How Long Does A Small Can Of Formula Last Seven Key Formula for Winning Cost Proposals

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Seven Key Formula for Winning Cost Proposals

In a highly competitive environment with tight budget constraints, your cost solution must not only be compliant but responsive, competitive and reliable.

From the cost side, it is almost impossible to influence the technical proposal. But you can follow seven basic principles that will go a long way toward making your next proposal a successful cost proposal as well.

1. Be available and use current customer information – know the market conditions that drive value.

Knowing what your customer is about is the first step. You are simply guessing about the customer without knowledge of their previous purchase history, their budget pressures, authorized system funding, system support pull, customer personnel, and resources and independent cost estimates and whether they are price-oriented or performance-oriented. You need to find your intelligence ethically.

2. Know how much it costs your company to do business.

We often hear from many companies that they can’t find out how much it will cost to do a job until the final RFP goes out. That is hogwash. With a draft RFP you can make an early estimate of what it will cost to do the work. Without a draft RFP you need to be smart enough about procurement to estimate how much it will cost you – even a broad estimate. Remember that this is not an exact science and you will get more accurate as you get closer to the actual RFP. Knowing the cost ahead of time will help you be more efficient in the final step. If you wait until the final RFP comes out, it is too late to make a creative difference in your price (as opposed to cost) because you are too busy to guess about the actual cost. With the knowledge of your costs at hand, you can make more strategic choices for success.

3. Know what your competitors’ costs are for doing the same business.

Without competitive knowledge, you’re just guessing about what it takes to win. This information is readily available through GSA Advantage, Internet searches, FOIA requests, and subscription search services such as EZGovOpps and GovWin. Find out who your competitors are and how they will compete by looking at the past success of your competition and their team. Gather information about what investment the company is likely to make in the project and what their potential bidding methods are. Find out the little tricks your competitors are using to get lower prices such as changing work locations to a lower base, installing improved production equipment, greening the workforce. Companies tend to do similar things over time. You should also consider whether your competitors are in position. Entrepreneurs tend to take fewer risks and think a little more ‘outside the box’.

4. Provide a well-designed work structure (WBS) that relates to the performance task description and is supported by estimates.

We believe that without a WBS to estimate the work described in the statement of work performance or work report, you can not think enough about all aspects related to doing. You may leave out other items or double your estimate. We often find that a three-level WBS is sufficient to estimate work. Furthermore, we see that contractors often estimate at all levels of the WBS rather than only at the third level, which causes confusion and inaccurate estimates. When you develop this level of detail, it’s easy to see where you can make adjustments, cuts or additions to your value.

5. Consider your company’s investment in the project you are calling for.

Corporate investments are those things your organization does to enhance performance or project success (training, recruitment, change), investments in property, plant and equipment, and direct project reductions taken by the organization at indirect costs. All these types of investments are sponsored by the corporation and are not reimbursed by the Government.

6. Be an easy company to do business with.

Give them what they ask for and more. The winning company is the company that simplifies testing, presents data (technical and cost) in an organized and trackable manner, and presents the data in written and electronic formats. Even if the RFP does not request an electronic format, provide it to the Government that way. Save all the formulas so that the examiner can easily follow your thought processes. Remember, the firm that provides them with a written and electronic version that they can follow up on, will do unscored articles with the examiners.

7. Be cost competitive and be creative about it.

This step is the easiest (really) if you complete all the remaining steps before this one. This means sharpening your pencil and your mind about labor rates, employee turnover, attrition, competitive fees, competition and new indirect measures, direct bidding when possible, and company investment.

All those details aside, there should be a visible unity of purpose and thought between all aspects of the proposal. Simply put, you cannot specify something in a technical or administrative proposal that cannot be identified in the cost. Many proposals (perhaps many) are very difficult to trace from one volume to another. Brash as it may sound, there should always be a visible link between things, even if you have to create it yourself.

Most projects or products, either implicit or explicit have a work breakdown structure. For projects it’s usually something like a statement of work structure. In products they can look very much like the description. However possible and difficult it is to find agreement on specifics, such divisions exist. It is the most effective competition for combining different volumes.

In the absence of specific direction in the request, this breakdown will make sense, easy to explain and an important link between technical proposals and costs. “But the customer didn’t ask us to do that.”, he says. Well, you might be good, but you want to win don’t you. Consumers want to buy from companies that are easy to do business with. A good way to start cementing that idea is to simply make your proposal easier to understand than the competition’s. “But it’s too much work to make prices that way.”, you might say. Do you want to win?

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