In a highly competitive environment with tight budget constraints, your cost proposal solution must not only be compliant, but also responsive, competitive, and compelling.
From a cost standpoint, it is almost impossible to have an impact on the technical proposal. But you can follow seven key basics that will go a long way toward making your next proposal a cost-winning proposal, too.
1. Have available and make use of current customer information: know the market factors that drive the price.
Knowing what your customer is all about is the first step. You are simply guessing about the customer without knowing their prior purchasing history, budget pressures, authorized program funding, program support deductions, customer staff and reservations, as well as your independent cost estimate and whether they are targeted to price or performance. You must source your intelligence ethically.
2. Know what it costs your company to do business.
We’ve often heard from many companies that they can’t figure out how much it costs to do the job until the final RFP comes out. That’s silly. With a draft RFP, you can make an early estimate of what it will cost you to get the job done. Without a draft RFP, you need to have enough intelligence about the acquisition to estimate what it will cost you, even if it is a long-range estimate. Remember that this is not an exact science and you will get more precision as you get closer to the actual RFP. Knowing the costs ahead of time will help you get creative in the last step. If you wait until the final RFP comes out, it’s too late to make a creative difference to your pricing (other than cost) because you’re too busy guessing what the actual costs are. With early knowledge of your costs, you can make many creative decisions to win.
3. Know what your competitors’ costs are to do the same business.
Without competitive information, you’re just guessing what it takes to win. This information is readily available through GSA Advantage, Internet searches, FOIA requests, and subscribed search services such as EZGovOpps and GovWin. Find out who your competing teammates are and how they will bid by looking at the past wins of your competition and your teammates. Gather information about what corporate investments they are likely to make in the project and what their likely approaches to bidding are. Find out the little tricks your competitors use to get lower prices, like changing work locations to hit a lower base, infusing improved productivity tools, greening staff. Companies tend to do the same things over time. You should also consider whether your competitors are incumbents. Incumbents tend to take fewer risks and think less “outside the box.”
4. Provide a well-designed work breakdown structure (WBS) that links to the statement of work performance and is supported by a baseline of estimates.
We believe that without a WBS to estimate the work described in the performance statement of work or statement of work, you cannot adequately think through all the elements related to performance. You may be missing some items or doubling your estimates. We often find that a three-level WBS is adequate for estimating work. Additionally, we see that contractors often estimate at all levels of the WBS instead of just the third level, leading to confusion and incorrect estimates. When you develop this level of detail, it’s easier to spot where you can make corrections, cuts, or additions to your cost estimate.
5. Actively determine your company’s investments in the project you are bidding for.
Company investments are those items your corporation makes to improve project performance or efficiency (training, hiring, transitions), investments in property, plant and equipment, and project-specific reductions taken by the corporation in indirect rates. All of these types of investments are those that are supported by the corporation and are not reimbursement items by the Government.
6. Be the company that is easy to do business with.
Give them what they ask for and more. The company that wins is the company that facilitates the evaluation, presents the data (technical and cost) in an organized and traceable manner, and presents the data in written and electronic format. Even if the RFP doesn’t ask for the electronic format, give it to the government that way anyway. Keep all the formulas so that the evaluator can easily follow your thought processes. Remember, the company that provides them with the written and electronic version that they can follow will probably score points without scoring with the evaluators.
7. Be cost competitive and be creative about it.
This step is the easiest (really) if you’ve done all the remaining steps before this one. This means you need to sharpen your pencil and mind on labor rates, greening your workforce, de-escalation, competitive rate structures, new and competitive indirect rates, direct offers where possible, and company investments.
Aside from all those details, there needs to be a visible unity of purpose and thought among all the elements of the proposal. In short, you cannot describe something in the technical or management proposal that is not identified in the cost. Many (perhaps most) of the proposals are very difficult to trace from one volume to another. As daring as it sounds, there should always be an identifiable link between items, even if you have to create it yourself.
Most projects or products, either implicitly or explicitly, have a work breakdown structure. For projects, it’s usually something like the statement of work structure. For products, it can look a lot like the specification. Yet it happens, and as difficult as it is to agree on its details, there is such a break. This breakdown is the most viable candidate for linking the various volumes.
In the absence of specific direction in the application, this breakdown would make a sensible, easily explained, and important link between the technical and cost proposals. “But the client didn’t ask us to do that,” you say. Yes, you may be right, but you want to win, right? Customers want to buy from companies that are easy to do business with. A great way to start cementing that impression could be to make your proposal easier to understand than your competition’s. “But it’s too much work to price that way,” you might say. You want to win?