Chapter 3 Proposed Solutions

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Chapter 3Proposed Solutions
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Learning Objectives

• Second phase starts when the RFP becomes
  available and ends when an agreement is reached
  with a contractor
• Proposal marketing strategies
• Bid/no-bid decision
• Development of a winning proposal
• proposal preparation process and elements that
  may be included in a proposal
• pricing considerations
• The evaluation of proposals
• Types of contracts between the customer and the
  contractor

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Real World Example

• Vignette Volunteers Clean Up Mount Fuji
• Mount Fuji, Japans tallest mountain, is covered
  in garbage. Mt Fuji attracts thousands of
  tourists each day, houses religious
  organizations, golf courses and a safari park
• In 1995, the United Nations Education, Scientific
  and Cultural Organization visited Mt. Fuji, but
  could not grant it as a World Heritage Site. They
  recommended a management plan to clean up Mt.
  Fuji
• Toyohiro Watanabe, an environmentalist,
  established the Fujisan Club to lead clean up
  efforts and encourage volunteerism
• So far, volunteers have removed 900 pounds of
  garbage from Mt. Fuji
• Watanabe and the Fujisan club have changed the
  environment of Mt. Fuji through community
  activism and strong leadership

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Real World Example

• Vignette Helping Those in Need
• Pura Vida Partners, using the brand name Fair
  Trade, sell organic, shade grown coffee
• Fair Trade targets college students because they
  tend to be high volume coffee drinkers, and
  because they are aware of and interested in
  social issues. 55 college campuses have Fair
  Trade coffee
• The company is non-profit, and run by John Sage
  and Chris Dearnley. 100 of profits go to poor
  farming communities in coffee growing regions
• Fair working conditions are guaranteed for the
  farmers who produce the coffee
• Profits fund programs for at-risk children and
  families in Costa Rica
• Using the creative and critical thinking
  abilities developed in large corporate settings,
  Sage and Dearnley have helped to fulfill the
  vision of Pura Vida Partners by acting as agents
  for social change

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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.

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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 customers 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
  contractors 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
• customers 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 doesnt 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
• contractors experience and past success
• experience of key individuals
• management capability
• realism of the schedule
• price reasonableness, realism, and completeness

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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

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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 considerations
• Termination
• Terms of payment
• Bonus/penalty payments
• Changes

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