Chapter 3 Proposed Solutions

2 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

3 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.

4 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

5 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.

6 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

7 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

8 Bid/No-Bid Decision Factors to consider: competition risk mission extension of capabilities reputation customer funds proposal resources project resources

9 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

10 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

11 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

12 Proposal Contents Proposals are organized into three sections: Technical Section understanding of the problem proposed approach or solution benefits to the customer

13 Proposal Contents (Cont.) Management Section description of work tasks deliverables project schedule project organization related experience equipment and facilities

14 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

15 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

16 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

17 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)

18 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 reimbursement 19 Types of Contracts

20 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

21 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

22 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

23 Contract Provisions (Cont.) Disclosure of proprietary information International considerations Termination Terms of payment Bonus/penalty payments Changes

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