• The ultimate outcome is achieved through a series of alternative “what-if” and “sensitivity” analysis yielding a solid business case that enables management to make an informed and strategic decision.

Bottom-line: PTW is the estimated price that, when integrated into the

Government’s source selection process, results in a winning bid.

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Defining Price-to-Win • PTW as a process:

– Involves a team reviewing and discussing internal capabilities, customer expectations, and competitive pressures

– Enables an analyst to build dynamic pricing and cost models which incorporate detailed information on: your own company, competitor(s), alternative technical approaches/solutions, customer relationships, supplier relationships, past performance, bidding history, preferred in-sourcing/outsourcing approaches, etc.

– Built over time (i.e., iterations) and continually refined as the PTW team’s knowledge grows and changes

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PTW Is Not… • PTW is not an exact science nor can

the process provide 100% precision towards the winning bid position

• Risk Free – Performing Due Diligence on your data,

sources of data, risks, assumptions, and everything else you model is vital to ensure you avoid the pitfalls of GIGO (Garbage In, Garbage Out)

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The PTW Areas of Focus

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Five Focal Areas of PTW 1. Opportunity Information

• Understand the nature of the solicitation • Basically the Who, What, When, Where, & How • Explicit & Implicit Requirements

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Five Focal Areas of PTW 2. Price-capability Tradeoff - Be able to answer

the question: How will the customer evaluate the offering? (i.e., understand (Section M)) • Which Proposal Sections are evaluated and how

(e.g., scored (e.g., numerical or colored), pass/fail, confidence rating, etc.)

• Understand the overall evaluation model (i.e., Lowest Price Technically Acceptable, Capability Satisfied, Best Value Approach)

• Be able to articulate and demonstrate how the customer’s evaluation model impacts the PTW for all credible competitors

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Five Focal Areas of PTW 3. Customer’s Information

• Budget • Timing of Funding • Profile of Funding • Source of Funds (i.e., Color of Money) • Should-cost model • Independent Estimates • Prior purchases of similar nature and recent

award trends

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Five Focal Areas of PTW 4. Credible Competitor(s) Analysis

• Alliances or teaming • Prior bid positions/decisions • SWOT / Gap Analysis • Relative financial condition • Risk Assessment • Rate(s) Analysis

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Five Focal Areas of PTW 5. Our Team Analysis

• Alliances or teaming • Prior bid positions/decisions • SWOT / Gap Analysis • Risk Assessment • Supplies & Services Rate(s) Analysis

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Getting Our PTW Started…

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Getting Our PTW Started… • The key to leading the PTW process is

decomposing 5 PTW focal areas into manageable steps. So let’s get started! • Step 1: Opportunity Description • Step 2: Identify the PTW Team/Resources • Step 3: Opportunity Information • Step 4: Customer Information • Step 5: Competitor and Market Information • Step 6: Our Team Analysis • Step 7: Modeling What-if & Sensitivity Analysis • Step 8: Repeat All Steps above as necessary!!!

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Step 1: Opportunity Description • What:

– Determine “what-is-it?” • Perhaps the best place to start any PTW activity is with

completion, even in-part, of an Opportunity Description document (Opp Doc)

– A PTW Opp Doc captures salient components of the opportunity. Four of the key areas are: opportunity information, customer information, competitor information, and our team information and capability data

– PTW is an iterative process and the PTW Opp Doc should be updated throughout the course of capture activities

• Deliverable:

– A regularly up-to-date PTW Opp Doc

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Step 2: Identify the PTW Team • What:

– Keep the team relatively small – Add members as needed to assist with collection of various

information, data calls, or management level decisions – Depending on the nature and size of the bid, a typical PTW

team may include representatives from Business Development, Pricing, Program Management, Project Control, Contracts, Subcontracts, Procurement, and other Subject Matter Experts as needed

– Caution: Remember that while this team contributes resources and knowledge to support the PTW analysis and modeling activities the overall PTW is competition sensitive and should be treated as such

• Deliverable:

– PTW Org Chart for this specific opportunity

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Step 3: Opportunity Information • What:

– In order to better understand the opportunity and gather data from open source information providers, you are encouraged to use the “Opportunity” information collected via our PTW Opp Doc to secure more data from:

• Our internal opportunity MIS • Use of 3rd competitive research and analysis services

for intelligence on the opportunity. Various subscription-based research firms are available

• FOIA Request – Securing FOIA data is often critical on tasks that are being recompeted or are of a similar nature to a new effort. Read up on the FOIA process, understand how it works, and coordinate with the capture leads on which contract(s) to FOIA and what information to request

• Open Source Intelligence Searches

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Step 3: Opportunity Information • Deliverable(s):

– Document each of the following: • Findings: “capture the facts” • Questions/Inquiries: develop questions and points of

inquiry for further research/exploration • Assumptions: Remember, assumptions will be the basis

for the Risk Matrix and BOE artifacts that substantiate our proposal submission

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Step 4: Customer Information • What:

– Valuable information via researching the customer – Not all information is important but you are seeking

information both germane to the solicitation in question as well as those recent awards of a similar nature

– Research the customer using open resource sites – Access the specific Agency website – each agency should

have a web-site. Visit their web-site and review award announcements, briefings, other salient materials germane to our capture effort

• Deliverable:

– A record of the salient customer information that may influence the overall bid solution/strategy

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Step 5: Competitor/Market Info • What:

– Researching the competition will yield valuable information and insights that may help facilitate modeling the competition’s bid position

– Not all information about a competitor is vital but we are seeking nuggets about historical and recent activities and actions that could influence what the competition is thinking and methods to their proposing strategy

– Again, all information comes from public open source data

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Step 5: Competitor/Market Info • Deliverable(s):

– Document findings: report the nuggets that may impact this opportunity

– A SWOT analysis – Price (i.e., Labor Rates & Quals, Avg Hrly Rates,

Solution Costs, win prices, etc.) information of the Competitor and Subcontractors for future modeling

– Model the competitor’s Price Offering (i.e., leverage the open source information above, note our assumptions, and model the competitor’s price offering

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Step 6: Our Own Team Analysis • What:

– Naturally, valuable information can be garnered from understanding our own company and teammates. Our competition is just as hungry to understand and model our moves and will be searching open source data to better understand our go-in position

– A key point in this step is to look at our Team as the competition would view us

– You’ll use the information you gather in this step to help build a bottom-up model of our team

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Step 6: Our Own Team Analysis • Deliverable(s):

– SWOT Analysis – Balance of Technical, Schedule, and Risk as it

relates to Cost Trade-off – Team Labor Rate Analysis – Non-labor Cost Assessment – Model our team’s Price (Top-down) – Team Wrap Rate Assessment – And so on….

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Step 7: Modeling and Analysis • What:

– Developing our team’s business model on “how-to” achieve the recommended PTW Target is completed through modeling and analysis of those technical, schedule, and resource driven cost levers that can tactically impact our price offering

– Metrics are an important but not without the analysis regarding: customer/client, internal research/capabilities, the assumptions, competitive and market research, and other attributes supporting the best offering

– A key component is to modeling those tactics that can be leveraged to enable our team to “hit the target”

– In building an analysis and metrics for any tactic, be sure to measure the impact of each change. Not only with respect to price but non-price factors (i.e., changes to: assumptions, operational impact, risk, etc.)

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Step 7: Modeling and Analysis • Deliverables:

– Dash board financials/metrics – Model our team’s go-in position (i.e., bottom-up

model (finalized closer to RFP release))

• Notes: – Management does not need to see all our

calculations and detail – Summary dashboard reports are most helpful.

• Show metrics that are relevant to our particular situation and business case

– Use metrics and reporting points of interest that impact how we view various cost drivers in our modeling and represent charts that have been helpful in viewing our bids

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Step 8: Rinse, Wash, & Repeat • Remember…

– Start Early! – The process is iterative – The assumptions and the facts will change as new

information is learned throughout the life-cycle – Therefore, repeat steps 1-7 as necessary to refine

and complete the process

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Ethics

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Ethics • The Importance of Ethics:

– Open Source Information – Strictly follow Business’ Ethics and

Compliance Guidelines. – Never take shortcuts in your research. – Never jeopardize your company’s, team’s, or

personal ethical standards. – Be Sure to Know:

• Where your information comes from… • How and when you may use information… • When to say no to others!

– Take the high road at all times.

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Conclusion

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The Reality is… • In order to avoid failure, steer clear of…

– Last minute price tactics that could sink your proposal. – Thinking about price as an afterthought or a mere result of

the technical solution – Reactive price tactics are not strategies and often only

serve to diminish the value of your offering

• You must reshape your capture cycle to think about Price upfront!

• Create a Disciplined but Flexible Process • Due Diligence is vital • Understand your overall goals and objectives before

you get started • Be Ethical • Rinse, Wash, Repeat

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• Jason Rupinski – Organization: Leidos – Email: rupinskij@leidos.com – Phone: 719.474.8093

Contact Information

Back-up (Thought Exercise - As Time Allows)

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Thought Exercise: (As Time Allows)

The Art & Science of PTW

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The Art & Science of PTW • PTW is a mix of Science and Art • Terms are not polar opposites but exist

along a continuum

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Science ArtObjective SubjectiveRational Open EndedUnbiased Emotional

Factual Meanings - Feelings - ViewpointsObserved Natural Order Justification of Thought/Ideas

Probabilities PossibilitiesSolves Problems Connects Expressions

General Laws AestheticsReason & Development

CreativityNeither "Needs" the other but they do co-exist

BeautyExpressive

Talking Point Chart: Widget “X” • Design, Build, and Deliver “N” units of Widget “X”

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5 Focal Areas of PTW1 - Opp Info2 - Price Capability Trade-off3 - Customer Info4 - Credible Competitor Info5 - Our Team Analysis

Initial Spec AdjRange % Δ Range % Δ$99 n/a $99

$102 3.0% $102$105 6.1% $105$108 9.1% $108$111 12.1% $111$114 15.2% $114$117 18.2% $117 n/a$120 21.2% $120 2.6%$123 24.2% $123 5.1% Comp$126 27.3% $126 7.7% All Range$129 30.3% $129 10.3% Min $99 $117$132 33.3% $132 12.8% Avg $132 $135$135 36.4% $135 15.4% Max $165 $153$138 39.4% $138 17.9%$141 42.4% $141 20.5%$144 45.5% $144 23.1%$147 48.5% $147 25.6%$150 51.5% $150 28.2%$153 54.5% $153 30.8%$156 57.6% $156$159 60.6% $159$162 63.6% $162$165 66.7% $165

Below Performance Specification

Above Price Tolerance

Notional Range of

Competitive Offerings

Range of Widget "X" Prices in the Current Market Space

Science ArtCost of Resources Source of ResourcesAmount of Resources-historical Amount of Resources-futureLearning Curve-formula Learning Curve-application

Widget "X"Team "A" Price $117