Chapter 3 Proposed Solutions

1. Chapter 3Proposed 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 2

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. 3

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 4

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. 5

6. 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

7. 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.

8. 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 6

9. 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 7

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

11. 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 9

12. 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 10

13. 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 11

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

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

16. 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 14

17. 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 15

18. 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 16

19. 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) 17

20. 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 18

21. Types of Contracts 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

22. 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 20

23. 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 21

24. 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 22

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

26. 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